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May 7, 2013

Internet Sales Tax

Dick Morris is leading the charge against the internet sales tax, writing “With 11,000 separate tax jurisdictions and rates in the US, taxing sales online is a huge burden on net firms.” First, the internet sales tax is not in my self interest. Nevertheless, I feel compelled to refute this assertion from Dick Morris. What the internet does best is to deal will complexities like the number of jurisdictions and tax rates. If there is an internet tax that works by taxing transactions at their destinations (that is, the location of the buyer), then services will arise to keep track of the various taxing authorities, collect, and distribute the tax. The cost of such a service should be tiny. On the other hand, why not tax these transactions at their origins (that is, the location of the seller) rather than at their destinations? Then each seller would only have one location to deal with. I like this approach, because it would put the screws to high tax states and localities which cannot attract internet sellers. In contrast, taxing the destinations encourages the high tax places.

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