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E-taxes aren't really stuffing Uncle Sam's pockets enough

Internet sales tax proves less lucrative than predicted

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Some US states have started collecting the first tranche of internet sales taxes, but it's a lot less than studies were anticipating.

A number of states fought to get a sales tax on internet commerce, saying that the advantages enjoyed by etailers like Amazon not paying the man over bricks-and-mortars shops was unfair. Of course, the fact that federal coffers have been a bit light since the global economic recession and raising taxes on people is pretty unpopular may have had something to do with it.

When campaigners were working towards the new tax law, a University of Tennessee study estimated that the US would lose $11.4bn in 2012 if it didn't start to collect internet taxes. California's share of that was estimated at as much as $1.9bn.

But the state has only taken $96.4m in the September to December quarter last year, its first full quarter of collections, Reuters reported. That result puts California well on its way to its own target of $107m in e-taxes for a year from July 1, but far short of the nearly two billion a year the study expected.

Other states have also used estimates like UoT's to get new tax laws passed, but they're also using similar figures in their state budgets. New York, where Amazon and Overstock.com are fighting the local internet tax law, can expect $360m in sales tax as of this month, according to the State Department of Taxation and Finance, far less than the $2.5bn the study forecast for the same period.

Study leader Professor William Fox said that the shortfall in the estimates could be due to the fact that smaller etailers are exempt from the tax. He also pointed out that sales tax collections have lagged economic growth, suggesting that untaxed commerce has grown. ®

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