In the past few years we have witnessed tremendous growth of the Internet economy, partly because many states have a policy of excluding pure Internet companies from sales tax. Once again we are faced with the prospect of States levying taxes on Internet sales in the United States. Isn't it strange? For years, mail order companies have operated unfettered by burdensome tax regulations, allowing them to sell out-of-state without charging sales tax. Now the Internet economy is booming and states feel they are missing out. Does this have something to do with the fact that the Internet is so much bigger than mail order? The Internet is very similar to mail order in many ways, offering what is effectively an electronic catalog. Why should it need different tax rules to mail order? In fact there are very good reasons why even the mail order sales tax is unsuitable for the Internet. By making the Internet a tax free zone, we level the playing field for all retailers. The mail order system, of charging tax for sales to states in which the company has a business interest, penalizes larger companies and retailers with physical stores. By removing all sales tax on the Internet, large and small retailers compete under the same rules. Some retailers complain that a tax-free Internet gives pure eRetailers an advantage. If all retailers can sell on the Internet without sales tax, then nobody will have an unfair advantage. The result will be the most efficient and profitable companies will survive. Adding complex tax rules to the Internet will stifle the young start-up companies; the very same companies that have been the life-blood of the new economy. Of course it could be worse ….. we could have VAT (value added tax) as in Europe! If we can't figure out the rules for the US economy, how are we going to be able to agree world wide trading rules? Or will we end up with Internet tax havens, with all Internet companies being set up in remote offshore islands to avoid tax regulations? | 