- The Washington Times - Wednesday, July 18, 2001

Two Virginia members of Congress yesterday introduced another in a long line of bills that would extend a moratorium on Internet taxes and ban some taxes that states levy against online retailers.
Rep. Robert W. Goodlatte, a Republican, and Democratic Rep. Rick Boucher want a three-year moratorium on Internet sales taxes that expires Oct. 21 to be extended permanently.
Their business-friendly legislation also would prevent states from levying a range of taxes on e-commerce companies.
"We believe a business should only pay taxes in a state when they have more than a fleeting presence," Mr. Boucher said.
The House bill comes while the Senate Commerce, Science and Transportation Committee also continues work on legislation to extend the moratorium. The new bill addresses confusion over a state's ability to levy business-activity taxes on retailers that sell goods and services in a state but have no store, warehouse or other physical presence there.
Most states with the exception of Michigan, Nevada, South Dakota, Washington, Wyoming and the District charge all companies business-activity taxes, intended to reimburse the states for extending companies the privilege of doing business there.
But simply having a Web site that reaches consumers in a state should not be enough to justify levying the taxes against online retailers, Mr. Boucher said.
The bill would eliminate corporate-income taxes, franchise taxes and taxes on gross receipts of Internet retailers unless they have leased or owned property in a state for 30 days, said Mr. Goodlatte, who is co-chairman of the House Internet Caucus with Mr. Boucher.
States charged all companies $30 billion in business-activity taxes in 2000, according to the National Governors Association.
"This is not chump change," said Robert Fike, federal affairs manager at Americans for Tax Reform, a conservative advocacy group based in the District that supports lower taxes and supported President Bush's tax cut.
A majority of the congressionally appointed Advisory Commission on Electronic Commerce, headed by Virginia Gov. James S. Gilmore III, endorsed a proposal last year to eliminate business-activity taxes against Web retailers when their connection to a state is an Internet service provider it uses to do business or its customers.
Business groups yesterday praised the new bill.
"We believe that the states where we have employees and property are the only states where we should pay taxes," said Richard Bates, vice president of government relations at the Walt Disney Co.
But the legislation introduced by Mr. Boucher and Mr. Goodlatte avoids the tougher question surrounding the debate over Internet taxes: Under what circumstances should states be allowed to collect taxes on goods and services sold over the Internet?
Billions of dollars in revenue for state and local governments are at stake. The Department of Commerce said Internet sales reached $7 billion in the first quarter and could reach $35 billion this year.
The General Accounting Office, the congressional auditor, has estimated that uncollected sales taxes on Internet purchases could cost the states $12.5 billion in 2003. An independent study by two professors at the University of Tennessee last year concluded that states will lose a combined $10.8 billion in 2003.
A hearing by the House Judiciary Committee today will address a bill introduced by Rep. Ernest Istook, Oklahoma Republican, that would extend the moratorium by three years and would allow states to collect sales taxes provided they simplify their tax structure.
The committee held a hearing three weeks ago on two bills introduced by Rep. Christopher Cox, California Republican, to extend the Internet tax ban.
Separate efforts by the Streamlined Sales Tax Project backed by the National Governors Association and the National Conference of State Legislatures and the Direct Marketing Association are working on proposals to simplify the estimated 7,500 state and local sales-tax systems in the nation.
The Senate Commerce, Science and Transportation Committee has been working on legislation to extend the moratorium and is considering letting states collect sales taxes when the extension expires.
Sen. Ron Wyden, Oregon Democrat, and Sen. Byron L. Dorgan, North Dakota Democrat, each has introduced a bill to let states collect taxes. They are holding talks to resolve the differences between their bills. Under one proposal being discussed, Congress would expand the sales-tax-collection authority of states, but only if at least 25 states simplify their own tax rates.
The plan wouldn't take effect until 2006, and Congress would have to approve any tax-simplification proposal the states create.
Mr. Wyden is endorsing a plan to have one sales-tax rate per state.
The Direct Marketing Association also supports a one-rate-per-state plan.
Mr. Boucher said he and Mr. Goodlatte may introduce their own tax-simplification bill later.
"It's not in this bill. We need to address that and we are waiting for the right opportunity," he said.

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