Internet Buys to Be Taxed Soon

On account of the economic downturn, several states are pondering the possibility of starting to collect taxes on Internet purchases, in an attempt to address the worsening state of their budgets. Naturally, the move sparked vivid controversy, and online stores are thoroughly displeased with the proposed measure, as they have been enjoying this facility for a very long time. In one case, the state of New York even requires companies such as Amazon to charge its residents with shipping fees, although Amazon bases its operations elsewhere.

If we take into account the online shopping total revenue for the entire country, a rough estimate places the sum that the government would stand to benefit from at around $3 billion. Sucharita Mulpuru, a financial analyst for Forrester Research, says that online sales accounted for as much as 8 percent of all retail in the US in 2008, totaling about $204 billion, which is a drastic increase from the levels of 2007, when Internet buys collected $175 billion.

According to a 1992 Supreme Court ruling, states are not allowed to impose sales taxes on online shops if they do not have a “physical” presence in that state. In other words, the only retailers that can be subjected to the new tax are those who have office buildings or warehouses on the property of the state imposing the fee.

But even that won't be enough to get the new system going pretty soon. Law makers still have to untangle the intricate network of jurisdictions that are shared by states, counties and cities, and to agree on the amount of tax for each product. Currently, every jurisdiction demands a different tax for similar products, and bringing the numbers together will be quite a hassle.

However, the new initiative could fail, on account of the fact that changing legislation on the matter can be very difficult and expensive. Although the crisis will still prompt states to try and impose the taxes, they will also be discouraged from doing so by the large costs involved with the process, and some states already renounced doing so after being presented with a rough estimate.