WEB SALES TAX - House passes web-tax ban, avoids sales tax

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[OG Note: NC requires taxpayers to state whether or not they have purchased via mail and to declare the total so it can be taxed.]

Thursday August 2 5:57 PM ET

House Panel Passes Web-Tax Ban, Avoids Sales Tax

By Andy Sullivan

WASHINGTON (Reuters) - A House of Representatives panel voted Thursday to bar states from taxing Internet access and extend for five years a ban on other Internet-specific taxes, declining to approve legislation that would help states tax online commerce.

Democrats on the subcommittee and other supporters of the sales tax effort who had hoped to tie the two issues together said they would try again when the full committee takes up the matter in the fall.

As the clock runs out on a temporary ban on Internet access taxes and other Internet-specific taxes, state and local governments have sought congressional support for an initiative that would allow them to tax online sales.

But the House Judiciary subcommittee on commercial and administrative law opted not to consider the two issues together when it approved the moratorium extension.

The bill, as approved by the panel, would permanently ban taxes on Internet access, and extend for five years the current ban on ``multiple and discriminatory'' taxes on e-commerce.

An amendment that would have included support for the sales-tax effort was defeated when subcommittee chairman Bob Barr ruled it was not relevant to the bill being considered.

Barr, a Georgia Republican, said his priority was to renew the extension before it expired in October.

``I think that any effort to encumber a clean moratorium right now would slow it down and possibly kill it and I think that would be irresponsible,'' Barr told reporters after the session.

North Carolina Rep. Mel Watt, the committee's top Democrat, said he would reintroduce his sales-tax amendment when the full Judiciary Committee (news - web sites) takes up the bill after the August break.

Watt and other supporters of the sales-tax effort said they would likely find more allies on the full Judiciary committee.

``This is a minor-league trial period. We get to go to the major leagues next,'' Watt said.

STATES FEAR REVENUE LOSS

Under a 1992 Supreme Court decision, states cannot require out-of-state retailers such as catalog companies to collect sales taxes unless they have a physical presence in the state.

Many state and local officials fear a loss of revenues as constituents increasingly shop online, while Internet retailers say it would be impossible to comply with the maze of state and local tax codes across the United States.

A coalition of states is in the process of simplifying their tax codes with the hope that Congress would then allow them to collect sales taxes on remote sellers. Several bills introduced in Congress would give states the green light to collect sales taxes once enough of them sign up.

But the details of such a plan have proven difficult to sort out. In the Senate, sponsors of rival bills have failed to come up with a compromise after months of negotiations.

Barr pointed to the slow pace of the Senate negotiations as a reason why he wanted to keep it separate from the moratorium. The sales-tax issue could be considered on its own merits, he said.

``There's nothing at all stopping us from moving forward with consideration of other legislation, it just doesn't have to be tied to this legislation,'' Barr said.

The Direct Marketing Association released a statement applauding the moratorium's passage.

``This rightly creates two distinct legislative agendas that are not held hostage to one another,'' said DMA president H. Robert Wientzen.

Lisa Cowell, executive director of the E-Fairness Coalition, a retail group that supports the states' effort, said she was not disappointed that the subcommittee did not approve sales-tax language.

``This was barely a skirmish in the fight. Everything went as we expected it to go,'' Cowell said.

-- Anonymous, August 03, 2001


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