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To: Jenna who wrote (45884)	6/23/1999 12:22:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 120523

Government eyes Internet revenue: Will taxes kill the golden goose? by Curt Anderson The Associated Press WASHINGTON - Consumers are flocking to the Internet, where shopping by computer is convenient and easy, the selection seemingly unlimited and the sales tax uncollected. New research shows online sales tripling each year and possibly topping $200 billion in 2000. Keeping electronic commerce tax-free will help the economy grow faster, say many in business. But merchants large and small, on Main Street and in the mall, fear online shopping robs them of customers, while local governments worry about eroding the tax base needed for schools and public safety. Everybody frets about losing business if high U.S. taxes are imposed on Internet purchases: Americans might buy from foreign companies while consumers in other countries might bypass U.S. products. A 19-member commission created by Congress met yesterday in Williamsburg, Va., to begin sorting through tax options for Internet commerce. The goal is to have new laws in place before a federal moratorium on new taxes for e-commerce expires Oct. 21, 2001. But the commission has a tough road ahead if its initial squabble over fund raising is any guide. The meeting of the Advisory Commission on Electronic Commerce focused yesterday on how to solicit private money to operate and still avoid any perceptions of a pro-business bias. Congress provided no money when it created the panel last year. But the panel could not resolve the issue after several members balked at a proposal by its chairman, Gov. Jim Gilmore of Virginia, for each member to contribute up to $150,000 each - as Virginia has already done. It is to try to reach a compromise today on how to finance a projected $1.7 million budget. The fear was that contributions from well-heeled companies represented on the panel would outstrip those from state and local governments, leading to a perception of bias. Commission members include government officials and executives from Internet industry companies such as AT&T, computer maker Gateway, America Online and broker Charles Schwab. Gov. Gary Locke of Washington and Gov. Michael Leavitt of Utah are among the political members. With the growth of e-commerce, the commission's work promises to have a lasting effect on Americans' shopping habits. Austan Goolsbee, an economics professor at the University of Chicago, said most research indicates online sales next year could reach $200 billion to $1 trillion. His own study of 25,000 online buyers concluded that imposing a sales tax on remote commerce would cut spending by 30 percent. In most states with a sales tax, people who buy things online or from out-of-state catalog companies are supposed to calculate and send in the sales taxes, but it is rarely enforced. In 1992, the Supreme Court said Congress would have to change the law to require one state to collect and remit taxes for business done in another state. A study released today said states were unable to collect just $170 million in sales taxes in 1998 because of Internet sales that often aren't taxed. The study, by the Ernst & Young accounting firm, estimated the loss at only one-tenth of a percent of total state and local government sales-tax collections nationwide. Forty-five states collect sales taxes. "This study demonstrates that tax revenues for state and local governments are being minimally affected be e-commerce," said Thomas Neubig of Ernst and Young. Nonetheless, government officials said the explosive growth of Internet commerce could threaten to undermine basic services such as education and police protection if it erodes existing tax bases. "We don't want to be an impediment to this technology," said Dallas Mayor Ron Kirk. "But government has a fundamental role in meeting people's basic needs. We need a tax structure that allows government to do that." Many business groups that are active on the Internet fear being targeted with taxes. Frank Kelly, vice president in Schwab's Washington office, said the investment firm now does up to $4 billion in trades a day online. "For a company like Schwab, our customers are already taxed," Kelly said. "We are concerned that new taxes will impact our customers." Yet Mark Nebergall, vice president of the Software & Information Industry Association, said Internet business is unlikely to escape taxation unscathed. Most companies just do not want to face a patchwork of taxes from some 30,000 state and local governments. "What's fair and equitable for other forms of commerce ought to apply to electronic commerce as well," Nebergall said. Beyond U.S. borders lie many more tax questions. For example, how does the United States or a state collect a tax on the purchase of a sweater from a European Union country? And how does the United States prevent its own businesses from moving elsewhere if taxes are too high? "The issue we are dealing with is global," Gilmore said. "You can buy from Akron, Ohio, or you can buy from Moscow. We don't want to surrender our position of world leadership in electronic commerce, and we could do that easily if we do something shortsighted." Copyright © 1999 Seattle Times Company