The courts have found that Internet commerce is similar to interstate commerce in that it is largely exempt from taxation. Nonetheless, many state governments are attempting to tax the Internet broadly, levying transactions that would otherwise be considered nontaxable under the Commerce Clause of the U.S. Constitution and related interstate commerce statutes. This investigation assesses the current status of the taxation of Internet commerce and seeks to identify the factors that are associated with how states apply taxes to Internet commerce. Although a number of demographic, fiscal, and state organizational factors are associated with the application of taxes on Internet commerce, few of the relationships are strong enough to merit further attention. Moreover, recommendations are made to Congress, governors, and legislatures regarding how they may ensure that laws and programs designed to regulate the collection of Internet taxes are implemented in the fairest and least disruptive manner possible.
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