NC State Economist Dr. Mike Walden – Taxing Internet Sales

There’s a proposal in the U.S. Congress to allow states to tax purchases made on the Internet, even if the selling company does not have a location in the state. Why is this proposal being made? Is it just a way for states to raise more tax revenue? N.C. State University economist Mike Walden responds.

“Well, let’s look at North Carolina. North Carolina derives a substantial amount of its revenue for the state as well as counties from the sales tax.

“One of the issues with the sales tax, of course, is you pay it if you go into a store here in North Carolina. If you go online you don’t pay a sales tax unless you voluntarily report that, which many people probably don’t.

Most states are in that situation, so this is legislation that’s been talked about for a long time, which simply says in terms of the proponents. this is going to level the playing field. Right now, they argue that the playing field is not level. You buy at a store in your state, you pay a sales tax. You buy online, you don’t.

This could be a big deal for North Carolina if it went through. Estimates are that the state could bring in several hundred million dollars of additional revenue annually. Opponents, of course, some would argue this is a new tax.

Some also worry about the record keeping that online sellers will have to do. There’s something like 9,000 different taxing jurisdictions in the country, and online sellers would have to keep records on where those sales are being made so they can report the tax. There’s a lot of momentum behind this. I would not be surprised if it’s passed. If it does pass, this could be a game changer in terms of revenues for states.”


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