Sales tax revenues are diminishing for the U.S. states due to the increasing prevalence of e-commerce. Therefore, the Advisory Committee on Electronic Commerce (ACEC) has just hired you to submit a plan for a system of sales tax for this relatively new form of commerce. Here is some background material for your consideration:
- Currently, around half of the states subscribe to the Streamlined Sales and Use Tax Agreement, which enables sellers who volunteer to do so to collect sales taxes on behalf of participating states
- Currently, the states only require that businesses that sell goods over the Internet remit sales tax on intrastate sales. However, a majority of Internet sales are interstate, and those sales are not all taxed at present. An estimate of losses for 2006 from such sales is $5 billion for the states; for 2012, the estimate is $23 billion.
- Currently, vendors without a physical presence in a state are not required to collect tax on sales to customers in that state.
- Some leaders are concerned that interstate e-commerce threatens the viability of local (intrastate) vendors due to this current tax advantage.
- Any plan should not compromise the privacy of e-commerce consumers or discriminate against one state to the benefit of another.
Therefore, your task is to develop a tax plan for the states regarding interstate e-commerce. Be sure to address all of the relevant revenue administration standards when discussing your proposal.