Copyright 2000 Phoenix Newspapers, Inc.
THE ARIZONA
REPUBLIC
February 7, 2000 Monday, Final Chaser
SECTION: VALLEY & STATE; Pg. B1
LENGTH: 633 words
HEADLINE:
CITIES FEAR TAX LOSS TO ONLINE;
RELY ON SALES LEVY TO FUND SERVICES
BYLINE: By Chris Fiscus, The Arizona Republic
BODY:
When someone buys Nikes from a Chandler
sporting goods store, the city can charge a sales tax. When
that person buys the Nikes over the Internet, the city may be
out of luck.
That's why Arizona cities from Chandler and Phoenix to
Avondale and Tucson are nervous. They rely heavily on sales tax dollars to help
pay for police, fire and other services.
And if a federal moratorium on
taxing Internet sales continues, the cities could be out millions. Phoenix alone
says it could lose $9 million to $12 million in the next few years.
The
flip side: Companies say you have to foster technology and new industries such
as Internet-based businesses. But across the Valley, and across the country,
cities are fighting.
"Is it really fair for the 'main street' merchants
to pay a sales tax where an Internet provider
can take the same item and sell it over the Internet without paying the tax?"
Chandler City Manager Lloyd Harrell asks.
A ban on city sales
taxes through the Internet Tax Freedom Act could
expire in 2001. It may be extended, though, and Harrell says the idea of a
long-term moratorium is "a pretty grave concern."
Cities also have a new
weapon in their argument: all of the television ads during the Super Bowl
promoting Internet companies. They shelled out an estimated $2.2 million a pop
to buy the time.
"I was shocked" said Rep. Jeff Hatch-Miller, R-east
Phoenix, who leads an internet study committee in the state Legislature. "Are we
talking about poor companies?"
Those from the Legislature to City Halls
to Congress say it's an issue that will grow in importance as federal
authorities meet this year to discuss the moratorium.
"I love the idea
of not having to charge sales tax," says Marsha Sandoval, who runs Brag About
'Em!, a Chandler-based T-shirt company. About 60 percent of her sales are over
the Internet.
"You need to have that advantage. Every advantage for the
little guy helps," she said of her business, which she started out of her home.
If she did have to charge a sales tax, "it would just make it virtually
impossible to compete."
Bills have been introduced in the Legislature to
block or at least limit cities' ability to charge a sales tax on the e-sales.
Hatch-Miller hopes to delay any action until December, giving time to study the
issue locally.
"There is no easy answer," Hatch-Miller said of the
controversy. "It's a big issue. This is really important. The cities clearly are
concerned about their loss of revenue, maybe rightfully so."
He said
Phoenix, Tucson, Scottsdale, Chandler and Glendale are among those lobbying the
importance of collecting tax from the e-sales.
Internet companies "want to have a tax
advantage," he said. "It's an ace in the hole."
One East Valley
furniture store operator told Hatch-Miller's committee that the store is
becoming a sort of showroom for the Internet. People come into the store and try
furniture on for size -- and then order it over the Internet for less money.
He told the committee he's losing a half-million dollars a year in
sales.
It's not about taxing people for access or the
use of the Internet, cities say.
It is about how the
cities can collect tax on the sales.
"It needs some
time and discussion and debate. It'll take time to make any concrete decisions,"
Hatch-Miller said.
Norris Nordvold, Intergovernmental Affairs
Coordinator for Phoenix, says that approach "makes sense."
Technically,
there is an Internet use tax in place. When residents in Phoenix, for example,
purchase goods over the Internet, they are supposed to call and see how much
they owe. But the process is complex, Hatch-Miller says.
Phoenix City
Manager Frank Fairbanks did call after he bought a computer off the Internet.
But, says Nordvold with a laugh, "We haven't had many people call."
LOAD-DATE: March 9, 2000
