Essay on Internet Taxation

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Internet Taxation The advent and expansion of the Internet have brought the issue of the application of state and local sales taxation to Internet, telephone, catalog, and other "remote sales" to the forefront of the policy debate. Under current law, states cannot require corporations without a substantial presence within their borders to collect and remit sales taxes. While all states do require residents to remit the taxes owed in the form of use tax payments, few people send in use tax forms, rendering remote sales essentially tax-free. The revenue loss due to the lack of taxation on Internet sales has been minimal thus far; however, states are concerned that the growth of the Internet will lead to a substantial drain on revenue.…show more content…
Note that the high court's decision was in 1992, a full two years before the commercial Web existed. The states argue that it is legally easier for them to go after the Web sites. And therein lies the implicit threat and the only stick the states hold: They are making a not-so-subtle threat to start suing e-commerce sites unless they start collecting state sales tax. The SSUTA group set Oct. 1 as a target date for states to start enforcement. The legal standing that the states would have to force e-commerce sites to comply is weak at best, but it's the classic lawsuit threat: "We may lose, but you'll be forced to spend tons of money for lawyers and appearing in courtrooms and giving depositions. And, heck, there's always a chance that we'll win, so you might as well do what we want now and not take any chances" Argument Against Internet Sales Taxes Remote Sales and Taxation Issue In a series of opinions, the Supreme Court has ruled that states cannot compel firms without a substantial nexus" within the taxing state to collect and remit use taxes. The most important cases are National Bellas Hess, Inc. v. Department of Revenue of Ill. and Quill Corp. North Dakota. "Substantial nexus" has been interpreted to mean a physical presence, and precludes states from requiring vendors whose only connection to the state is by mail, phone, or Internet to remit taxes. In their 1992 decision in Quill, the court ruled that requiring out-of-state vendors to collect the use
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