1. SALES TAXES AND ELECTRONIC COMMERCE
William F. Fox, Director
Center for Business and Economic Research
The University of Tennessee
June 1999

2. ROLE OF STATE AND LOCAL GOVERNMENTS
Provide the Public Services that
Enhance Quality of Life
Are the Backbone of a Productive Economy
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

3. SHARE OF SERVICES
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

4. ROLE OF SALES TAXES IN STATE AND LOCAL FINANCE
Imposed in 45 States Plus D.C.
6,600 Local Governments
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

5. SHARE OF TAX REVENUES
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

6. IS THE SALES TAX A CONSUMPTION TAX?
Intent is to Tax Consumption
Nonetheless, Sales Tax Base Differs from Consumption
Much Consumption is Exempt
Most services
Some Goods
Many Business Purchases are Taxable
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

7. SALES TAX BASE DIFFERS WIDELY (Sales Tax Base as a Share of Personal Income, 1997)
Greater than 50%
40% to 50%
Less than 40%
No sales tax
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

8. IS THE SALES TAX A CONSUMPTION TAX?
Intent is to Tax Consumption
Nonetheless, Sales Tax Base Differs from Consumption
Much Consumption is Exempt
Most services
Some Goods
Many Business Purchases are Taxable
Must be Destination Based--Use Tax
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

9. TAX BASE HAS NARROWED OVER TIME (Sales Tax Base as a Percent of Personal Income)
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

10. TAX BASE HAS NARROWED OVER TIME
Services Grow Faster than Goods
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

11. PERSONAL CONSUMTPION EXPENDITURES, 1979 and 1998
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

12. TAX BASE HAS NARROWED OVER TIME
Services Grow Faster than Goods
Legislated Business Exemptions
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

13. TAX BASE HAS NARROWED OVER TIME
Services Grow Faster than Goods
Legislated Business Exemptions
Other Legislated Exemptions
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

14. TAX BASE HAS NARROWED OVER TIME
Services Grow Faster than Goods
Legislated Business Exemptions
Other Legislated Exemptions
Remote Purchases
Cross Border Shopping
Mail Order Shopping
Electronic Commerce
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

15. STATE RESPONSE--RAISE RATES
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

16. STATE SALES TAX COLLECTIONS AS A PERCENT OF GDP

17. POTENTIALLY TAXABLE E-COMMERCE EVENTS
Tangible Goods and Services Sold over the Internet
Digitized Services Sold Over the Internet
Access to the Internet
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

18. GOALS IN DESIGNING TAX STRUCTURES
Neutrality
Tax Functionally Equivalent the Same
Destination Basis
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

19. GOALS IN DESIGNING TAX STRUCTURES
Neutrality
Tax Functionally Equivalent the Same
Destination Basis
Equity
Vertical--Difficult with the Sales Tax
Horizontal--Broad Tax Base
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

20. GOALS IN DESIGNING TAX STRUCTURES
Appropriate Revenue Growth Path
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

21. GOALS IN DESIGNING TAX STRUCTURES
Appropriate Revenue Growth Path
Ease of Administration and Compliance
E-Commerce Presents Some Problems
Simplification by States Should be Required
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

22. GOALS IN DESIGNING TAX STRUCTURES
Neutrality
Equity
Revenue Growth
Administrative and Compliance Ease
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

23. SOME OPTIONS TO TAXING REMOTE COMMERCE
Reduce State and Local Spending Growth
Raise Sales Tax Rates
More Federal Finance of State and Local Government
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

24. FEDERAL TRANSFERS AS A PERCENT OF GENERAL REVENUE
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999

25. SOME OPTIONS TO TAXING REMOTE COMMERCE
Reduce State and Local Spending Growth
Raise Sales Tax Rates
More Federal Finance of State and Local Government
Alternative Own-Source Revenues
Personal Income Tax
Business Taxes
Property Taxes
W.F. Fox, Center for Business and Economic Research, UT Knoxville, June 1999