Internet Sales Tax to be Introduced in US Senate

Sen. Dick Durbin (D-Ill.) could propose sweeping legislation as soon as Monday to tax all online purchases, in a move aimed at closing states’ budget shortfalls.

Such a tax would plow more than $1 billion in tax revenues into New York’s state coffers for the 2012 budget, according to some estimates. William Fox, a University of Tennessee economics professor, said that based on his own estimates, New York lost about $865.5 million in tax revenues in 2010 — almost enough to close that year’s $1 billion budget deficit — based on its four percent tax rate.

However, he acknowledged that a research report he helped author last year did not appropriately factor in the blistering pace of online sales growth over the past several years. Fox estimates that the annual growth rate for online sales was actually about 14 percent from 2006 to present, rather than the study’s 9.9 percent.

Some reports indicate that online sales hit a whopping $165 billion in 2010 — an annual growth rate closer to 15 percent, which would put New York’s tax receipts at close to $1 billion.

Durbin’s bill, dubbed the Main Street Fairness Act, is being portrayed as an end to the tax holiday that online shoppers on major internet vendors have enjoyed for years.



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