The rationale behind the Congress's decision of passing the ITFA is likely that it believes the growing popularity of e-commerce will bring the whole economy to a new and more prosperous stage in the future and therefore it is worthwhile to sacrifice current tax income at this point. It is clear that the local governments will lose revenue if taxes are not collected, however, if taxes are collected consumers will leave the Internet, online retailers such as Amazon.com will lose large amounts of trades, discouraging development of the infant e-commerce industry. "75% of online consumers reported that they would be less likely to purchase goods online if they were required to pay taxes for their purchases- (page 2). Moreover, in the mean time, offline retailers would be the only benefited party.
Another direct victim is the traditional retailer; with the ITFA, the problem of online-offline balancing/trade-off cannot be neglected. The greater online activities are, the lower demand for offline goods will be bound to become. Without Internet taxes, people will have greater incentive to shop online, causing the offline retailers to lose market share to online firms and as a result they will not be able to earn sufficient revenues. There will be more bankruptcy of offline companies, and in turn negatively affecting state and federal governments' income from taxes submitted by those firms. Now traditional retailers have been put into an unfavorable state to compete with online companies because of their tax advantages.
To add to the complexity in taxing the Internet, we have to point out that a sound system has not been developed yet to collect Internet taxes even if the ITFA does not exist. "Given the high costs associated with collecting and remitting use taxes under the current system, many executives argued that the costs of implementing the taxes would lead to the death of many online firms- (page 2).