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.
