State and local governments will lose $13.3 billion in sales tax revenues in 2001 due to difficulties collecting taxes on rising volumes of Internet transactions, according to a study released yesterday.
The study, commissioned by the Institute for State Studies and done by the University of Tennessee using data collected by Forrester Research, Cambridge, MA, also said the $13.3 billion figure was 41 percent higher than its previous 2001 forecast due to higher rates of online business-to-business transactions.
In addition, the study found that in 2006 that figure would grow to $24.2 billion and in 2011 to $29.2 billion because of increasing commerce over the Internet.
The report will undoubtedly add fuel to an already lively public policy debate over whether and how governments should collect tax from e-commerce and other “remote” sales.
At issue is a 1992 Supreme Court decision that says states cannot require retailers such as catalog companies and merchants that use the Internet to collect sales taxes unless they have a physical presence in the state.