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Mayors Urge Opposition to Bill Extending Moratorium on Internet Taxes By
Larry Jones When members of Congress return to
Washington from a two-week recess the week of May 1, Congressional leaders
are expected to try to move a bill that would extend the current
moratorium on Internet taxes for an additional 5 years. But mayors,
governors, state legislators, county officials and other local leaders
across the nation are opposing a five-year extension because they feel it
will undermine efforts underway to simplify their sales and use taxes so
they can be applied equitably to all commerce. A number of states have
already adopted or are in the process of considering model simplification
legislation. In response to an April 18 Conference alert, mayors are
contacting their Congressional delegations urging them to vote against S.
2255, a five-year extension bill sponsored by Senator John McCain (AZ),
who chairs the Senate Commerce Committee. Although the current moratorium runs through October 21, 2001, McCain, feels the extension is needed to protect Internet commerce from what he describes as “burdensome, anti-consumer taxation.” Senate Majority Leader Trent Lott (MS) and House Speaker Dennis Hastert (IL) are backing Senator McCain’s proposal and have stated their intention to approve a five year extension proposal this year. McCain had scheduled his proposal for mark up in the Senate Commerce Committee on April 13 but pulled it after it was clear he did not have the votes to pass it. He is expected to try to move it again soon. Also, Speaker Hastert is planning to introduce similar legislation in House soon. It is likely his bill will include provisions permanently banning taxes on internet access, and repealing the 3 percent federal excise tax on telecommunications services. Criticizing the bill, Dallas Mayor
Ron Kirk said “This bill is designed to maintain the status quo, an
un-level playing field that gives businesses in cyberspace an unfair
competitive advantage over our local retailers.” Under current law, local
retailers are required to collect state and local sales taxes on
over-the-counter sales while out-of-state merchants (remote sellers) are
under no such obligations on sales conducted over the Internet. The
primary barrier to collecting taxes on remote sales is the Supreme Court’s
decisions in National Bellas Hess, Inc. v. Illinois and Quill Corp. v.
North Dakota, which prohibit state and local governments from imposing a
duty to collect on remote sellers. As lead mayor for the Conference on the issue, Kirk explained that the bill “fails to address the inequity between local retailers and remote sellers, which if left uncorrected, will undermine and quite possibly lead to the elimination of the sales tax as a viable revenue source.” Instead of an extension, Kirk said “Congress should level the playing field by passing legislation granting states, that simplify their taxes, the authority to impose a duty to collect on remote sellers.” The Conference and other state and
local groups have been working with a bipartisan group of Senators to
block passage of the McCain bill in its current from. These include
Senators Slade Gorton (WA), Byron Dorgan (ND), George Voinovich (OH) and
Bob Graham (FL). If Senator McCain insist on moving his proposal, these
Senators can be expected to offer amendments in Committee and if needed on
the Senate floor to authorize the collection of state and local
taxes.
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