E-Tax or E-Commerce: The Debate on Taxing Electronic Commerce Transactions

For businesses and consumers, electronic commerce provides unprecedented opportunities through faster, easier, and more convenient access to markets just by the click of a mouse. However, tax authorities, including state and local governments, worry that their revenues may plunge as more and more commerce moves to the Internet. They are concerned that Internet commerce will deplete state and local government revenue by reducing sales and use taxes. They are trying to impose a tax on transactions undertaken over the Internet to replenish their shortage of tax revenue. The paper addressed the impact of non-taxation of electronic commerce on state and local government's tax revenues. It also discussed the main reasons for and against an Internet tax. It finally examines the adequacy of the Internet tax and whether it is feasible or not.