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Archive for Friday, September 29, 2000

Lost revenue spurs Internet tax debate

Merchants, officials disagree on wisdom of cyberspace sales tax

September 29, 2000

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— Garden City resident Linda Katz has operated Prairie Tumbleweed Farm on the Internet for more than three years.

She has sent tumbleweeds to places as far away as Australia, England and Singapore, and her site has recorded hits from the Vatican to the U.S. Defense Department.

"To me, if you have a business you should have to collect those taxes, whether you have a storefront or not."

Michelle Velazquez, small business owner

She can't even begin to imagine trying to collect a sales tax: "It's not a local thing. This is a global market."

But with U.S. consumers spending more than $13 billion online for retail goods, many government officials are looking hard at how much revenue they may be losing to cyberspace, where online transactions are largely free of sales taxes.

Among them is Vince DiPiazza, assistant city manager in Garden City. He estimates Garden City lost more than $57,000 in local sales tax revenue to e-commerce in 1999, and in 2000 the loss is expected to top $127,000.

DiPiazza used a Kansas State University study to arrive at his figures.

During the next five years, he figures Garden City will lose about $1.3 million in sales tax revenue to Internet sales.

Michelle Velazquez, co-owner of County Cottage Crafts, was unaware that businesses operating on the Internet were not collecting sales tax.

"To me, if you have a business you should have to collect those taxes," she said, "whether you have a storefront or not."

Katz said equating online businesses to area shops isn't a fair comparison.

"This is a worldwide market," she said.

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