Question

What are the positive and negative implications of collecting sales tax on Internet purchases?

Answer 1

The positive and negative implications of collecting sales tax on internet purchases:

Positive implications :

• Collection of sales tax on internet purchases, could add an additional source of revenue for our government. The government can use this income for repayment of it's debt or could also use it for developmental activities.
• The brick and mortar stores are slowly losing customers to the internet operated stores as they offer huge discounts. Now, after the imposition of the sales tax, goods available online will be equally expensive and this will make people purchase more and more through brick and mortar store as customers can purchase form these stores by looking at a product live. These stores have undoubtedly lost customers as a result of e-commerce.

Negative implications:

• After the imposition of such taxes, people might opt for slowly shifting from online purchases to purchasing from brick and mortar stores. This will help the local economies but will hurt concept of a free market in the country. The concept of a sales tax free way of conducting business had attracted lots of business which were operating on a smaller scale and did not sufficient capital. Internet sales are encouraged by the sales-tax free environment abounding today.
• Regulating the internal market place might be a  difficult task to accomplish by the Government. It is unclear how the government will impose laws on the Internet. Imposing regulations on online retail might be excessively difficult right now.