Are you wary about sales taxes on your Internet purchases, even if you're only paying to join members-only sites - like sexy sites? Well, according to some state legislators and tax commissioners, unless there's a sales tax on online transactions and soon, public safety and education will hit substandard levels.
At least, that's what they told the Congress-appointed Advisory Commission on Electronic Commerce Wednesday.
On the other hand, separately, the National Tax Association (NTA) has released a report that addresses the issue of Internet taxes by recommending a uniform stales tax rate for all states.
"(T)he Internet (is) a magical, mystical tool" that shields e-commerce from tax responsibility, says Randy Johnson, who chairs the Hennepin County Board of Commissioners in Minnesota. "State government can't run on an empty tank…(and) many voters view (sales taxes) as the least onerous."
Others told the panel online merchants could come to cost states as much as $10 billion a year in tax revenues, in addition to the $5 billion annually they are now said to lose to mail-order business.
But still others argued the real problem isn't finding new tax sources but, rather, simplifying the sales tax system. "We should take the seller out of the collection process entirely, and there are ways to do that," says Federation of Tax Administrators director Harley Duncan. However, that proposal could mean yet another government-based tax collector posing yet another series of problems for consumers already bedeviled by the usual tax collection machinery.
The NTA proposal is dependent on agreements being reached on other issues concerning state and local taxes, according a spokesman. "We like the vote we took on one rate per state, but that's contingent on a lot of things we never got to," said Mark Nebergall, a co-author of the report and member of the Software and Information Industry Association.
But e-commerce industry officials told the panel that, even if the sales tax system is simplified, imposing a sales tax on Web business would create almost more new problems than it would solve - including potential Constitutional problems.
"It would be dangerous," said Direct Marketing Association tax counsel George Isaacson, "for us to sweep the interstate commerce clause protections aside just because we are afraid of hindering state tax collection." He said states, in fact, have prospered from the high-tech economy.
The advisory committee was created by Congress last year to explore and recommend tax policy for online commerce in the wake of the Internet Tax Freedom Act, ZDNet News says, and has until April 2000 to make its report to Congress.
