Jupiter Media Metrix reports that while the October 2001 expiration of the Internet Tax Freedom Act of 1998 will eventually end the Internet’s tax-free status, the anticipated sales tax on all online purchases will not alter consumers’ purchasing habits. According to a Jupiter Consumer survey of US online buyers who have abandoned a purchase in the past, 74% do not choose one online retailer over another to avoid sales tax for purchases under $50.
Under current legislation, state and local governments risk losing up to $7.7 billion in lost tax revenues from online sales in 2005, according to Jupiter analysts. This loss represents 7% of total sales tax revenue. Since the Tax Freedom Act has met its goal of protecting nascent Internet companies and stimulating e-commerce, state and local governments are now eager to recover the tax dollars.
