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August 31, 2006
Sales taxes and the Internet
A major issue for many states is that the sales tax they levy isn’t collected on Internet sales. Does this mean that if a state increases its sales tax rate it may drive more buyers to the Internet? N.C. State University economist Mike Walden says there's good evidence now that the answer is "yes."
"We have a new study that carefully tracks sales tax rates and Internet sales. And what it found was that for every 1 percent increase in a state’s sales tax Internet sales from people in that state go up by 6 percent," Dr. Walden says. "So obviously what this is showing is if you have a higher state sales tax that is going to drive some people to go buy off the Internet. And what this means is that states won’t collect as much as they expected from a sales tax hike, and it gives us more reason to hope there’s some resolution on the taxation of Internet sales."
Posted by deeshore at August 31, 2006 07:15 AM