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9/25/2003
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States, Retailers Ask Congress To Bless System To Collect Sales Taxes On Internet Purchases

State and local officials, as well as several major retailers, want Congressional permission to collect sales taxes on Internet sales.

WASHINGTON (AP) -- State and local officials, backed by some of the country's largest retailers, approached Congress on Thursday asking permission to start collecting sales taxes in the mostly tax-free world of Internet shopping.

Lawmakers backing the effort, known as the Streamlined Sales Tax Project, unveiled legislation to give their approval to the new system. Some 20 states have already enacted new tax laws to join the movement.

The effort imposes no new taxes. It provides a way for states to start capturing the taxes already due.

"This is not a tax bill," said Rep. William Delahunt, D-Mass. "This bill will not raise taxes."

The Internet has remained a mostly tax-free shopping zone since the Supreme Court ruled that states can't force a business to collect sales taxes unless it has a store or other physical presence in the state.

While 45 states require buyers to pay taxes on Internet purchases, few states enforce those laws.

State and local governments have been working with businesses since 2000 to organize an easier way to collect the taxes. They have simultaneously established a simpler set of tax rules that keep businesses from having to adapt to the different tax customs of every state and local government.

The National Governors Association estimates sales taxes make up roughly one-third of state tax revenue, and state and local governments fear that tax collections will decline as shoppers turn to the Internet more often.

"Congress has the opportunity to provide fiscal relief to the states with no impact on the U.S. Treasury," said Pennsylvania state Rep. David Steil, a Republican.

Congress this year gave states $20 billion to relieve their budgetary pressures. Rep. Ernest Istook, R-Okla., said he would rather let states raise and spend tax revenue without looking to Washington for help.

"We want them to have the power and ability to solve their own problems," he said.

Traditional brick-and-mortar retailers also have their eyes on lost money. They said they stand to lose money as shoppers turn to tax-free Internet purchases.

"Online and other mail-order merchants benefit from an unfair price advantage when they don't have to collect sales tax," said Maureen Riehl, vice president of the National Retail Federation, which represents more than 1.4 million U.S. retailers. "All retailers should be required to play by the same rules, and tax policy should not be allowed to determine the winners and losers in our industry,'' she said.

If the plan wins congressional approval, participating states could require merchants who ship goods into their states to collect sales taxes. The businesses would be given software to calculate and collect the taxes, and the states would pay businesses for their efforts. Very small businesses would be exempt from the sales tax system.

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