E-commerce still too young for sales tax

Legislators in Indiana have been considering imposing a state sales tax on items purchased via the Internet, arguing the state could lose money from uncollected sales taxes on these items, the Associated Press reported Sept. 7. Groups such as the National Governors Association are clearing the way for such taxes, as well.\nElectronic commerce continues to gain popularity because it allows consumers to purchase items easily and conveniently, or at decreased prices. It also offers items consumers might not be able to find locally. But e-commerce is still in the developmental stage. Adding a tax in these crucial years could hurt the growth of the industry.\nNearly 60 percent of consumers would make fewer purchases if they had to pay a sales tax on Internet purchases, according to a survey by BizRate.com, the Internet's leading e-commerce rating site and marketing research firm. The survey assembled information from almost 17,000 online consumers, 87 percent of whom said they do not shop online solely to avoid a sales tax.\nAnother issue is whether e-commerce is a threat to "brick and mortar" retailers, and if a sales tax would curb the number of people turning to so-called "click and mortar" or online retailers for their goods. Although some argue e-commerce takes business away from these retailers, its market share is still small, despite its unprecedented growth. According to the U.S. Commerce Department, online retail sales accounted for only 0.64 percent of total U.S. retail sales. \nThe Internet Tax Freedom Act of 1998 mandated the establishment of a special advisory commission on e-commerce, which released its full findings in April. The commission stated now is not the time to establish new taxes, but rather to study the tax laws and to extend the current moratorium on proposals for new Internet sales taxes, allowing e-commerce to evolve.\nClearly, a new sales tax on items purchased electronically would only serve to hinder e-commerce and its growth. The state might lose some money as a result, since 40 percent of the state's revenue comes from sales taxes, according to the Associated Press. But Indiana is fiscally robust, according to Gov. Frank O'Bannon's State of the State speech, and thus is not in any immediate fiscal danger from e-commerce.\nAt some point, a tax might be necessary to stop people from turning away from "brick and mortar" retailers. But imposing a tax now is unnecessary, and could hinder the growth of an amazing new industry. The state should put this decision on hold for several years, and allow e-commerce to develop more fully.