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The University of Tennessee, Knoxville

Taxing the Internet: Is this good for the US?

Bill Fox, ProfessorCollege of Business Administration

Internet sales exploded from $1.1 trillion in 2000 to more than $3.8 trillion in 2012. A 1992 Supreme Court ruling hampers the ability of states to collect sales taxes on many of these transactions because the vendors do not have taxable presence. Some argue that a tax-free environment should foster growth of the Internet and that low taxes have been an important part of its rapid growth. Further, they maintain that it is too expensive to comply with the tax laws of 45 sales-taxing states and more than 9,000 local governments. Others argue that uneven taxation of e-commerce versus bricks-and-mortar commerce harms the US economy and costs state and local governments tax revenues. These counterpoints will be evaluated along with UT faculty research that evidences annual tax losses of at least $12 billion and elimination of jobs in bricks-and-mortar stores.‚Äč

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