By Mike Benbow
Herald Writer
The federal ban on taxing Internet sales expires this weekend, but don’t panic. There’s no need to do all your online Christmas shopping today.
Washington state has its own ban on new Internet taxes that lasts until next summer, and it can’t force businesses without facilities here to collect state sales taxes.
"It doesn’t mean much to us," Mike Gowrylow, spokesman for the state Department of Revenue said Friday, referring to the failure by Congress Thursday to extend a ban on taxes that target the Internet.
The moratorium imposed in 1998 prohibits taxes on Internet access and bans any tax that singles out the Internet. It does not, however, address a more complex issue involving uncollected state sales taxes on electronic commerce, estimated at nearly $26 billion in 2000.
"Starting Monday, there’s an opportunity for considerable economic mischief," said Sen. Ron Wyden, D-Ore.
There is concern that tax officials around the country could begin interpreting a variety of their current tax laws as applying to the Internet. Some lawmakers say that would drag down a key economic engine, adding to the nation’s economic woes.
But Gowrylow said Gov. Gary Locke supports for now the state ban on Internet taxes enacted by the Legislature. It expires in July.
Gowrylow said the courts have made it clear that states can’t force businesses outside Washington state to collect taxes on sales to state residents.
"Unless a remote seller has a presence in state, we can’t make it collect the sales tax," Gowrylow said, explaining courts have sided with Internet retailers when they argue that it’s too confusing to figure out which states tax which products at which rate.
But Washington state would like to eventually tax Internet retail sales because it needs the money, he added.
"Voters have said over and over again that they don’t want an income tax in this state," Gowrylow said. "Our biggest source of revenue is the sales tax, so obviously we need to protect it."
Gowrylow said the state estimates it is now losing about 2 percent of possible sales tax revenues to untaxed Internet retailers. That could double or triple in the next two years, he added.
"We think that by 2003 we’ll be losing $250 million in sales tax revenues," he said. "Two hundred and fifty million dollars is a lot of money."
State officials here are working with their counterparts around the nation to try to standardize the items subject to sales tax.
"Some remote sellers have said if you made it easy for us, we’d collect the sales tax," Gowrylow said. "Maybe Congress in a couple of years will revisit this issue. It lends some urgency to find a solution."
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