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Forty-two Governors Ask Congress to Open Net Tax Door

[BELLEVUE, Wash.] NoInternetTax.org, a leading grassroots opponent of Internet taxation and regulation, condemned forty-two governors for signing a letter to Congress from the National Governor’s Association (NGA) urging them to extend the current moratorium against Internet taxation only if it contains language to support the Streamlined Sales Tax Project (SSTP). The moratorium, or Internet Freedom Act, will expire on October 21, 2001.

“On the surface, SSTP seems to make sense by proposing to simplify the existing definitions, rules and tax rates levied by more than 7,500 taxing entities across America,” stated Jennifer Holder, Executive Vice President of NoInternetTax. “Scratch that surface and you’ll find that the measure violates consumer privacy and is wholly unconstitutional.”

The governors are seeking congressional approval to work on methods to overturn court decisions that forbid them to collect sales taxes on interstate e-Commerce. President Bush supports a permanent moratorium against discretionary taxation of the Internet and Internet access.

“We would be among the first to agree that our complex and archaic tax system is in dire need of an overhaul,” continued Holder. “However, the NGA is merely hiding behind the guise of reform and fairness, by attempting to kick down the door that will allow them to collect taxes on e-Commerce, thus imposing taxation on the Internet.”

Under SSTP, the governors are proposing a “streamlined” system that flattens tax rates, resulting in a de facto national sales tax and creates the national sales tax collection center. The collection center would be responsible for monitoring and collecting consumer online shopping information, such as purchases, credit cards, names and addresses. The center would use this compiled information to issue an Internet sales tax bill.

The U.S. Supreme Court has ruled twice, most recently in 1992 in Quill v. North Dakota, that it is a violation of the Commerce Clause for a state to force an out of state vendor to collect and remit taxes to a state where they have no physical presence, or nexus. Currently, taxes apply to e-Commerce in the exact same manner as they do for catalog, television and telephone sales.

“Consumers should be alarmed that this will allow for the formation of a national database that will monitor their personal information and shopping habits,” added Holder. “The National Governor’s Association should be ashamed of themselves for using scare tactics to avoid discussing the real problems associated with SSTP.”

The governors have alleged that they are losing their tax revenue base to their inability to tax e-Commerce, leaving social programs, education, transportation and other core services in the lurch. These allegations are in conflict with data released by the CATO Institute who reported that sales tax revenues to the states increased by 7.3% last year.

The General Accounting Office (GAO) has also reported to Congress that not a single entity has been able to demonstrate lost sales tax revenues to e-Commerce.

“Regardless of what they’re calling it—streamlining or leveling the playing field,” concluded Holder, “It all adds up to yet another route for the government to impose a tax and grow government.”


About NoInternetTax.org: Based in Bellevue, Wash., NoInternetTax.org is a nonpartisan education and advocacy organization. The mission of the organization is to protect the Internet on the state, national and international level from burdensome regulation and taxation. For more information, please visit our Web site at: www.NoInternetTax.org.

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