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Internet Sales Tax? Don't Hold Your Breath

Wednesday, September 8, 2004; 9:09 AM

Most consumers won't have to worry about being charged sales tax on stuff they buy online anytime soon, thanks to the sluggish pace of federal legislation that would give states the power to collect taxes on all Internet sales.

The states and their allies in Congress had hoped to hold hearings on the tax plan this year, but a crowded election-year legislative agenda has dimmed prospects for action on the issue until sometime in 2005.

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The states -- united under the banner of the "Streamlined Sales Tax Project" -- are building the legal and technical foundations for a system in which online merchants would be required to collect taxes on all Web sales and forward the money to the state where the buyer lives. The states are working to harmonize their tax laws in effort to convince Congress to overturn a 1992 U.S. Supreme Court ruling that said such a plan would overburden out-of-state sellers with a confusing patchwork of tax regulations.

Keep in mind that when you buy something over the Internet, even though many online retailers don't collect taxes at the point of sale, you probably are still required by law to report the purchase to your state's bean-counters. Most states have so-called "use tax" laws on the books that require citizens to report and remit taxes on items they buy out-of-state and online, but such laws are notoriously tough to enforce and very few consumers bother to comply with them.

Congress also has yet to reconcile two separate bills passed by the House and Senate to extend a moratorium on taxing consumer access to the Internet. Under the Senate version, the 27 states that tax high-speed digital subscriber line (DSL) Internet services would have two years to phase out their taxes, while another 10 states that taxed Net access before the original ban was passed in 1998 would continue to be exempted from the ban. The House version would ban the taxes permanently and bar states from taxing phone calls made over the Internet. The Bush administration also has signaled its support for extending the ban.

--Brian Krebs, washingtonpost.com Staff Writer

Trees 1, Voter Advocates 0

Most Maryland voters are now even more likely to have two choices on Election Day: vote by touch screen or stay home. That's after an Anne Arundel County circuit judge struck down a challenge to the state's new voting machines.

The plaintiffs, led by TrueVoteMD.org co-founder Linda Schade, had asked that Maryland voters be given a choice between using the touch-screen machines -- which, they argue, are vulnerable to tampering -- or a more traditional paper ballot.

Though Judge Joseph Manck said the machines' potential security holes raised a "very real fear," he agreed with Maryland elections chief Linda H. Lamone that the state had taken reasonable steps to make the election secure. In his ruling, Manck also pointed out that it would be exorbitantly expensive for the state to make paper ballots available to voters in November.

The plaintiffs vowed to appeal the ruling.

The Feds Never Sleep

Most of official Washington may have been on vacation, but the high-tech industry's two most influential regulatory bodies -- the Federal Trade Commission and the Federal Communications Commission -- apparently had enough people in the office to make a couple big headlines last week.

The FCC honed plans to slap CBS with a record-setting $550,000 fine for airing a Super Bowl halftime show in which Janet Jackson's bare, pierced breast made an unexpected cameo. The amount comes to $27,500 for each of the 20 CBS-owned stations that ran the MTV-produced song, dance and striptease extravaganza. Entertainment giant Viacom owns both MTV and CBS.

Meanwhile, over on Pennsylvania Avenue, the FTC announced its first stab at suing a telemarketer for violating the terms of the federal Do-Not-Call list. The FTC said that Braglia Marketing Group LLC broke federal rules by making unsolicited calls to 300,000 prohibited phone numbers. The telemarketer could be hit with more than $3 billion in penalties under the agency's rules.

--David McGuire, washingtonpost.com Staff Writer

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