Exams: There will be two exams during the semester. You will be expected to apply the concepts from class and in the reading (even if not covered in class). The exact coverage of each test will be...

Running Head: TAXING INTERNET AND MAIL ORDER SALES 1
The Economic Impact in Taxing Internet and Mail Order Sales
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TAXING INTERNET AND MAIL ORDER SALES 2
State Tax Paper: The Economic Impact in Taxing Internet and Mail Order Sales
Introduction
There is a considerable increase in the online retail sales in the world, especially in the
United States. An increase in the online sales has created more complexities in determining the
suitable taxation method to charge the taxes. Sales tax forms a significant part of the revenue to
the state. Every state has their taxation and has different fiscal policies and implications. There is
an economic impact in taxing the internet and mail order sales.
Taxation on internet and mail order sales should be tactful as they are a good source of
evenue generation. At the same time ove
urdening them will have an adverse impact on the
online industry. California’s state tax law is considered for performing this analysis to have a
clear understanding of the economic consequences of taxing the internet and mail order sales. An
in-depth analysis is being ca
ied out in this paper by analyzing the consequences on the
economy by not charging taxes & poor nexus definition; and the benefit of expanding the
definition of nexus to the state.
Internet and Mail Order Sales Taxes Overview
For improving the online sales and mail order sales, there were more privileges in the
taxation. By making the internet sales tax free, the country was losing about $10 billion on the
tax revenue (Einav, Knoepfle, Levin, & Sundaresan, 2014). The sales tax has an influence on the
uyer behavior as it will increase the overall amounts that are being paid by the customers
towards their online shopping.
There are more complexities involved in selecting the best taxing policies for the
espective state. In a
ick & mortar retail stores, the sellers have to charge their customers with
the respective sales taxes if the seller is from the same state as the buyer. On the other hand, the
TAXING INTERNET AND MAIL ORDER SALES 3
seller will not be in a position to charge the buyer of a different state to pay the taxes. The major
challenge associated with the taxation is the nexus. Nexus is related to the physical presence in
the respective state.
In general, those stores that have online and physical presence will charge sales taxes on
their sales while Amazon or another e-commerce platform will charge taxes on some products.
The evolution of taxes to these online sales was when the country able to realize that they lost
sizable tax revenue from those sales made through the e-commerce (Einav, Knoepfle, Levin, &
Sundaresan, 2014). There were various debates and arguments related to the taxes of these online
sales. It resulted in every state adopting their best suitable tax for these e-commerce businesses.
There are more challenges faced by the state, and local government in collecting the
espective taxes due to the complexities. Quill is the major factor that was causing more trouble
to every state in deciding about the taxes on the internet and mail order sales (Calhoun, 2016).
There is a requirement for the new economic nexus to overcome the problem associated with the
Quill. As per the general rule, a state is eligible to charge taxes under Quill on if (Steingold,
2016): The company has a warehouse in the respective state.
 The company has a store in the state.
 The company has an office in the state.
 There is a sales representative of the company in the state.
Economic Impact of Not Charging Taxes on Online Sales
The state charges sales taxes to the sellers. These sellers charge the respective sales taxes
directly to the end-customers. Therefore, increase in the tax rate will increase the overall amount
paid by the buyer over the products they purchase. For instance, there was an observation that if
the state increases the taxes by 1% that is a tax increase from 8% to 9%, then there was an
TAXING INTERNET AND MAIL ORDER SALES 4
increase in the online sales by 1% to 2%. It clearly indicates that if the online sales are not
charging sales taxes, then most of the customers will switch to the online sales (Einav, Knoepfle,
Levin, & Sundaresan, 2014). The ultimate focus of the customer is to pay less for the products.
It will have an adverse impact on the retail store sales.
It will have a negative impact on the state tax revenue and will create the bad economic
effect. If there are no sales taxes being charged to the online sales, then more customers will
egin to prefer the online sales and ultimately, there will decrease the tax revenue generated by
the state and overall country. Similarly, if there is no proper definition of the Nexus and the taxes
y the state, then there will be greater opportunity for the business to avoid taxes. For instance, if
the state is indicating that the sales that are made from the different state sellers will not be taxed,
then there will be poor tax collection from the online sales taxes.
Whenever there is a decrease in the taxes, there will be a decrease in the state revenue.
When there is a decrease in sales revenue, there will be an increase in the budget deficit. If the
udget deficit increases, there will be an increase in the requirement for Federal Reserve funds. It
will add pressure to the federal budget in allocating more resources to the states with poor
evenue. Then it will ultimately increase the budget deficit of the country. It will result in
companies and buyers having money and obtaining all facilities and not paying appropriately to
the government. It will cause a negative effect to the economic growth of the country. It will
esult in poor and even negative economic growth of the country.
Economic Nexus
The new economic nexus was being proposed by every state to ensure that there is a
equirement for the state to collect more taxes from the online sales. As per the new economic
nexus, even if the seller who sold their goods to the buyer of different state does not have any
TAXING INTERNET AND MAIL ORDER SALES 5
physical stores in the state will be eligible for collecting the state taxes from the buyers if they
are obtaining any economic benefit from the state (Dion, 2016). The new economic nexus
focuses on the economic...