The Internet has created a world without borders. Consumers can purchase goods and services from around the world by going online and comparison shop for whatever they wish, be it a computer, a car, a book, and make their purchases, all tax-free, unless the vendor has a store in their state. The current tax system recognizes over 30,000 tax jurisdictions, within the 30,000 tax jurisdictions, there are more than 7,000 separate state and local tax rates that cover all goods and services.
The sales tax burden from multiple tax jurisdictions could be very costly. Taxation of online transactions "would require that the vendor identify all relevant taxing jurisdictions, calculate how much to charge, file forms, and remit payments to hundreds or even thousands of different taxing authorities" (Lilly, 1999). Trying to establish a tax system that takes into account the different jurisdictions, tax rates, the different product definitions, and which products are subject to taxation is a great challenge that could significantly impair the ability of large and small dot-com companies to make money or even to operate.
The ethical issues generated by Internet sales has, not surprisingly, caught the attention of business executives as well as local, state, and federal political leaders. The most pressing question, as one might assume is, "Should the Internet be taxed?" Existing tax laws were not developed to face the significant changes that continue to take place with the emergence of the Internet or "New" economy. The Internet allows anyone with Internet access to make purchases from anywhere in the world.
Forrester Research recently reported that online sales would grow to more than $184 billion by 2004 (Roserncrance, 2000). Potential tax revenues from Internet comm ...