ERNST & YOUNG STUDY FINDS TAX REVENUES MINIMALLY IMPACTED BY INTERNET
Ernst & Young's Economic Consulting and Quantitative Analysis Group recently compiled a study that estimates the sales and use taxes that would have been collected on Internet transactions would have amounted to less than $170 million. This figure amounts to one-tenth of one percent of total state and local government sales and use tax collections.
Electronic commerce has raised significant tax policy issues for state and local governments. Many elected officials are
concerned about the erosion of revenue that would have been otherwise collected. Companies are afraid of the administrative logistics of complying with the multitude of different sales and use taxes to which e-commerce is potentially subject.
"This study demonstrates that tax
revenues for state and local governments are being minimally affected by e-commerce," said Thomas Neubig, national director of policy economics at Ernst & Young. He suggests that state and Federal governments should therefore take their time in developing a fair and workable tax system for this new sector.
The magnitude of the effect is due to the tax treatment of the different kinds of transactions labeled e-commerce.
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