Voluntary taxation?
Utah Gov. Mike Leavitt is proposing such a thing to deal with the complicated issue of sales taxes on the Internet.The governor is right in that a system needs to be put in place so that merchandise purchased on the Internet is subject to taxation just as goods purchased at a department store. But while his voluntary tax plan is, as he puts it, "a radical 21st century idea," it is also a questionable one.
Leavitt's proposal, supported by several national associations of counties, mayors, legislators and state governments, would use state-certified software and third-party service providers to streamline sales tax administration.
It would work this way: Say a consumer made a $200 purchase off the Internet. A third party would charge the consumer $212 for the purchase plus sales tax. It would collect the money and distribute the cost of the purchase back to the retailer, the sales tax to the state and collect a small commission for itself.
While it's an innovative approach, because it's voluntary, it fails to address the Internet tax issue head-on and may even delay an acceptable solution. Leavitt notes the climate won't be right for the kind of tax changes he's talking about for six to eight years.
In six to eight years the Internet will have evolved considerably. A system needs to be put in place now to deal with it. It then can be modified as needed.
While worldwide commerce over the Internet is expected to total around $8 billion this year, it's projected to soar to $1.4 trillion in 2002. That would mean billions of dollars lost in sales tax revenue if there isn't legislation to account for it.
To Leavitt's credit, he at least is coming up with proposals to address the taxation issue. Many of his colleagues are either foolishly avoiding it or trying to make a case for not taxing the Internet.
Not taxing merchandise purchased on the Internet should not be an option. Many cities in Utah and elsewhere will suffer if that continues, particularly with current Internet sales projections.
For example, earlier this year the Utah League of Cities and Towns distributed information showing that 45 percent of the combined revenue of 64 cities and towns representing 1.3 million Utahns comes from sales taxes. If Salt Lake City is removed from that group, the figure rises to 52 percent.
Leaders from both parties need to work with Leavitt to address this pressing issue. They need to pass legislation that mandates a sales tax for items purchased on the Internet while protecting states' rights to access those tax revenues.