And a wire service story accused Internet vendors of enjoying a ''free ride,'' warning that local retailing could cease to exist. Not to be outdone, Congress appointed a commission earlier this month to study the issue. Of course, not all Internet purchases are tax-free, only those made across state lines. In other words, electronic commerce is treated exactly the same as mail-order business. And for mail-order, the Supreme Court says that states have no authority to tax outside their borders without the express permission of Congress.
Most states ask consumers to pay a ''use tax'' in lieu of sales tax on all purchases.
Few consumers volunteer. At first glance, the pro-tax case sounds reasonable. In theory, they shouldn't be. But in the real world, there are several reasons why letting states tax e-commerce from out of state is bad policy. First, there is no immediate danger of large revenue losses for traditional retailers or state tax authorities.