Wyden in 11th-Hour Push to Broaden Internet Access Tax Ban

Washington—Sen. Ron Wyden (D-OR) introduced a bill on Oct. 2 that calls not only for a two-year extension of the Internet Tax Freedom Act but also for other e-commerce-related tax collection bans. The Internet Tax Freedom Act, which implemented a moratorium on Internet access taxes, expires on Oct. 21.

Wyden’s bill, S. 1481, would bar other “multiple and discriminatory” taxes on e-commerce while encouraging states to simplify their sales and use taxes, in addition to extending the Internet access tax moratorium. Sens. Patrick Leahy (D-VT) and John McCain (R-AZ) cosponsored the bill, which has been referred to the Senate Commerce, Science, and Transportation committee.

But the Direct Marketing Association opposes the bill, concerned that by encouraging localities to simplify their tax codes, S. 1481 could lead to the eventual collection of local sales taxes. The bill “inappropriately links the extension of the Internet access tax moratorium with the issue of potential interstate sales collection,” says Mark Micali, DMA vice president, government affairs. “And there’s clearly no concensus on interstate sales tax collection. Instead, any discussion of the divisive sales tax debate should be saved for an appropriate time when there’s no pressure of a looming moratorium deadline.”

Under the 1992 Supreme Court decision “Quill v. North Dakota,” states and other localities can’t force remote marketers such as catalogers to collect sales taxes unless they have a physical presence in the locality. The court agreed that collecting for the myriad localities, with their varying tax codes, would be an administrative nightmare. But state and local officials have never stopped battling for an overturn of the decision, citing billions of dollars in lost revenue.

In fact, states stand to lose more than $13 billion in uncollected sales taxes on online transactions alone in 2001, according to a University of Tennessee study introduced on Oct. 2. The study adds that during the next five years, uncollected state e-commerce taxes will soar to $45 billion.