A spokesman for Rep. Billy Tauzin told the E-Commerce Times that the Louisiana Republican was serious last week when he warned Web merchants that states and localities will win the right to impose sales taxes on their transactions.
Tauzin, who heads the House subcommittee on telecommunications, personally advocates eliminating the income tax entirely in favor of a 15% national sales tax, but spokesman Ken Johnson said his remarks had nothing to do with that proposal. A 19-member commission under Virginia Governor James Gilmore is presently looking into the matter of Internet sales taxes, and the Net is under a three-year moratorium on new taxes passed by the last Congress.
“Billy has opposed the idea of regulating the Internet,” added Johnson. “All he’s saying is when it comes to sales taxes, they are inevitable. If everyone shops on the Internet, how do we fund public safety requirements?”
Current laws on Internet sales taxes are just like those faced by direct mail catalogs. If a merchant has no store in your community, you don’t have to pay sales taxes on your purchases. But many Web stores have no physical stores. In states like Alabama and Washington, with high sales tax rates, this gives Web stores a sizable cost advantage over local merchants.
State and local government officials have been trying to get the tax law concerning catalogs changed for years, but the rise of Internet sales has given that effort new urgency. In fact, the U.S. Conference of Mayors and National Association of Counties sued to keep the Gilmore commission from meeting, claiming it’s biased against their cause. The suit may have given Internet merchants a false sense of security on the question, which Tauzin was moving to dispel.
Johnson predicted that a law to end the ban on Net sales taxes is most likely to pass in the year 2001. “We want to hear from the commission first,” he said, but the commission is only an advisory body. “In the end, Congress is going to resolve the issue.”