Copyright 2000 Times Mirror Company
Los Angeles
Times
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March 26, 2000, Sunday, Home Edition
SECTION: Opinion; Part M; Page 4; Editorial Writers
Desk
LENGTH: 657 words
HEADLINE: TAXING INTERNET SALES;
THE LOSSES
TO STATE TREASURIES COULD AMOUNT TO $20 BILLION IN EACH OF THE NEXT FIVE YEARS.
BODY:
Whether consumer and business purchases over
the Internet should pay the same sales tax
assessed in stores started as a simple question of fairness, of treating all
buyers and sellers alike. It has turned into a broader battle involving the
electronic industry, anti-tax members of Congress and state and local
authorities, all defending their own interests. A congressionally appointed
advisory panel, after more than a year of deliberation, failed last week to
muster enough votes to make a recommendation to Congress. That doesn't mean the
effort should cease, but it will have to return to the original question of
fairness: Is it just--or economically justified--to treat buyers on the Internet
differently than all other buyers? The answer is no.
To California and
the other 45 states that levy sales taxes, this is not an
academic question. As untaxed sales over the
Internet grow, state and local governments are losing billions
of dollars in revenue. A study by the University of Tennessee estimates the
losses to state treasuries will amount to $ 20 billion in each of the next five
years. That's $ 20 billion less for education, public safety and transportation
services that these local governments provide. To cities in California, where
sales taxes finance government, the potential lost revenue is particularly
stinging.
Congress last year imposed a three-year moratorium on
Internet sales taxes to study the issue and give the new
e-commerce industry a breather to grow. Yet even today, some Internet sellers
admit they don't need special treatment to survive. They believe their business
model gives them enough advantages over the bricks-and-mortar retailers to allow
them to flourish on equal terms.
The states, under a 1992 U.S. Supreme
Court decision, cannot require "remote," or out-of-state, retailers, including
both mail-order houses and e-commerce sellers such as Amazon.com, to collect
sales tax unless the retailers have stores, warehouses or service shops in the
state.
Most states, including California, technically require purchasers
to pay the tax voluntarily. These taxes, not surprisingly, go largely
uncollected. The 1992 Supreme Court decision, while curtailing the states'
powers to tax nonresidents, left room for change if the states and local
governments agreed to simplify the tangled web of their tax systems.
This is what the governors of 44 states, backed by mayors and county
officials, have agreed to do. They got together and last December agreed on a
proposed "radical simplification" of sales tax collection. The plan would impose
no new taxes, provide privacy protection for Internet purchasers and treat all
retailers equally, resident of the state or not. The same technology that is
making electronic retailing possible will make the sales tax collection as easy
as a single click of the mouse.
A majority of the congressional panel
recommended that the sales tax moratorium be extended for an additional six
years--until 2007--to give the governors time to simplify complex state and
local tax systems. That is better than the permanent moratorium called for in a
handful of legislative proposals introduced in the House and Senate. But before
extending the moratorium, Congress should work with the state officials to
determine how long it would take to implement the governors' plan. Six years may
be too long a period.
The question of taxing sales on the Internet is
vital for local authorities that depend on it to provide basic services for
their citizens. It does not, as some detractors in Congress claim, amount to
imposing a new tax on e-commerce. It merely extends existing tax obligations to
the "new economy."
Clearly, the dynamic new electronic retailers do not
need this unfair advantage over the old retailers--whether they are as big as
Wal-Mart or as small as the neighborhood clothing store. Fairness demands that
they be all treated alike.
LOAD-DATE: March 28, 2000
