Online Taxation

Today's Washington Post has a story on the Streamlined Sales Tax Project. If you're a reader of Bill Hobbs, then you're already familiar with this effort to begin taxing online sales. Tennessee is a participant in this, but has not, to my knowledge, begun to implement any parts of their proposed legislation. Given the constant bleating about the need for more revenue, you can bet that we'll be seeing it soon.

Many businesses and legislators believe the Internet economy is sturdy enough, and sophisticated enough, now to support taxation. They also believe they're losing significant amounts of money to online sales.

But the story makes the point that the 2002 holiday season produced about $13 billion in online sales. The common mantra in retail is that this accounts for as much as one-fourth of annual sales. We'll be generous and say that annual online sales come to $60 billion (and if someone can provide a more accurate number, please do). That's in an economy that measures around $4 trillion dollars. It's a drop.

State governments drowning in their own extravagant promises and incompetent management will grasp at whatever straw they can. Personally, I'm waiting to see how they handle taxing eBay.