The Inland Revenue Department and Customs have set up a working group to establish whether 15 per cent GST should be charged on items bought online which cost less than $400. Other countries, including Australian and the United Kingdom, are currently grappling with how to introduce such a system.
It has the support of New Zealand retailers, who say it would create a level playing field with the booming online market, but Mr Williamson could not see how it would work.
"Because I've got a technology background I think ... it's just about going to be impossible to do," he told Radio New Zealand.
"It would be great if we had some easy mechanism to charge it against credit card transactions but that would mean you'd have to identify whether the person was actually in New Zealand at the time.
"There will be all sorts of digital payment systems in the future like digital money and PayPal and digital coin payment systems - how would you track those?"
However, he said the retail sector made a good point and he would wait for the working group's findings before ruling out such a change.
"I think they've got a valid point but we do not want to put a regime in place that puts a whole lot of extra cost and hassle to the consumer.
"... You could be bringing in a $10 item and have to got to the airport to fill out forms and pay your GST and so on and that would just make a nonsense of it."
Retailers Association chief executive John Albertson disagreed and told RNZ there were ways it could work.
"As the whole payment system moves into the electronic world where virtually every offshore purchase that's made is done on either a credit card and through PayPal we believe there is a way through the electronic processing to actually be able to clip the ticket for the government and add the GST on.
"At the moment the government are basically subsidising offshore retailers to the tune of in excess of $200 million per year. I think that's worth collecting."
