Okay, here is where things get interesting.
We should be taxing the crap out of things that are harmful to society, and untaxing things that are actually GOOD for society.
Is having an income good? If so, why are we taxing it?
Think what would happen if we taxed PORNO instead? or Drugs? Or Prostitution? or whatever. Taxing stuff that makes society better is just plain STUPID.
I wouldn't be opposed to a sales tax on Internet purchases, in the current wacky tax/spend system we have today. But here is how I would set it up.
Any Purchase made by or through a internet source or destination inside the USoA would be taxed at a FLAT rate, to be evenly divided among the origination and destination states.
For instance, Ma&Pa Internet Sales INC, sells me a $100 pair of gold plated plastic spoons. They are in Texas, and I am in South Dakota (not really). Texas and South Dakota get 1/2 of the collected sales tax. Let us say that sales tax is 4% that would mean SD and TX would both get $2 each.
Now, if I were in say London, M&P would still collect 4% tax. Tex would get $2, and the other $2 would go to some other fund.
If on the otherhand, M&P were in London instead, that is a tricky issue. I think Import duties and other such restrictions would then apply.