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 which pose a greater burden to the impoverished because they pay a higher percentage of their income in taxes. Sales taxes are generally considered regressive because the poor spend more of their income (proportionately) than the wealthy, and so pay a greater percentage of their income in sales taxes. ...