Local, State Governments Lobby for Net Taxes
PACs want to put an end to tax-free online purchases
By: Jed Nottingham
Posted: 05/30/2007
WASHINGTON -
State and local governments this week lobbied U.S. Congress
to put an end to the tax-free status of Internet shopping,
broadband connections, and even possibly email. The main
debate is over whether the ban should be made permanent or
allowed to lapse.
Currently, federal law currently bars Internet access
charges and sales on the Internet from being taxed at the
local or state level. However, new lobbying efforts,
coordinated through groups including the National Governors
Association, hope to change these laws, possibly as soon
as fall of 2007.
During a House of Representatives hearing on May 22, Sen.
Michael Enzi, R-Wyo. introduced a bill that would require
mandatory sales tax for Internet purchases. He believes if
Internet-based taxes are not authorized, other taxes may
increase. "Are we implicitly blessing a situation where
states are forced to raise other taxes, such as income or
property taxes, to offset the growing loss of sales-tax
revenue?" Enzi said at a Senate hearing on Wednesday. "I want
to avoid that." Enzi pointed out it was "important to level
the playing field for all retailers."
During a congressional hearing the same day, politicians
weighed whether to let a temporary ban on Net-access taxes
lapse when it expires Nov. 1. A House backer of another
pro-sales tax bill this week said to expect a final version
of the bill to be delivered in July.
"If a moratorium is made permanent, there is a slippery
slope where other industries will seek their own pre-emptions
of state laws," said David Quam, director of federal
relations for the National Governors Association.
The NGA supports the idea of extending the ban in a limited
sense and for a defined period, he added. He said reports by
government auditors and the University of Tennessee have
shown no statistical correlation between levels of broadband
penetration and the existence of Internet access taxes.
Rep. Jim Jordan, an Ohio Republican and one of 66 House
members who co-sponsored the permanent ban proposal,
suggested he wasn’t swayed by that argument. "Taxes always
impact everything else in our economy," he said. "I would
assume they’ve had a major impact in this area, as well."
Currently, Seattle-based Amazon is not required to
collect sales tax on shipments to millions of its customers
in states like California, where Amazon has no offices.
(Californians voluntarily are supposed to pay the tax with
their annual state tax returns, but few do.)
The group NetChoice, which includes Yahoo!, eBay, and the
Electronic Retailing
Association, opposes the sales-tax plan and fears that
the change in parties will make it happen.
The Internet-access tax moratorium expiration in November is
serving as a focal point for Internet tax efforts. Four bills
currently are under consideration: The Enzi bill, which calls
for mandatory sales taxes on Internet purchases; S156 and
HR763, which renew the Net-access tax moratorium permanently;
and HR1077, which renews the Net-access tax moratorium
permanently and eliminates grandfather provisions that allow
nine states to collect taxes on Internet access.
