Increased Internet sales and the effect on brick and mortar retailers and government revenue will determine if e-sales should be taxed, the Federal Trade Commission said yesterday.
In a 102-page study of the past, present and future of the Internet, the FTC said that the debate over e-commerce will eventually be decided by consumer demand for online products and services.
Monday the General Accounting Office estimated that tax-free Internet sales will result in state and local governments loosing between $300 million and $3.8 billion in revenue this year. (Direct Newsline, July 26).
The report called for additional studies on Internet taxation to determine if current online buying practices and revenue streams for local governments are representative of a long-term pattern or merely growing pains.
Roscoe P. Starek III, the Direct Marketing Association’s senior vice president, catalog issues, agreed that more studies need to be conducted before any legislative decisions are made.
He also agreed with the report that “the current debate over Internet taxation has may parallels to the previous controversy over taxing mail-order catalog sales” which the U.S. Supreme Court twice decided in 1967 and 1993.
In both instances, the High Court ruled that states could only tax mail-order sales if the seller had a physical presence within their borders. It also ruled that states required Congress’ permission to tax sales from out-of-state companies lacking such a presence.
It was also noted in the report that the Virginia legislature is considering two bills that would repeal the state’s 4.5% sales tax on over-the-counter, mail-order and Internet sales.
Besides recapping recent Congressional actions resulting in a five year moratorium on Internet taxes, other sections of the report traced the Internet’s development, operations and pricing structure.
