That system also discriminates against the millions of Americans with no Net access, making the Internet a duty-free shop for the digital elite. The story of the Net's rise as a tax haven began before most Americans had heard of e-anything. Amazon, for example, should tax customers who live in Washington, where the company is headquartered. But, as with catalogs, most online sales go untaxed. For one thing, like their mail-order counterparts, few Internet retailers own tangible property beyond their headquarters.
Collection is another problem.
Whey they do owe taxes on online purchases, and the vendor doesn't collect then, consumers are supposed to pay them at the same time as they make their annual state or local income tax payments. Few buyers are even aware of this requirement, much less meet it. To help resolve the mess, Congress two years ago passed the Internet Tax Freedom Act, which created a three-year ban on new Internet taxes. That ban ends October 2001. Last May, the House voted to extend the moratorium an additional five years, but the Senate has yet to take up the matter.