Adam Thierer on Internet sales tax

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October 25, 2011

Adam Thierer, a Senior Research Fellow with the Technology Policy Program at the Mercatus Center, discusses his new paper, co-authored with Veronique de Rugy, The Internet, Sales Tax, and Tax Competition. With several states in the midst of budget crunches, states and localities struggle to find a way to generate revenue, which, according to Thierer, leads to an aggressive attempt to collect online sales tax. He discusses some of these attempts, like the multi-state compact, that seeks taxation of remote online vendors. Thierer believes this creates incentives for large online companies like Amazon to cut deals with certain states, where jobs will be created in exchange for tax relief. This, according to Thierer, creates unfairness for smaller online companies as well as for brick and mortar shops who have to pay taxes to the state where they have a physical presence. He proposes an origin-based tax, which imposes the tax where the purchase is made instead of tracing the transaction to its consumption destination. This proposal, he submits, will level the playing field between brick and mortar companies and online companies, and promote tax competition.

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