States Eye Online Services for Tax Bounty
Wow. What's most disturbing about this news story is that some of the states might be considering taxing downloadable products like software or other digital content. We heard the argument that tax revenue was being lost because consumers were buying from merchants on the web instead of brick-and-mortal merchants. That argument is a little easier to accept. But arguing for taxing online services and downloadable content is a BIG step. We all know that it's hard to sell digital content because of peer-to-peer networks. And, it's hard to sell subscriptions to content because many consumers are used to getting content for free. So, now the states will step in and make it even harder to succeed as an online business. Taxing is just an easy way out, but it's not always the smart thing to to. If you kill economic growth as a result of a tax policy, then you end up with less tax revenue.
Then, I wonder about the logistics of collecting the taxes. Sure, they want to simplify the procedure for the States. But what are we going to do when every little small country out there in the world insists that we collect their tax for them. And what about those Internet-based businesses that move to some remote part of the world where it would be difficult to police them. That would make competition difficult for their competitors that play by the states rules.
Posted by Doug Sauder at January 24, 2003 05:14 PM