Copyright 1999 Gannett Company, Inc.
USA TODAY
July 19, 1999, Monday, FINAL EDITION
SECTION: NEWS; Pg. 10A
LENGTH: 526 words
HEADLINE:
Panel can't agree on taxing Internet sales Commission has 9 months to make
recommendations
BYLINE: Richard Wolf
DATELINE: WASHINGTON
BODY:
WASHINGTON -- A task force of business and government officials
has
failed after nearly three years to agree on how to tax sales
made over the Internet. That spells trouble for a federal
commission
that has just nine months to make recommendations to Congress.
The 39-member group, created in 1996 by the National Tax
Association,
was set to propose a dramatic change in the nation's sales tax
system.
States would have only one statewide sales tax rate,
vastly simplifying
a system that now has 6,600 sales tax jurisdictions.
Businesses
selling over state lines would be required to collect taxes at
the point of sale.
That kind of radical change is considered
necessary by many experts
if electronic commerce is to be taxed in the same
way as local
retail sales.
Internet sales to consumers are
expected to reach $ 43 billion
by 2003; business-to-business sales over the
Internet will top
$ 1.3 trillion. Governments want a piece of that action,
and interstate
merchants want an easier way to collect it.
The
compromise fell apart this month when business representatives
on the task
force refused to support the plan. Their companies
do not have to collect
sales taxes on most interstate sales.
Government representatives
endorsed the changes.
"All of our efforts underscore how difficult
it's going to be,"
says Harley Duncan, executive director of the Federation
of Tax
Administrators. "The economics of the situation make it tough."
Congress has until 2001, when a three-year moratorium expires,
to decide whether to expand Internet sales taxes. The
commission,
headed by Virginia Gov. James Gilmore and including several
corporate
CEOs, has until April to offer its suggestions. It was hoping
for a proposal from the task force.
The difficulty encountered
by the task force illustrates the problems
likely to be encountered by
Gilmore's commission:
-- Internet businesses don't
want to collect sales taxes in 50
states. They fear it
could lead states to impose corporate income
and franchise taxes on
out-of-state businesses.
"Some members of the business community are
extremely concerned
that there will be all sorts of new taxes imposed," says
Kaye
Caldwell, public policy director of CommerceNet, an electronic
commerce consortium. "This country fought a war over that issue."
-- Local governments don't want to lose their ability to set
sales tax rates unless they are guaranteed a single state rate
will not
reduce their revenues. Such a formula would be left up
to each state to
devise.
"The legislatures would have to make what would be real
tough
decisions in a lot of the states," says Scott Mackey, chief economist
at the National Conference of State Legislatures. "They don't
want to be
responsible for tax increases."
Despite failing to agree on
recommendations, the task force is
trying to write a final report to be
presented to the commission.
Even that is causing controversy.
"Not only could we not agree, we can't even agree on what we
discussed," says Jeffrey Friedman, vice president of the Committee
on
State Taxation, a trade group.
LOAD-DATE: July 19,
1999 
