ABSTRACT
This chapter examines one of the most pressing tax policy issues that state governments face in the 21st century — the taxing of electronic commerce. The sales tax has not been able to keep up with technological advances, especially with the advent of the Internet. This issue is important given the narrowing of the sales tax base because of exemptions, and the inability to collect taxes on all remote sales. In a practical sense, the leakage of revenue from electronic commerce means that states have to recoup these revenues, either by raising sales tax rates, or exploring other options such as collecting more taxes on remote sales. The former option is not as attractive given the
antitax sentiment in the U.S. However, political pressure is mounting on state government political leaders to try to find a solution. This chapter outlines the issues surrounding the taxing of electronic commerce and some possible solutions to this contentious issue.
