(National Bellas Hess,386 U.S. 753, 1967; Quill, 504 U.S. 298, 1992). This has meant that use taxes have rather extreme complianceproblems and are little known by most consumers (see Trandel, 1992). Enforcement of the use tax on consumershas only been effective for goods like automobiles that must be registered in the state of use.ഊ3setting of tax policy.2Empirical work on the responsiveness in border communities to taxes andother such policies has tended to bear out these predictions by finding large elasticities in suchlocations.3Against this backdrop, then, perhaps the key issue that the Internet poses for tax policy isnot so much its potential to create a world without borders but rather to create a world of onlyborders-a world in which everyone is as responsive to local taxation as people who live ongeographic borders. With that perspective, it is clear why state lawmakers and some in thepopular press have decried “the disappearing taxpayer” and have called for reform (see TheEconomist, 1997a; 1997b). State Tax Notes has declared the issue of taxes and electroniccommerce “the hottest topic in multistate taxation” (Sheppard, 1998) and the National GovernorsAssociation itself has called for a uniform tax on all Internet and mail-order sales. They argue thatthis would protect their revenue base and protect “Main Street” businesses.4On the other hand, there is also serious opposition to taxes on the Internet. Theopponents have argued that introducing taxes now might seriously impede the Internet’s growthat a critical stage of early development (see, for example, Stephenson and Zeisser, 1998). Therecent passage of the Internet Tax Freedom Act is certainly one manifestation of this viewalthough in its final form it does not prohibit uniform sales taxes.5Other opponents have arguedthat compliance with the thousands of local tax rates, or even monitoring those rates, would beunduly burdensom...
