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Electronic Commerce and the State Retail Sales Tax: A Challenge to American Federalism


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  • Charles McLure
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    Electronic commerce, by magnifying problems with the existing sales tax, has precipitated reexamination of basic precepts of fiscal federalism in the United States, not just taxation of remote sellers. This paper examines: key features of electronic commerce; the Internet Tax Freedom Act and the Commission it mandates; tax assignments in the United States; problems in assigning sales taxes to subnational governments; constitutional impediments to requiring remote vendors to collect sales and use taxes; tentative findings of the National Tax Association's project on taxation of electronic commerce; and implications of the current debate over taxation of electronic commerce for intergovernmental fiscal relations in the United States. Copyright Kluwer Academic Publishers 1999

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    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 6 (1999)
    Issue (Month): 2 (May)
    Pages: 193-224

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    Handle: RePEc:kap:itaxpf:v:6:y:1999:i:2:p:193-224

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    Keywords: electronic commerce; Internet Tax Freedom Act; Quill; sales tax; fiscal federalism; intergovernmental fiscal relations; National (NTA) Tax Association Electronic Commerce Taxation;


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    1. Hellerstein, Walter, 1997. "Transaction Taxes and Electronic Commerce: Designing State Taxes That Work in an Interstate Environment," National Tax Journal, National Tax Association, vol. 50(3), pages 593-606, September.
    2. Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer, vol. 5(3), pages 429-442, July.
    3. Joel Slemrod, 1989. "Optimal Taxation and Optimal Tax Systems," NBER Working Papers 3038, National Bureau of Economic Research, Inc.
    4. Fox, William F. & Murray, Matthew N., 1997. "The Sales Tax and Electronic Commerce: So What's New?," National Tax Journal, National Tax Association, vol. 50(3), pages 573-92, September.
    5. Peha, Jon M. & Strauss, Robert P., 1997. "A Primer on Changing Information Technology and the Fisc," National Tax Journal, National Tax Association, vol. 50(3), pages 607-21, September.
    6. Austan Goolsbee, 1998. "In a World Without Borders: The Impact of Taxes on Internet Commerce," NBER Working Papers 6863, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Rahul Mukherji, 2002. "Governing The Taxation Of Digitized Trade," ASARC Working Papers 2002-05, The Australian National University, Australia South Asia Research Centre.
    2. Horacio L. P. Piffano, 2007. "Argentina and Brazil: Fiscal Harmonization and Subnational Sales Taxation – State / Provincial VAT versus State / Provincial Retail Sales Tax," Department of Economics, Working Papers 069, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    3. Charles McLure, 2000. "Implementing Subnational Value Added Taxes on Internal Trade: The Compensating VAT (CVAT)," International Tax and Public Finance, Springer, vol. 7(6), pages 723-740, December.


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