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Archive for Friday, January 5, 2001

County sees ‘Net steal revenue

Online purchases blamed for drop in sales tax funds

January 5, 2001

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Douglas County officials are worried the county is starting to lose sales-tax revenues because of an increase in untaxed e-commerce.

An indicator: last year, the county's revenues increased by only 3 percent compared to a 6 percent annual growth in previous years. The revenue amounts to about $9 million per year, or roughly 24 percent of the county's annual budget, which totals $37.8 million this year.

Because the county's population continues to grow, county officials think the Internet is to blame for taking away potential sales revenues.

Thursday, Commissioner Charles Jones urged state legislators to ensure that all sales in Douglas County including those made through the Internet are subject to equal taxation. Lawrence city officials also want legal authority to levy sales taxes on Internet and catalog sales.

"I think it's something that needs to be addressed at many levels, including the state and federal," Jones said. "It's only possible if you push it."

Cities, states and counties only have authority to tax retail sales that occur in their jurisdictions. The federal government has banned taxes on Internet sales.

Unless the problem is remedied, local and state sales-tax revenues could take a further dive.

"I believe it's going to continue to erode," Commissioner Dean Nieder said.

Scott Holeman, a spokesman for the Kansas Department of Revenue, said the state was estimated to lose from $2 million to $5 million in sales tax revenues to the Internet in 2000 for a total of $50 million in all remote sales, including catalog sales.

In 2003, he said the state's general accounting office predicts Kansas would lose from $11 million to $111 million in tax revenues to the Internet and from $81 million to $253 million in all remote sales.

Kansas is one of four states participating in a pilot project to track Internet sales through computer software, Holeman said.

Though the county does have some money in a "rainy day sales tax fund," Jones said the county needs increased tax revenues.

"If we don't have sufficient sales tax revenues, we have to go to other resources like property taxes," he said.

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