Internet Sales Tax: Clinton, Governors Talk
Dateline: 02/29/00
President Clinton and the U.S. Governors held a face-to-face chat about the Internet yesterday in Washington. While opportunities for using the Internet in government and online voting were also discussed, the topic of the day was whether states should collect taxes on Internet sales.
In spite of the potential revenue from taxing online sales, the governors remain divided on the issue.
While collecting Internet sales tax appeals to states with economies dependent on sales taxes, it could hurt those states with massive Internet-based economies already in place.
After the meeting, California's Democratic Gov. Gray Davis told the press, "In the short term, I do not favor the application of the sales tax for the Internet, because I certainly don't want to kill the golden goose that is laying the egg."
From the other side, Maryland's Democratic Gov. Parris Glendening said, "We are concerned that if the states lose on the average across the country 40 percent of their revenue, what would happen to education and other services?"
A Feb. 2, 2000 report from the National Governors Association recommends that states "look at their current telecom taxes and take steps to treat the telecommunications industry like any other industry in their state."
The report goes on to note that Internet taxation will produce "winners" and "losers" and urges state leaders to "undertake a thorough review of their telecommunications tax structure, using the fundamental principles of tax efficiency, competitive neutrality, tax equity, and administrative simplicity to guide their work."
According to White House spokesman Joe Lockhart, President Clinton wants the states to resolve the issue among themselves. "He believes that it may have to involve some simplification of sales tax. But this is something they (the states) will have to work out with some urgency as we move forward," stated Lockhart.
The federal government has also been wrestling with Internet taxation.
In Oct. 1998, the Internet Tax Freedom Act imposed a five-year moratorium on any form of Internet taxation.
On Feb. 3, 2000, U.S. Rep. Christopher Cox (R-Calif.) and U. S. Senator Ron Wyden (D-Ore.) introduced the Internet Non-Discrimination Act which would make the moratorium permanent.
President Clinton, who endorsed the Internet Tax Freedom Act, has often expressed his administration's support for keeping the Internet tax-free.
Among the presidential candidates, Republicans George W. Bush and John McCain, and Democrat Al Gore have all stated support for extending the Internet taxation moratorium.
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