US Senator Grassley Seeks Answers In Internet Sales Tax Debate

by Mike Godfrey, Tax-news.com, Washington

07 May 2001

Senator Chuck Grassley, chairman of the US Senate Committee on Finance, is a determined man when it comes to resolving taxation issues. His latest move is to order the first comprehensive Internet tax study, from which he hopes to glean "answers to multiple questions" in the debate over whether state and local governments should be able tax certain sales made via the Internet.

Grassley and Senator Max Baucus, lead Democrat on the Committee, last week wrote a letter to the Congressional Budget Office asking for economic data on how consumers, state and local governments and Internet businesses would fare under additional Internet sales taxes.

The US Supreme Court has ruled that state and local governments cannot require out-of-state vendors to collect and remit sales tax on purchases made by their residents. However, the Court has said that Congress could impose such a requirement. A limited moratorium on Internet taxation is set to expire in October this year.

In a press release from the Finance Committee, Grassley said: 'The US Supreme Court gave this issue to Congress. It's up to us to decide whether to let state and local governments require businesses to collect sales taxes on certain Internet purchases. This is a big decision. It affects how much consumers pay when they order a book or a sweater on-line. It affects how much money state and local governments collect for their public initiatives. It affects the bottom line of those doing business on the Internet. We have to go into this debate equipped with all of the facts.'

The Grassley-Baucus letter to Dan L Crippen, Director of the Congressional Budget Office, said an in-depth study would help them "make the right decisions" and highlighted specific points it should focus on such as efficiency issues including non-neutral taxation, interstate tax competition and size of the public sector, and the social benefits of Internet growth; equity issues, including equal treatment of consumers; high compliance costs imposed on remote sellers required to collect taxes for state and local governments; projected tax revenues lost by state and local governments if remote sales continue to be tax-free and the stability and growth characteristics of state and local tax systems.

Grassley said: 'I'm looking forward to a thorough, scholarly analysis from the Congressional Budget Office. That will help us make the right decisions on this issue.'

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