But we're talking about a situation where people used new technology to avoid paying taxes. This seems very different from a world in which the government introduced a radical new sales tax.
purchasing an item from another state uses very little in the way of state services, far less than purchasing from local retailers
Do you have a cite for this claim?
I see sales tax as an implicit headcount tax: everyone needs to buy a certain amount of stuff every year to live so everyone ends up contributing a minimal amount to the state government. If one group of people manage to get their stuff without paying sales tax, that's a problem because their usage of state services hasn't decreased significantly: they still send their kids to school, they still use libraries and parks, they still benefit from state courts and prisons and environmental regulators.
An in-state retailer uses police/fire protection for the entire time the item is sitting on the shelf, local roads to move the item to the store, police/fire protection at the production site if the item was made in-state, and assorted local regulatory services depending on the specific business (e.g., health inspectors).
An out of state retailer only uses local roads as the item is shipped to the customer.
I don't see any plausible way that an out of state retailer could use anything remotely close to the same amount of state services as an in state retailer.
Your analysis ignores the fact that in-state retailers pay property taxes, income taxes, user fees, and employ people within the state who in turn pay taxes.
If you convert the traditional cost-benefit analysis into a cost analysis, then you can prove that literally anything is a bad idea. But that's not a serious way to argue a point.
Sales tax might have once been a convenient way to tax people by locale, but it meshes poorly with the internet. If there must be a per-sale tax on internet goods, it should probably be a new type of tax which reflects the fact that the internet isn't related to geography. If anything, it should be a flat tax.
Yes, however: (1) property taxes do not fund the entire school budget in most states and (2) states spend money on a great deal more than just schools.
If anything, it should be a flat tax.
Um, isn't sales tax already a flat tax? It sounds like you're describing the simplified internet sales tax agreement mentioned in the article...is that true?