The collection of state and local sales and use taxes when individuals purchase items over the Internet or from other remote sources is an issue that is now before the Congress. The Internet Tax Freedom Act of 1998 established an Advisory Commission on Electronic Commerce to make recommendations about Internet taxation, including whether to require retailers to collect sales taxes on Internet purchases. But the commission made no formal recommendations, and the issue has remained unresolved. This Congressional Budget Office (CBO) paperprepared at the request of the Senate Finance Committeeuses an economic framework to evaluate the various arguments that have been advanced by proponents and opponents of remote collection of sales taxes. In keeping with CBOs mandate to provide objective analysis, the report makes no recommendations.
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