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Hudson Report Predicts Up to $330 Billion at Stake in Sales Tax Battle

Hudson Institute

WASHINGTON—More Americans are turning to the Internet to shop this holiday season, buoyed in part by the lure of what they believe to be tax-free shopping. Because of a loophole in federal law that pre-dates the Internet, the traditional “brick and mortar” store is under economic siege by a variety of out-of-state sellers who are not required to collect state sales taxes.

A new report from Hudson Institute, entitled Future Marketplace: Free and Fair, finds that the sales tax loophole is equivalent to a subsidy, distorting the free market by providing an incentive for one form of economic activity over another.

The report, authored by Hudson Visiting Fellow Hanns Kuttner, says up to $330 billion in annual sales will be subject to government special treatment for online, out-of-state sellers in 2012.

“As more people shop online, local businesses that are put at a competitive disadvantage by the government will lose,” says Kuttner.

Click here to download the full report.

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