• Should purchases made over the Internet be taxable?

Act (S . 1433 , which would impose a 5 percent sales tax on all retail sales over the Internet and through mail . Money collected from the tax would be sent to the U .S . Treasury and deposited in the Sales Tax Safety Net Trust Fund ' That money would ultimately be distributed to the states based on a formula and used primarily to increase teachers ' salaries . If salaries were already high in the state , the funds could go for other educational purposes

Hollings ' proposal in its current form is visible and taxes all sales at

the same rate . It has minimal privacy problems because the buyer 's residence is irrelevant the customer pays the same tax irrespective of his residence or the vendor 's location . As a result , very little or no information is needed about the buyer , except for the expensive shipping purposes

However , the Hollings bill would represent a new and unprecedented federal incursion into state activities . Apparently , the states would be unable to collect any sales or use taxes on merchandise bought online or through mail . Thus it is unlikely that a state could collect use taxes from one of its citizens who had bought cigarettes over the Internet in to avoid the state 's taxes . While states don 't collect a lot of money through use taxes , the Hollings bill may undermine any future attempts to do so , costing the states revenue

But wouldn 't those losses be more than made up when the states receive their share of the tax ? Probably , but that money comes with strings . It must be used on education , and so would not be available for general revenues

The National Governors ' Association (NGA ) has gone far beyond the issue of whether or how to tax Internet access and sales . It envisions restructuring the...