Should Sales Taxes Be Imposed on E-Commerce?

We study the impact of E-commerce across state lines in the U.S. on tax revenue, public good provision, and real income. In particular, in light of the unenforceable nature of interstate taxation, we evaluate the potential gains from coordinating sales and income state taxes among sovereign jurisdictions. We find that the revenue at risk is small and that the welfare gains or losses of any countervailing policy measures, in particular those associated with the Streamlined Sales Tax Project (SSTP), are even smaller.

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