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Document 199 of 890.

July 26, 2000, Wednesday

SECTION: NEWS;Pg. A-2

LENGTH: 571 words

HEADLINE: As localities lose revenue to Internet, push is on for e-tax; Senate stalls measure extending moratorium

BYLINE: Mary Deibel; SCRIPPS HOWARD NEWS SERVICE

BODY:
If you are among the growing legion of cyber-shoppers, you probably have saved on Internet sales taxes because most states and cities find them too tough to collect.

But your tax-free shopping spree could be coming to a close.

A bill to extend the current three-year federal moratorium on new Internet taxes to 2008 sailed through the House after a bipartisan e-tax commission deadlocked without making a recommendation. But the legislation is stalled in the Senate, where momentum is growing to help states and localities collect taxes from online sales.

A new report from the congressional General Accounting Office underscores how costly the Internet is to states and localities that cannot send cyber-firetrucks to put out real fires, use virtual taxes to pave actual potholes or tap dried-up e-sales taxes to pay flesh-and-blood teachers:

[] E-commerce will cost states and localities up to $3.8 billion in tax revenues this year and up to $12.4 billion by 2003.

[] The losses three years from now could be as high as $20.4 billion if taxes on all remote sales including mail-order catalog and telephone sales are included.

Sen. Bob Graham, D-Fla., requested the GAO report and is co-sponsoring the Senate bill to help states and cities collect Internet sales taxes if they will simplify their crazy quilt of 30,000 sales taxes that blanket the nation.

Concern by Graham and Florida is understandable when the Sunshine State stands to lose $1 billion in revenue in the next few years to Internet sales.

Florida gets 70 percent of its revenue from sales taxes and is as dependent on them as any of the 45 states and 7,500 localities with sales taxes. Alaska, Delaware, Montana, New Hampshire and Oregon do not have sales taxes.

"Sales taxes are the major source of funding for police, for fire protection, for schools, sewerage and roads, and they're legally due whether we can collect them or not," said Don Borut, executive director of the National League of Cities.

The league's new 353-city survey finds that while the nation's cities are fiscally healthy, a seven-year upswing appears to be leveling off and city leaders worry that a system that relies on sales taxes is not fit for the 21st century with its increased reliance on remote sales via the Internet and other sources.

States and cities took the battle over taxes on catalog sales to the Supreme Court only to be told in 1992 to take their case to Congress. Mix in the Internet and its promise of trillions of dollars in electronic transactions, and the battle becomes even more high-stakes.

Sen. Byron Dorgan, D-N.D., chief sponsor of the Senate e-tax bill, sees hope in another bill he also sponsored that just cleared Congress. It streamlines $7 billion a year in state and local taxes on cellular phone calls: From now on, you will pay cell-phone taxes as if all calls were made in your "primary service area."

It was a case in which simplification serves everyone's interests, Dorgan said.

Lisa Cowell, head of the E-Fairness Coalition of Main Street merchants lobbying for cyber-tax equity, agreed the cell-phone tax simplification plan denies politicians the chance to claim Internet sales taxes "can't be done."

But in a nation where 45 percent of Internet users use the Internet to shop, Cowell acknowledged, no bill that increases taxes is going to get through Congress before Election Day.

LOAD-DATE: July 28, 2000

Document 199 of 890.


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