ELECTRONIC COMMERCE, STATE SALES TAXATION, AND INTERGOVERNMENTAL FISCAL RELATIONS

State sales taxes, designed to tax local merchants selling manufacture d products, cannot easily accommodate electronic commerce, ''the use o f computer networks to facilitate... the production, distribution, and sale and delivery of goods and services....'' Sales taxes generally a pply to tangible products, but not services or intangible products, bo th prominent in electronic commerce. Sales taxes do not exempt all bus iness purchases. Much electronic commerce involves out-of-state vendor s. The paper proposes to tax all sales to households, exempt all sales to business, and tax non-de minimis sales by out-of-state vendors. En acting this system, or any other, would strain intergovernmental fisca l relations.