By Jay Kirchner Online sales for the recent holiday season were, by any measure, boffo. Newspaper headlines focused on the few toys that failed to arrive in time for Christmas, but overall, the only people really disappointed were state and local tax collectors. The tax authorities' inability to collect the hundreds of millions of dollars in sales taxes that would otherwise have been generated by such economic activity surely had them feeling blue and looking forward to this spring, when Congress takes the next step in its consideration of Internet taxation. Besides access-fee taxes, the sales tax issue is the most vexing one for states and local governments.
Some states get more than half of their revenues from sales taxes.
With this much money on the line, it's no surprise that the debate is growing. The current moratorium results from Congress's conviction that a rush to taxation would stifle the Internet boom. As the moratorium ends and the Internet era flourishes, that concern won't be paramount. Assuaging state and local concerns without over burdening online businesses will become the focus. Meanwhile, established local merchants decry the unfairness and hardship of having to collect taxes that their online competitors do not.