Retailers, officials urge Congress to reject Internet tax

Friday, April 7th 2000, 12:00 am

By: News On 6

WASHINGTON (AP) -- Congress will vote this year on repealing the 102-year-old telephone tax, extending a moratorium on new Internet taxes beyond 2001 and a permanently banning taxes on charges for Internet access, House Speaker Dennis Hastert says.

In a draft speech to be delivered Monday in Chicago, the Illinois Republican said the votes will underscore the GOP as prime supporters of tax relief and electronic commerce. House Minority Leader Dick Gephardt, D-Mo., recently spoke in favor of a similar approach as both parties jockey for support in the high-tech industry.

"No one can seriously believe that House Democrats, who have fought us at every turn when it comes to reducing the burden of taxes, ... will now turn around in an election year and promote tax relief and a stable framework for the new economy," Hastert said in the speech.

"Taxes are an impediment to economic growth," he said. "Instead of retarding growth, we must encourage it."

The speaker's remarks were circulated on Capitol Hill Friday shortly after some of the nation's biggest retailers, joined by state and local government officials and sympathetic members of Congress, said lawmakers should reject a federal e-commerce commission report they say gives tax breaks to business and could lead to a permanent sales tax exemption for the Internet.

Executives from Target, Wal-Mart, Radio Shack, J.C. Penney and Circuit City appeared on Capitol Hill with government officials to criticize the Advisory Commission on Electronic Commerce majority report as unfair to traditional retailers. They described it as a potential threat to billions of dollars in state and local sales tax collections that pay for schools, roads, police and fireprotection.

"There should be a level playing field where all retail sales are treated equally," said James Hale, executive vice president at Target. "No tax policy should encourage retailers to avoidc ontributing to their loc by Congress to recommend future e-commerce tax policy, failed to reach the necessary two-thirds vote for formal recommendations on most key points. But its six business members, joined by anti-tax members, won majority approval of proposals to extend a moratorium on new Internet taxes for an additional five years after it expires next year.

It is this last point that opponents say includes special tax provisions that would benefit business members of the panel such as AT&T, MCI Worldcom and America Online while costing states $30 billion a year in lost revenue. They also contend it could lead to a permanent barrier against states extending to Internet commerce their existing sales taxes, which provide about 48 percent of the states' revenue.

"The argument shouldn't be how to favor one form of commerce over another," said Henry Chiarelli, president of RadioShack.com.

Gov. Mike Leavitt, R-Utah, chairman of the National Governors Association and a dissenting member of the e-commerce panel, said if Congress extends the moratorium on new taxes it should also permit states to simplify their sales-tax systems and develop interstate compacts that allow them to collect the money on remote Internet sales. Leavitt proposed that Congress pass a law allowing compacts to be created by Dec. 31, 2003.

Republican leaders on Capitol Hill already are moving legislation that mirrors many of the commission's majority proposals. Senate Commerce Committee Chairman John McCain, R-Ariz., plans votes next week on his bill to extend the moratorium on new taxes through 2006, and support is building for repealing the 3percent telephone tax and for a permanent ban on taxes on Internet access.

But Sens. George Voinovich, R-Ohio; Bob Graham, D-Fla.; and Byron Dorgan, D-N.D., appeared with Leavitt and the retailers tosignal their intention to fight any legislation that might bar states from collecting sales taxes on e-commerce.
--------
On the Net:
National Governors Association: http://www.nga.org
Congress: http://thomas.loc.gov
Advisory Commission on Electronic Commerce:http://www.ecommercecommission.org