Moratorium renewal may leave door open to Web tax
Daniel W. Gottlieb -- Purchasing, 6/21/2001 2:00:00 AM
With the current moratorium on Internet taxation set to expire in October, some members of Congress are seeking ways to extend the moratorium yet leave the door open for state and local authorities to collect sales taxes on e-commerce. Several conflicting bills are in the pipeline to extend the five-year moratorium.
But even legislators like Senator John McCain, who have taken a hard line keeping the Internet permanently tax free, have indicated willingness to compromise on state sales taxation of Web-based and catalog mail sales.
The states claim they are losing revenues already and that as much as $30 billion from taxes on these types of sales could escape their revenue collectors in 2003, according to a study released by the National Governors Association (NGA). Meanwhile more than half the states are collaborating on an NGA-led project to simplify and unify state sales tax laws. A model state law has been approved, but so far only 20 states have introduced some version of the law and only one, Wyoming, has passed it.
Nevertheless, the states hope to convince Congress they can overcome objections of online and catalog sellers to remote sales taxation. The remote sellers have long claimed, with backing from the U.S. Supreme Court, that the burden on interstate commerce is too high for them to calculate, collect, and remit taxes under 7,500 different state and local sales tax laws, some dating back to the 1930s.
As yet, the Bush administration has not indicated its position on various legislative proposals, but President Bush has spoken in favor of continuing to ban any new taxes on access fees charged by Internet service providers.
McCain, who chairs the key Senate committee considering Internet tax bills, has noted that some states and localities as well as bricks-and-mortar retailers have asked Congress to require all remote sellers to collect and remit sales taxes if the jurisdictions simplify their tax systems. McCain says he is working with Senate colleagues who are willing to extend the tax moratorium if some provision is included to broaden the states' authority to tax remote sellers.
In another sign that a straight extension of the moratorium is running into resistance, a major dot-com—Amazon—has indicated openness to a uniform state taxation scheme. In testimony before McCain's Commerce, Science and Transportation Committee, Amazon's vice president for tax and tax policy, Robert Comfort, said: "Amazon would support any properly focused effort among the states to bring their sales tax systems into conformity with the Constitution as applicable to remote sellers." Nevertheless, Comfort expressed skepticism about the ability of NGA's Streamlined Sales Tax Project to overcome past objections. "Congress must not authorize states to require all remote sellers to collect sales taxes based solely upon representations that the states will address, somewhere down the road, a variety of criteria for simplification."
An NGA-supported Internet Tax Moratorium and Equity Act has been introduced in the House (HR 1410) and a similar version in the Senate, with bipartisan sponsorship of 12 senators. The bill has provisions to assist the states in simplifying their sales and use taxes. Senator Ron Wyden (D-Ore.) and Representative Christopher Cox (R-Calif.) have introduced legislation to permanently extend the current Internet Tax Freedom Act ( ITFA ) moratorium on state and local Internet access fees. Their Internet Tax Non- Discrimination Act (S. 288) would, according to a Wyden aide, do three things: (1) extend the moratorium on discriminatory Internet taxes for five years; (2) permanently ban access taxes, and (3) offer states, if they can come up with a sales tax regime that was "no better or worse" than the tax treatment of in-state bricks-and-mortar sellers, to get an up or down vote from Congress to authorize them to start taxing Internet sales.
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