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E-Commerce on E-asy Street

Buy a $10 widget at your local hardware store in most states, and you pay a sales tax. Buy it off the Web and you pay no tax.

Is that fair? No. But solving that problem won't be easy.

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One part of one solution does appear to be simple: Just tax the Internet purchases of each person by the tax rate in his or her state. Collecting such an e-commerce tax is technically feasible. A national agency could require every mom-and-pop e-business to pay a state sales tax by tacking it onto an electronic purchase that uses a credit-card number. The agency would then distribute the money to each state.

That tax money would help those states (and cities) - which now rely heavily on a sales tax to provide government services - from not losing tax revenue as the nation's business moves from Main Street to the now-untaxed Web Street.

But alas, what happens if those e-businesses move to another country, avoid an e-tax, and still ship goods to American buyers? The world is shrinking fast in this digital age.

And what if this e-tax collection dampens the Internet revolution, which is fundamentally reshaping the economy of not only the United States but the world?

Those are just a couple of the Big Questions now before The Advisory Commission on Electronic Commerce, which was created last year by Congress. The commission will make its final recommendations next April.

Then Congress must tackle this difficult problem - one that would challenge even America's Founding Fathers: How does a nation-state tax itself in an electronic global economy that defies borders (and tax collectors)?

More than just a tax question, it's an identity question: Are we global traders and buyers first, and citizens of a country second?

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We hope that all sides in this debate can find a balance between our need to tax ourselves for government services and the global rush to use the Internet for business. Finding that balance may take compromises and constant attention to ideals of fairness.

Of course, the whole sales-tax question could be avoided if states chose to rely mainly on property and income taxes. But that would shift tax burdens in ways that might spark their own revolutions.

And what about a global sales tax on e-commerce? As we saw in the Seattle protests against the World Trade Organization, moves to expand global governance over trade are troublesome at best.

No, the irony of the marketplace is that it both lifts nations and perplexes them with its inventive ways. It's a golden goose that both needs and often defies the saddle of taxation.

As mundane as state sales taxes may be, the Internet has elevated this topic into a cosmic question that requires all of us to look for an answer.

(c) Copyright 1999. The Christian Science Publishing Society

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