Press Release


Jubi Headley
The U.S. Conference of Mayors
(202) 861-6766

  • Internet Tax Commission Makes Headway on E-commerce
  • Principles for Making Electronic Commerce Fair and Modernizing Sales Tax Systems for the 21st Century

  • Collecting Sales Tax Over the Internet: Myth vs. Fact

    Myth: The Internet Tax Freedom Act of 1998 gave Americans a three-year sales tax holiday.
    Fact: The moratorium only affected "new" taxes. It did not impact existing sales taxes. While the law requires buyers who weren't charged sales tax to voluntarily hand it over to the state on their own, few comply.

    Myth: E-commerce companies are "infant" fledgling businesses that need a break.
    Fact: Massachusetts-based Forrester Research expects electronic sales to surpass $184 billion by 2004.

    Myth: E-commerce businesses argue that the software doesn't exist that can handle complicated tax collection scenarios.
    Fact: Software does exist, and is already used by businesses across the country. Taxware International (, considered the market leader, integrates with Netscape's CommerceXpert software, to provide accurate sales tax calculations. IBM and Open Market have similar systems, as well as DPC Computers' Zipsales ( and Vertex's Quantum ( C/NET

    Myth: But the software can't handle all the different taxing jurisdictions found in the U.S. and classes of products taxed.
    Fact: It can tax different products at different rates. It can tax at all jurisdiction levels. It can exclude tax-free products automatically. It can accommodate special tax situations (such as a local jurisdiction's annual tax-free days).

    Myth: Since tax laws are always changing, no software can keep up.
    Fact: Several of the commercial software companies are providing the most complex level of tax compliance by continuously expanding and updating their products. Some e-mail upgrades to their clients on an average of every 28 days. The upgrade takes only minutes.

    Myth: The software is too expensive for most businesses.
    Fact: Some of the tax software solutions for e-commerce sales retail for as little as $1,000.

    Myth: Collecting sales taxes adds to business costs.
    Fact: Many states allow vendors to retain a portion of the sales taxes they collect. The portions retained by vendors across the nation can range from 1% of total sales tax revenue collected in Indiana to a high of 4% of total sales tax revenue collected by small vendors in Virginia.

    Myth: Tracking of local sales taxes just can't be done.
    Fact: "By offering integrated calculation and tracking of local sales taxes, Netscape is making it even easier for merchants and publishers to conduct commerce on the Internet." Jim Sha, Vice President and General Manager, Internet Applications, Netscape Communications Corp. Taxware, 1999

    Myth: The total sales taxes lost is "insignificant."
    Fact: According to the National Association of Counties' 1998 Wage and Salary Survey median for the position, recent estimates of 1998 losses of $170 million would have enabled every county in the nation (3,066) to hire two additional law enforcement officiers.

    Myth: Those businesses that collect sales taxes on e-commerce purchases will not survive long on the Internet.
    Fact: Some of the most recognizable corporations collect taxes on e-commerce related sales, such as IBM, Mobil, Microsoft, JCPenney, Staples, Gateway Computers, Circuit City and The Gap, and their sales continue to rise dramatically.