On Friday the US Senate passed a motion supporting the rights of states to collect sales taxes on internet sales.
While not a binding vote or a law, this is the latest blow in the fight to control, and tax, online commerce.
The stakes are high, companies like Amazon have built their business models on basing themselves in low tax jurisdictions while many bricks-and-mortar retailers have complained they are at a disadvantage compared to out-of-state or international suppliers.
For consumers a few dollars in avoided tax isn’t the main reason they shop online, most internet shoppers cite a better range, convenience and, in many cases, superior service as the reasons they buy over the web.
But it is clear the online retailers do get an advantage over local stores.
While provincial governments cite protecting employment in their regions as part of the motivation for trying to tax online sales, the bigger issue is the desperate search for sources of revenue to balance cash strapped state and local budgets.
Those budget requirements aren’t going to ease – the global economy is restructuring in a way that doesn’t favour 19th Century levies like sales tax or stamp duty, while aging populations and declining incomes are increasing demands on government services.
With governments caught in a pincer of rising costs and falling revenues, it’s not surprising they are trying to find ways to get more money.
It’s not clear though they’ll win this battle though, the Senate vote is a symbolic gesture and the difficulties of being able to tax all forms of internet commerce can’t be underestimated.
The struggle ahead for local governments also can’t be understated, the public demands more services while administrators have to deal with rising infrastructure costs and the pension liabilities of retired public servants, teachers, firefighters and police.
Even the bravest politician struggles to find the political capital needed to deal with that challenge.
How we tax the internet is going to be a task that will define our governments and society in the first half of this century. We’re going to have to think very carefully about the choices we have ahead.
Tax image courtesy of ctoocheck through sxc.hu