INTERNET SALES

Taxing Internet Sales

Taxing Internet Sales

Introduction

The internet's advent has given rise to new opportunities to business. Internet allows businesses o operate without having any physical presence. This has enables businesses to significant reduce their costs of operating and increase profit margins. Till the 1990', the United States has no regulations over the usage of internet. The lack of regulation meant companies were able to operate without having to abide by the general rules of trade. Businesses operating through the internet did not have to pay taxes due the absence of the typical brick-mortar store. Until recently regulations regarding taxing internet sales have been different depending on the state in question. In 1996, the United States government started to believe internet sales could help expand the tax-base and generate federal revenue. The Internet Tax Free of 1998 saw the move to tax internet sales being halted. The court's ruling was a move to prevent thousands of United States' jurisdictions from laying claim to tax revenue from internet businesses. The court, however, did not rule out the possibility of taxing sales made through the internet. Critics of the tax regulation on internet sales argue that the benefits far outweigh the costs and businesses should not be taxed. Another point in the argument is that critics believe that governments may have generated a far greater amount of revenues without realizing the gains and benefits to the economy (Bullard, 1998).

The counter argument to this debate is that opposing critics believe the benefits would remain the same even if internet sales are taxed. The opposition believes the federal government can earn much needed tax revenue in this time economic crisis. This taxation should expand to all levels of governments in all states of the country. The Congress has been pursuing to implement the tax bill on businesses operating through the internet. The different forms of internet taxes are as below;

Internet access tax

The first form of internet taxation is taxing the Internet Service Providers by charging the number of times users access the internet. These taxes are currently applicable on statutory level. Internet service providers are not liable to pay taxes on the extent of internet usage. The category for such taxes varies from one state to the other. Some states consider it as a telecommunication tax. Others label such taxes as service charges; some states exempt companies from usage taxes. The states that charge taxes on internet usage include Hawaii, Texas, New Hampshire, South Dakota, Wisconsin and Ohio. These states currently charge $25 every month from several internet service providers.

Telecommunications tax

The states of Tennessee and Wisconsin categorize internet usage charges under telecommunication tax. Falling under this category, internet service providers often have to pay heavy amount of taxes due to general telecommunication regulations. The various forms of the internet such as, DSL, cable, wireless or ISDN, are charged with varying level of taxes. This can create an unfair advantage for some ISP's. The form that is charged least may have ...