TAXES, MARKET VALUATION AND CORPORATE FINANCIAL POLICY

Abstract

This paper takes a pragmatic look at the appropriate sales tax policy for the Information Highway, composed of Internet/on-line service providers ; content, hardware/software, and tele- communications transmission. Our general conclusion is that the sales tax should be designed to be largely con- sistent with the current structure. At the same time, we argue for a more inclusive approach to taxing final sales and a more liberal treatment of business input pur- chases. Specifically, we argue for destina- tion-based taxes; an economic concept of nexus preferably enabled through Con- gressional action; a direct use rule for ex- emption of business purchases; and the enumeration of nontaxable as opposed to taxable transactions. Neutrality should be enhanced by taxing similarly all functionally equivalent activities