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Internet Sales Tax Effort on Hold for Now

To do that, the Streamlined Sales Tax Coalition must develop a system for the states to get their dues while making sure that smaller online businesses are not swamped by having to comply with thousands of different tax jurisdictions.

Seeds of a Deal?

If some technology lobbyists have their way, the Internet sales tax effort will fade away.

_____E-Tax Headlines_____
Moratorium on Web Tax Advances (The Washington Post, Nov 18, 2004)
Congress Poised to Vote on Internet Taxes (washingtonpost.com, Nov 17, 2004)
Senate Backs Internet Tax Ban Extension (The Washington Post, Apr 30, 2004)
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NetChoice, a lobbying group that represents online auction giant eBay and travel Web site Orbitz, said that the plan's supporters have not done enough to answer difficult questions about how it will work, including how to certify tax software vendors, educating online merchants and how the states will exchange revenue.

The Direct Marketing Association (DMA), meanwhile, said in a June study that the amount of money states could get from Internet sales taxes might be far less than they claim -- just $3.2 billion by 2006.

The states might win more support from the business community if they cut a range of other corporate income and franchise taxes, said Stephen Kranz, tax counsel for the Council on State Taxation.

"That could very well be the play that earns the states the momentum they need to get their tax plan approved," Kranz said.

Neil Osten, director of telecommunications and commerce at the National Conference of State Legislatures, said some states fear that additional tax breaks could cancel out any increased tax revenues collected on Internet sales.

Riehl of the National Retail Federation said that one possibility under consideration is combining the sales tax plan with a proposal to limit how states charge business activity taxes.

Business activity taxes include franchise taxes and business license taxes that usually affect only the companies that are established in the local area where the tax is applied. Some states have angered companies by seeking to expand the taxes to more kinds of corporate activity including sending salespeople or delivery trucks that cross state lines for even just a few minutes or hours.

House lawmakers introduced legislation that would bar states and localities from levying businesses activity taxes against out-of-state companies unless the company has a store, shipping center or other property physically located in the taxing jurisdiction.

Riehl said that the idea is a good one but has no guarantee of success.

"We will know by the first of March whether this thing will get the traction it needs next year or not."

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