Online sales tax
The online sales tax is also often called Internet sales tax. It is important to say that the online sales tax is not really a tax that would be paid by the online businesses. The idea behind the online sales tax is that online businesses are just collecting tax which internet customers are already legally obligated to pay.
Why is online sales tax a problem
States are estimated to be losing close to $23 billion in tax revenue each year due to low compliance on the part of their taxpayers. So, the states do have a great motivation to collect online sales tax. California is a prime example. California’s tax collector estimates the unpaid online sales taxes at $1.15 billion in the last fiscal year. The board estimates unpaid online sales tax will grow to almost $1.2 billion this year and $1.27 billion in 2012.
On the other hand the online sales tax is not the same in all states. Residents of high-tax states, like Massachusetts, have driven across the border to no-tax states, for example New Hampshire. Driving across the border pays of when making big ticket purchases. And because internet commerce is very easy to move to other state, states with higher online sales tax will in great disadvantage. The advent of the internet and online shopping has caused the problem of online sales tax to explode.