Federal lawmakers in the new year are expected to again take up controversial legislation that could lead to the collection of sales taxes on goods sold over the Internet.
It's not that the idea of collecting sales taxes on e-commerce is so odious; the problem of getting so many conflicting interests and taxing authorities to agree on the issue is the challenging part of getting passed the legislation introduced by Reps. Ernest Istook, R-Okla., and William Delahunt, D-Mass. Similar legislation is likely to be considered by the Senate.
"The American people will view it (Web sales tax) as a new tax," said Jon Abolins, vice president of tax and government affairs at Velosant LP. "The budget crisis of the states is an impetus to pass the legislation. Whether its proponents are strong enough to counter election year politics is something else."
Many states have been working to facilitate Congressional approval by agreeing to make their taxes more uniform. In decisions in the 1960s and 1990s, the U. S. Supreme Court ruled that sales taxes on goods shipped across state lines didn't have to be collected primarily because the multiplicity of tax structures among the many states were too complicated to enforce. The legislation specifies that a threshold be reached -- that at least 10 states representing at least 20 percent of the populations of sales tax-collecting states must simply their sales tax regulations. "Already 17 states have done so," says Abolins. "So I think the threshold has been cracked."
There is another important threshold: The legislation, as currently written, would not include firms with annual revenues below $5 million.
Most retailers -- Web and bricks-and-mortar -- have opinions on the issue. The major bricks-and-mortar retailers like Wal-Mart and Sears generally support the legislation. They are at a competitive disadvantage to Web retailers like Amazon. As for Amazon, it has said it will support Web sales tax legislation in some for or other.
One of the ironies of the legislation in Congress is that its co-sponsor Congressman Istook is a longtime anti-tax hawk. Many legislators supporting Internet taxes in general have long histories against taxes, but their experience in their respective state governments have tempered their stances. For instance, Senators George Voinovich, R-Ohio, and Lamar Alexander, R-Tenn., both former governors, support an access tax on the Internet for some broadband providers.
Further complicating the issue is the fact that forecasts of the actual amount of Web sales taxes that could be collected differ wildly. A 2001 study by two professors at the University of Tennessee stated that uncollected e-commerce taxes could be as high as $45 billion by 2006. On the other hand, the Direct Marketing Association says just $3.2 billion in Web sales taxes will be uncollected by 2006.
This story courtesy of TechWeb.