Posted on 09/29/2003 12:46:16 AM PDT by garmonbozia
Owens to testify in Congress against proposed national system
Despite the state budget crisis, Gov. Bill Owens will testify Wednesday in Congress against a bill that would let states collect billions in new Internet sales taxes. The legislation, introduced last week by Rep. Ernest Istook, R-Okla., would allow states to implement a unified taxation system for collecting taxes on sales by Internet, phone or catalog.
Owens, who will testify before the Commercial and Administrative Law Subcommittee of the U.S. House Judiciary Committee, has expressed his opposition to Internet taxes for years. But the pressure to impose them has built nationally among other governors as the economy has cratered.
State governments are losing an estimated $20 billion this year because they don't collect Internet sales taxes, according to estimates by the General Accounting Office. Colorado will miss out on $394 million, according to the GAO.
"It's relatively rare when I'm on the opposite side of my fellow governors," Owens said. "But I'm on the side of the vast majority of people."
Under current law, for instance, Coloradans who order a chair from Pottery Barn's online store would pay sales tax because Pottery Barn has physical stores in the state. But if a Coloradan ordered from Denver-based EBags.com, they would not pay sales tax because EBags has no physical stores here.
Owens argues that Internet customers shouldn't pay taxes because they don't use local state or city services to make those purchases. Conversely, a customer of a traditional retail shop, he said, uses city streets, is protected by police and benefits from clean air.
"It's unfair to have to pay a sales tax when (customers) have received no benefit from that state," Owens said.
But traditional retailers argue that the current tax system is unfair because unlike pure- play dot-coms, most of them must collect taxes online in each state where they have stores.
"All retailers should have to play by the same rule," said Chad Davis, director of government relations for the National Retail Federation, a trade group representing major retailers. "A brick-and-mortar Main Street store is at a competitive disadvantage."
The debate over Internet taxes stems from a 1992 Supreme Court decision that says taxes are owed in remote sales, but states can't be required to collect them because myriad tax laws and rules make it too difficult.
So a state only can require sales taxes from merchants with a physical presence in that state.
But over the past several years, a coalition of 20 states pieced together a unified sales tax system to comply with those various laws. And the proposed bill allows states to implement Internet taxes using this system.
Even if the proposed tax legislation becomes law, Colorado won't be required to collect those Internet taxes on sales made from inside the state.
Owens questioned the numbers released by the GAO and said Colorado collected plenty in income taxes due to the success of Internet companies during the late 1990s.
"I don't think the state government has lost a dime because of the Internet," he said.
And ultimately, Owens hopes his position will make Colorado more attractive to tech firms looking to expand or relocate.
"It contributes to the image of Colorado being very tax conservative and emphasizes it's a tech- friendly state," said Floyd Ciruli, president of Ciruli Associates, a Denver political consulting firm.
"And he's in pretty good step with voters," Ciruli said. An August survey by his firm showed most voters oppose Internet taxes.
"The Republican strategy is that, 'we are going to work our way out of this budget crisis relatively soon and that by mid to late next year, a lot of this pressure is going to dissipate,"' Ciruli said.
And to Ernest Istook, R-Okla..... Go away!
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