| This study deals with the impact of electronic commerce (e-commerce) on sales tax revenues in Florida. It uses econometric modeling to forecast taxable retail sales and compares two models. Based on the separation of consumer sales (durables and nondurables) from total taxable sales, changes associated with sales suitable for electronic commerce are scrutinized. Results show that only the model that focuses on consumer sales, not the model for total sales, documents a substantial difference in forecast reliability. Forecasts for 1995–1999, the period of inception of electronic commerce, are compared to forecasts for 1989–1994. The errors in forecast increased three-fold both in terms of mean percentage error (M.P.E.) and mean absolute percentage error (M.A.P.E.).; Forecasts for total taxable consumer sales and total taxable sales for 1995–1999 are based on data from 1964–1994. They are accurate to .2% in terms of M.P.E. during the 31 years before electronic commerce but declined to −13.7% during the e-commerce period. Modifications in the forecast model to include e-commerce variables are set forth.; Potential variables for electronic commerce relate to growth in the Internet, high-tech jobs, Internet domain name registrations, college graduates, high-income households, residents 30–49, and metropolitan population. These trends are found to closely correlate with growth in the error of the sales forecast for 1995–1999 based on the earlier model.; The impacts of electronic commerce on government revenues include equitable access to the Internet, inter-jurisdictional competition, fiscal disparities, public choice, globalization, proposals for a national sales tax, value added tax (VAT), use taxes, taxability of services, and the moratorium on Internet taxation. Legal issues regarding interstate commerce are included. The implications for government finance are summarized in the conclusions.; A new theoretical concept, the “dual dilemma,” is proposed. This is the paradox wherein the obligation of providing adequate fiscal resources, which fund programs with an equitable tax burden, is pitted against competing economic concerns. E-commerce challenges both sides. Economic development and tax expenditures policy forgo revenue to promote growth but may threaten fiscal health. The lack of favorable tax treatment may stifle growth and innovation but such policy may result in unfair competition. |
