Electronic commerce is the exchange of money for goods and services over the Internet. Citizens paying taxes and utility bills, renewing vehicle registrations, and paying for recreation programs are all examples of e-commerce. Government buying office supplies and auctioning surplus equipment online are also examples of local government e-commerce.

While the federal government and many state governments are moving forward with electronic financial transactions, such as accepting tax payments, smaller governments face real obstacles to rolling out e-commerce applications. One challenge local governments face is dealing with credit card fees. Many are struggling to justify charging user fees for the small number of transactions they process. That doesn't mean, though, that they are sitting on the sidelines.

For example, Monroe County, in anticipation of online credit card transactions, has negotiated a deal with a bank that will pave the way for any future online e-commerce applications. The county's account balances are large enough that the bank can justify waiving the credit card fees. In a different example of e-commerce, four smaller counties in western New York - Genesee, Livingston, Orleans, and Wyoming - formed a consortium that allowed them to negotiate a group price on office supplies if they each ordered through an online application with a national office retailer. The ease of online purchasing and the 10-percent discount on supply costs makes this a win-win situation for both the localities and the vendor.