Internet Tax Debate Rages On

According to a new study by the Information Technology Association of America, about one third of American adults would be less inclined to buy products on the Internet if those purchases were taxed. The unsurprising data was released in conjunction with the Advisory Commission on Electronic Commerce’s two-day meeting on Internet taxation.

“Voters want to see growth in the Internet and E-Commerce, not E-taxes,” the ITAA said. In a survey of 1,000 registered voters, “a shocking” 34 percent said that they would be less inclined to make purchases either by mail order or over the Internet if both types of companies were required to collect sales taxes on purchases. The ITAA also concluded that the growth of the Internet and electronic commerce are more important to voters than the taxes generated by e-commerce, but the group offered no further data to substantiate that conclusion.

Election Implications

“Even when presented with the possibility that state and local governments might lose tax revenue as a result of not collecting sales taxes on Internet purchases, voters are still opposed to taking steps to collect revenue from Internet purchases,” the ITAA said. Such sentiments will be reflected in next year’s elections, the group said, if Congress ends up passing a set of Internet taxes.

Congress has placed a moratorium on Internet taxes to give the commission time to study the issue. However, based upon the commission’s findings, the debate over taxation is expected to heat up again on Capitol Hill when that moratorium ends next summer.

According to the study, 44 percent of those surveyed said that they would be less likely to vote for a candidate who supports new Internet taxes. However, 26 percent said that they would be more likely to vote for that candidate, which shows there is a voting contingent looking for immediate public gains from the e-commerce boom.

ITAA President Harris Miller urged the Advisory Commission to seriously consider the voter study as it weighs arguments by government and the private sector. “In this period of unprecedented economic growth, when states are experiencing budget surpluses, changing the Internet tax collection rules is the equivalent of the hatchet falling on the neck of the goose that laid the golden egg,” Miller said.

Revenue Drained from Where?

State and local governments, backed by brick-and-mortar shops, are complaining that the rise of electronic commerce has driven shoppers away from local retail stores. Additionally, they feel that lost sales tax revenue will drain funding for local government programs. However, e-commerce tax opponents counter that the majority of online sales have come at the expense of mail order companies, not local stores.

If the 34 percent of voters who said Internet taxes would scare them away from e-commerce were to act on that prediction, Miller argued, “We would see a backlash that could dampen both federal and state income tax receipts and damage the current technology-driven economic boom.”

The ITAA, a member of the Internet Tax Fairness Coalition, lobbies on behalf of 11,000 information technology companies in the United States.