I think partly the historical legacy, but also the ease of enforcement and the fact that lower tariffs and services have trended together.
Collecting taxes on goods flowing through a limited number of physical locations is much much easier than trying to audit the client list of a huge number of foreign service providers.
You don't need to hit a huge number of service providers because the USA market is highly concentrated.
That's why you read things like «The Anti-Coercion Instrument (ACI), a nuclear option that has yet to be deployed, would empower the EU executive to hit U.S. service industries such as tech and banking».
https://www.politico.eu/article/eu-trade-bazooka-anti-coerci...
You can just pick the top 10 biggest financial and tech firms and be done with it.
This strikes me as the sort of first-order thinking that often plagues ideas about macroeconomics.
The US market is highly concentrated... right now because there are no tax benefits to being diverse. Apply significant tariffs to services and watch thousands of micro-service providers bloom.
There's really no "and be done with it" when it comes to tax policy. It's always an arms race.
None of this is to say that you couldn't tax service providers. Just that it's likely not as simple or obvious what would happen if you tried.
I'm saying that "You don't need to hit a huge number of service providers because the USA market is highly concentrated" is not a good argument because the act of taxing the concentrated incumbents will cause changes.
Also note that the micro-service providers might just be white-label resellers of the big providers.
Which supports my general point that services are hard to tax because unlike physical goods you can't force them to flow through a few physical choke-points. The fact that economies of scale and other factors cause them to naturally collect in a few concentrated firms in the absence of taxes does not mean that you can just tax those concentrated firms because they will figure out ways to not get taxed!
Collecting taxes on goods flowing through a limited number of physical locations is much much easier than trying to audit the client list of a huge number of foreign service providers.
Agreed that other countries are considering this.