National
Internet Sales Tax Bill Introduced
by Janet Attard
Senator Ernest
"Fritz" Hollings (D-SC) has introduced a bill that would place a
5 percent national sales tax on Internet sales and other mail order and
catalog sales that are not now subject to sales taxes.
The bill, entitled the Sales Tax Safety Net and Teacher Funding Act,
(S1433) targets companies that, under rulings by the US Supreme Court, are
not required to pay local sales taxes. Such transactions include out
-of-state sales where the seller does not have a physical presence (nexus)
in the customer's state.
The Treasury Department would, under the Hollings bill, be responsible for
setting up a program that would distribute the money to states as grants
to be used for funding for compensation and benefits payable to elementary
and secondary school teachers.
The tax would be " imposed on the first retail sale of merchandise
effected via the Internet, by mail order through a catalog, or by direct
sales other than through a local merchant." There would be a tax
credit up to the amount of the local sales tax collected for in-state
Internet and mail order sales up to a maximum of the 5% national tax.
However if the state and local taxes were less than 5% the merchant would
still need to collect the full 5% national tax, remitting the difference
between the state and local taxes to the US Treasury Department.
The Association of Online Professionals (http://www.aop.org)
has issued an alert to its members saying the bill "is intended to
derail the more reasonable study of Internet taxation by the National
Advisory Commission on Electronic Commerce, an industry/government effort
that began earlier this year. The commission has been bitterly opposed by
tax authorities anxious to impose a heavier tax burden on the Internet at
the state and local levels."
According to Dave McClure, executive director of the AOP, "The bill
is based on the incorrect premise that electronic commerce is in some way
reducing the revenues to state and local governments. In reality, those
taxing authorities are enjoying their highest tax collections in decades
thanks to the healthy economy. Further, the bill assumes that no sales
taxes are being imposed on e-commerce, when in fact 42 states already have
sales taxes on e-commerce. "
The text of the bill can be read on the AOP Web site at http://www.aop.org/legis/s1433.txt
Individuals wishing to voice their thoughts about the bill can do so by
contacting Senator Hollings at
The Honorable Ernest Hollings
Senator for South Carolina
125 Senate Russell Office Building
Washington, DC 20510-4002
Phone: (202) 224-6121
Fax: (202) 224-4293
Email: senator@hollings.senate.gov
You can share your opinions online in the Business Know-How Mail Order Tax
message board.
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