State Taxation of Internet Transactions [November 1, 2011]   [open pdf - 294KB]

"The United States Bureau of the Census estimated that $3.4 trillion worth of retail and wholesale transactions were conducted over the Internet in 2009. That amount was 16.8% of all U.S. shipments and sales in that year. Other estimates projected the 2011 so-called e-commerce volume at approximately $3.9 trillion. The volume of e-commerce is expected to increase and state and local governments are concerned because collection of sales taxes on these transactions is difficult to enforce. Under current law, states cannot reach beyond their borders and compel out-of-state Internet vendors (those without nexus in the buyer's state) to collect the use tax owed by state residents and businesses. The Supreme Court ruled in 1967 that requiring remote vendors to collect the use tax would pose an undue burden on interstate commerce. Estimates put this lost tax revenue at approximately $11.4 billion in 2012. […] In addition, H.R. 3179 (Representative Womack) would also grant states the authority to compel out-of-state vendors to collect use taxes provided selected simplification efforts are implemented. A related issue is the 'Internet Tax Moratorium.' The relatively narrow moratorium prohibits (1) new taxes on Internet access services and (2) multiple or discriminatory taxes on Internet commerce. Congress has extended the 'Internet Tax Moratorium' twice. The most recent extension expires November 1, 2014. The moratorium is distinct from the remote use tax collection issue, but has been linked in past debates. An analysis of the Internet tax moratorium is beyond the scope of this report. This report will be updated as legislative events warrant."

Report Number:
CRS Report for Congress, R41853
Public Domain
Retrieved From:
Via E-mail
Media Type:
Help with citations