No Free Lunch With Internet Sales Taxes; Sales Tax Act Will Like a Tariff

Comment I posted to "The Battle over Internet Sales Taxes" by Howard Gleckman on TaxVox blog:

Behind every Internet sale are physical locations of the business, its headquarters, its IT department and servers, its distribution center, etc. These locations pay fees and local, State and Federal taxes based on their geographical presence and volume of business.

Adding a sales tax on top will act like a tariff. In will increase the transaction cost and price of buying the item on the Internet, resulting in decrease sales volume and lower the tax revenue to the localities where the Internet businesses are located.

It will cause relocation of distribution centers and because it will act as a price increase, sales volume will decline, employment will decline and tax revenue will be much less than anticipated.

Read the complete blog post here.