Reference no: EM132312757

Question: Sales tax is a tax on the retail sales price of purchases (Hyman, 2014). Sales tax is an indirect tax. State governments set sales tax rate. I think sales tax should be collected on internet purchase. As there is no sales tax on internet purchase, sellers can sell goods at lower price on internet. This gives online sellers undue advantage over brick-and-mortar sellers. If sales tax is collected on internet purchase, the government can collect additional tax revenue that can be used to add infrastructure, and welfare programs. Additional tax revenue will also help to offset budget deficiencies. Other advantage of collecting sales tax on internet purchase is, it will encourage additional competition between virtual and brick-and-mortar stores (Parietti, 2015). Brick-and-mortar stores are losing customers to online sellers because online sellers are able to sell goods at lower price.

There are some disadvantages of collecting sales tax on internet purchase. Enforcement of these laws will be a challenge as sellers can be located anywhere, even outside the country (Parietti, 2015). Businesses can also establish nexus to avoid collecting and paying sales tax. Another disadvantage of collecting sales tax on internet purchase is, it will discourage many small businesses, many operating from home and selling exclusively online. Internet sales is encourages by the sales-tax free environment. If sales tax is collected on internet purchase, consumers will have to pay more to buy goods online, which may decrease aggregate demand. So, it may hurt the growth of economy.