Internet Taxation

1
Internet Taxation A Debate
Source The incredible internet
2
Con

• Complicated tax system
• Different items subject to sales/use tax depend
  on each jurisdiction
• Numerous and varying definitions
• High compliance cost
• Negative impact on the growth of e-commerce
• Extra burden on customer paying tax in addition
  to existing handing and shipping costs
• Fairness Businesses receive no benefits or
  services from a jurisdiction when they are
  located elsewhere.
• Ability of consumers to buy goods and services
  from merchants located outside the reach of their
  own governments taxing authorities
• The buying and selling of intangible goods from
  external (or non-domestic) sources
• Potential diminishing fiscal autonomy of States
  and Local Governments due to necessary
  simplification and standardization of tax system

States With Sales/Use Tax 45 States and District of Columbia
Localities With Sales/Use Tax 7,500
3
Rationale for No Internet Taxation

• Our all-in marginal tax rate is 40

Source "Does It Pay, at the Margin, to Work and
Save?" by Laurence J. Kotlikoff and David Rapson
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How much can you Tax?

• Reduce Taxes
• http//www.youtube.com/watch?v6FBWwAC3lPkfeature
  related
• Tax Freedom Day keepproducing.org
• http//www.youtube.com/watch?vz-HGQj_pBagfeature
  related
• Commercial Extend moratorium
• http//www.cfif.org/htdocs/legislative_issues/fede
  ral_issues/hot_issues_in_congress/internet_taxatio
  n/legis/federal/internet/tax/commercial.html
• Reuters Debating the Internet Access Tax
• http//www.youtube.com/watch?veJjz0AFxnWo
• Fox News No Internet Taxes
• http//www.youtube.com/watch?v4qLvfmMHoA8feature
  related
• Tax Freedom Song
• http//www.youtube.com/watch?vbjy8KWsPtDE
• Real debate on the net
• http//www.youtube.com/watch?v96JXTWttOwU
• Your Money Online Sales tax
• http//www.youtube.com/watch?vG47VR2JKL3Yfeature
  related
• Congress debating internet taxes
• http//www.netcaucus.org/events/2007/taxation/vide
  o.shtml

5
Internet Tax Freedom Act

• Internet Tax Freedom Act was introduced on
  October 21, 1998
• Has been extended by another seven years, and
  will expire in 2014 if not renewed.
• Prevent states from either applying sales taxes
  to categories of electronic services or goods
  with no physical counterpart or applying
  discriminatory sales taxes on Internet commerce
  that do not, for example, apply to catalog sales.
  
• Internet A global free trade zone
• In my view, the Internet has the most profound
  liberating potential since Gutenbergs invention
  of the printing press, which allowed the mass
  distribution of ideas, thoughts and information.
  This legislation is a step forward to keeping the
  Internet free of unfair, discriminatory taxation
  policies that would impede its future growth as a
  source of commerce, education and information.
• U.S. Senator George Allen (R-Virginia)
• On the introduction of S. 777,
• Internet Tax Nondiscrimination Act
• April 26, 2001

6
States reliance on sales tax revenue
Source Legislative analysts office (CA)
http//www.lao.ca.gov/2000/013100_inet_tax/013100_
internet_tax.html
7
World Internet Statistics

• Electronic commerce has become a critical engine
  for economic growth
• More than 27 million small-business owners will
  potentially be affected by Internet sales tax

Source http//www.internetworldstats.com/stats.ht
m
8
Internet Usage Statistics
Source www.emarketer.com
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Total US Retail Sales (Online)
U.S. retail ecommerce sales for the fourth
quarter of 2008, adjusted for seasonal variation,
but not for price changes, was 31.9 billion
Source Census Bureau, Department of Commerce
10
E-Commerce Sales
Source www.emarketer.com
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Forecasted E-Business Growth
12
Rationale for No Internet Taxation

• Enhances future growth and strategically position
  the nation to compete in the global economy
• Americans can have affordable access to the
  Internet and promotes further broadband
  deployment in rural and outlying areas that may
  lack high-speed Internet access
• Gateway to entrepreneurship, regardless of race,
  income or neighborhood.- Higher taxes on
  technology will stifle the ability of small
  businesses to operate, grow, and create new jobs.

13
Rationale for No Internet Taxation

• Impede consumer demand for access, cripples
  innovation, creativity and competitiveness
• Multiple points of consumption makes it more
  difficult for independently administered tax
  agencies to identify, monitor, and resolve
  international tax transactions.
• Ability of consumers to buy goods and services
  from merchants located outside the reach of their
  own governments taxing authorities
• The buying and selling of intangible goods from
  external (or non-domestic) sources
• Internet sales tax could encourage exporting jobs
  to different states

14
Rationale for No Internet Taxation

• Enforce vital tax policy initiatives and
  decisions independent of trade and investment
  considerations.
• Globalization growth will be curtailed
• Applying a provincial average sales tax of 14 to
  all Internet sales in Canada would reduce the
  number of online buyers by as much as 44.

15
Proposed Solutions

• The National Sales Tax -- Alternative One
• Under a national sales tax option the federal
  government would determine the rules and tax
  rates for all domestic electronic commerce.
• Freedom of States -- Alternative Two
• The "Freedom of States" policy would give taxing
  authority, and the right to regulate ecommerce,
  to the individual states.
• Internet Tax Equity Policy -- Alternative Three
• The third option proposed would involve allowing
  the states to collect taxes on all
  goods,regardless of the method of transaction,
  under a federally-regulated tax policy.