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Archive for Friday, September 26, 2003

States push tax on Web sales

Congress hears proposal to boost government budgets

September 26, 2003

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— State and local officials 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, including Kansas, already have 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.

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 new set of tax rules that keep businesses from having to adapt to the different tax customs of every state and local government.

In Kansas, the effort resulted in a controversial new system that requires retailers to begin collecting taxes at the point of delivery rather than at the point of sale. Gov. Kathleen Sebelius has halted enforcement of the new law until retailers have more time to adapt to the changes.

The National Governors Assn. 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.

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