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States risk losing revenue unless Congress permits them to implement a system to collect sales taxes on Internet purchases, the vice chairman of the National Governors Association told lawmakers Tuesday. Michigan Gov. John Engler, a Republican, said that four out of five states are willing to adopt a streamlined, simpler tax system that would reduce the cost burden on remote sellers and bring Internet sales in line with the collection obligations borne by traditional retail stores. “I am not talking about a new tax, a tax increase, or a tax on the Internet,” Engler told the House Judiciary Committee’s panel on commercial and administrative law. “The Internet should not be a way for buyers and sellers of goods to avoid existing obligations.” Congress this year must decide whether to extend a moratorium on taxes that single out the Internet and prohibits taxes on Internet access. That moratorium, which expires Oct. 21, did not address sales taxes, which are governed by a Supreme Court decision requiring that a seller have a “physical presence” in a state in order to require collection. In the 45 states that have a sales tax, remote purchases via the Internet, catalog or telephone are still subject to the tax, but it is almost impossible to collect. Many retail groups say Internet companies have an unfair advantage that Congress must address. Sponsors of legislation to extend the moratorium say the sales tax issue is far too complicated to address this year, running the risk that state or local governments could try to impose new taxes on the Internet after the temporary ban expires Oct. 21. Negotiations among six senators on the sales tax issue have continued for weeks without resolution. “Time is of the essence,” said Rep. Christopher Cox, R-Calif., whose legislation would permanently ban Internet access taxes and extend for five years the ban on multiple and discriminatory taxes. “We may not get that accomplished in time.” In addition, many congressional Republicans approach the Internet from an anti-tax viewpoint and consider collection permission tantamount to a tax increase. Virginia Gov. Jim Gilmore, who headed a congressional Internet tax commission, noted in his testimony that Internet retail sales last year amounted to less than 1 percent of total retail sales. “I believe no taxation is presumptively necessary,” said Gilmore, who is also chairman of the Republican National Committee. Robert Comfort, tax policy vice president at online retailer Amazon.com, outlined the e-tailers’ viewpoint in urging lawmakers to carefully oversee any effort by states to impose what would amount to a national sales tax system, including uniform definitions and rules. “The states have repeatedly demonstrated inability or unwillingness to grapple with the issues that must be resolved in order to achieve genuine simplification,” Comfort said. Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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