Great Internet tax holiday may be ending
With state governments scrambling to find alternate sources of revenue as they face huge deficits (and no help from the Bush White House), online sales tax is an obvious place. In fact, state governments lost some $19B in revenue due to tax-free ecommerce in 2002 according to this Wall Street Journal story (subscription required). Amazon is yet to take the plunge but many other retailers have already made the change.
Consumers have long gravitated to online retail sites because they could escape the sales tax charged by stores at the mall. That savings, anywhere from 4% to more than 8% depending on where you live, has helped fuel Web sales of everything from clothes to major appliances.
But that tax break is beginning to fade. Just last week, more than a half-dozen major retailers agreed to start collecting state and local taxes from their Web and catalog customers. The voluntary move was aimed at heading off a bigger and broader clash with cash-strapped governments around the country.