Speaker's Commission
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Nation's Governors Are Seeking Internet Tax


August 6, 2001

By Leslie Gevirtz

PROVIDENCE, R.I. (Reuters) - Wyoming Gov. Jim Geringer is urging Congress to allow states to tax e-commerce to replenish state coffers.

Geringer, speaking on the opening day of the National Governors Association summer meeting Saturday, warned that without such a tax, states stand to lose annual revenues topping $30 billion by 2003.

``The Internet is here. E-commerce is here to stay,'' he told reporters. ``The Internet as a marketplace will only grow.''

The federal ban on states taxing the Internet is due to expire in October. States, seeing the budget gaps increasing and the savings shrinking as the U.S. economy slows, are lobbying hard to persuade Congress to let them tax such sales.

``It's one of the most misunderstood'' issues, said Michigan Gov. John Engler. ``In Michigan, taxing the Internet and drilling in the Great Lakes are sort of the great lies. Neither is happening, but we got a lot of people trying to stop it.'' The governors emphasize that they want to level the playing field between online businesses and bricks-and-mortar businesses. While states can impose sales taxes on shops in malls or downtown, they cannot impose such a tax on e-retailers.

Geringer said that the states were seeking to tax sales transactions, not content.

The federal government already imposes taxes on Internet sales that total $90 billion annually, according to Geringer.

``Anyone who has ever purchased a ticket online has had a federal Internet tax collected,'' he said.

Geringer and the other 39 governors who are attending the four-day conference in the smallest U.S. state are trying to come up with a simplified system.

``Anyone who wants to sell nationally would have only one set of tax rules to comply with,'' he said. He estimated about 20 states had already enacted enabling legislation for such rules.

"One thing Sacramento needs to understand is what they are doing is operating in a vacuum that is really hurting us," he said. "We cannot go out to provide the police, fire and parks that are necessary if they keep taking money away from us."

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