They should not buy simply to avoid taxes. We are now subsidizing the Internet in precisely this way. The typical rate is 5 percent. Some e-commerce depends on this hidden subsidy. Economist Austan Goolsbee of the University of Chicago has estimated that if people had to pay sales taxes, e-commerce might be 30 percent lower.
People think they're simply shopping for the best price, but lower taxes allow lower prices.
Obviously, this matters most for big-ticket items. Goolsbee's estimate doesn't mean that e-commerce would collapse without the tax subsidy. It's now growing faster than 30 percent a year. Superficially, consumers get cheaper products. A simplified, though exaggerated, example shows why.