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Last year was an exceptional one for online retailers, in which e-commerce spending, excluding travel-related purchases, eclipsed $100 billion–a 24% increase over 2005. And 2007 promises to be even better.
Little wonder, then, that state and local governments are lobbying Congress for the right to tax not just Internet connectivity, but online sales as well. Earlier this week, Sen. Mike Enzi (R., Wyo.) introduced a bill that would impose a mandatory sales tax on Internet purchases. The “Sales Tax Fairness and Simplification Act” would levy a sales tax on all Internet purchases, one that would yield billions in revenues for states and municipalities who, according to Enzi at least, are going to collect them one way or another. “Are we implicitly blessing a situation where states are forced to raise other taxes, such as income or property taxes, to offset the growing loss of sales-tax revenue?” Enzi said at a U.S. Senate hearing yesterday. “I want to avoid that.”
Turns out a few of Enzi’s colleagues feel they’d like to avoid the legislation he’s proposed. Among them, Sen. Ted “Series of Tubes” Stevens (R., Alaska). He would like “to see an impregnable ban on taxes on the Internet,” he said, noting that “the Internet is not something you just dump something like taxes on–it’s not a truck.”
It’s worth noting as well that a sales tax on e-commerce is not the only issue here. Also on the table: the expiration this November of a 1998 law that dictates that local governments in the U.S. generally cannot tax Internet access. If the ban is allowed to expire as state tax collectors hope, we could end up paying an additional 30% for Internet access and, perhaps, even a tax on email (shudder). “They might say, ‘We have no interest in having taxes on email,’ but if we allow the prohibition on Internet taxes to expire, then you open the door on cities and towns and states to tax email or other aspects of Internet access,” said Sen. John Sununu (R., N.H.). “We need to be honest about what we’re endorsing and what we’re opposing.”