eir borders, such as California, have long favored generous taxation rules regarding Internet transactions as a way to protect their Internet industry. California passed a moratorium on Internet sales taxes long before the federal government took the same measure; California also has one of the most active Internet industries in the United States ("To Tax," 1998, n.p.).
As of mid-1998, nine states taxed Internet services as did numerous local governments. These taxation policies were based on the idea that Internet tax revenues would greatly exceed those generated by catalog sales and mail order sales, and those transactions were subject to some type of taxation. California was the sixth state which passed a moratorium using the reasoning that taxation would inhibit growth of an industry which, left untaxed, would provide considerable economic growth ("To Tax," 1998, n.p.).
Issues of taxation nearly always raise issues of whether the taxes are "fair" to all members of society, and the Internet taxation issue is no different. Some critics of the Internet tax moratorium are of the opinion that sales taxes are not intended to tax businesses, they are intended to tax the purchaser. These analysts consider sales taxes to be use taxes and that the businesses merely collect the tax for the government. It is therefore irrelevant whether a business has a physical presence in a particular location and entirely relevant where the purchaser is located as to which taxes are appropriate to levy. This approach places considerable burden on states and local governments to determine where a purchaser is located with regard to Internet purchases (since purchasers could be located anywhere in the world), but illustrates the difference in how various stakeholders view the issue ("To Tax," 1998, n.p.).
The issue of Internet taxation also raise the social question of regressive versus progressive taxation. Regressive taxes are those whic...