40 US States Ask Congress Not To Extend Internet Tax Ban

by Mike Godfrey, Tax-News.com, New York

16 August 2001

While many states declare sales tax holidays timed to coincide with a buying surge during what the French call the 'rentree', the return to work and school, more than 70% of states have signed up to a letter urging Congress to reject legislation extending the Internet taxation moratorium.

The governors will send a letter to every member of Congress asking them not to extend the current ban on taxes on e-commerce unless the legislature also supports the SSTP (Streamlined Sales Tax Plan) which is attempting to create a unified proposal for cross-border sales taxes.

Says the letter: "If you care about a level playing field for main street retail businesses, and local control of state's governments and schools, extend the moratorium on taxing Internet access only with authorization for the states to streamline and simplify the existing sales tax."

The moratorium on Internet taxes is set to expire in October. A House of Representatives committee voted August 2 to bar states from taxing Internet access and extend the moratorium for five years, while choosing not to support the STTP.

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.

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