WASHINGTON -- Consumers are flocking to the Internet, where shopping by computer is convenient and easy, the selection seemingly unlimited and the sales tax uncollected. New research shows online sales tripling each year and possibly topping $200 billion in 2000.
Keeping electronic commerce tax-free will help the economy grow faster, say many in business. But merchants large and small, on Main Street and in the mall, fear online shopping robs them of customers, while local governments worry about eroding the tax base needed for schools and public safety.Everybody frets about losing business if high U.S. taxes are imposed on Internet purchases: Americans might buy from foreign companies while consumers in other countries might bypass U.S. products.
A 19-member commission, including Utah Gov. Mike Leavitt, created by Congress was to meet Monday in Williamsburg, Va., to begin sorting through tax options for Internet commerce. The goal is to have new laws in place before a federal moratorium on new taxes for e-commerce expires Oct. 21, 2001.
The panel's incoming chairman, Virginia Gov. Jim Gilmore, a Republican elected in 1997 on a tax-cutting platform, said in an interview he has no illusions about how difficult it will be to reach a consensus.
"I would not overestimate the conflict. It may not be resolvable," Gilmore said. "My goal is to run the commission in a way that allows all ideas to be aired out and to give a fair hearing. We will not cook up a policy and try to ram it down somebody's throat."
With the growth of e-commerce, the commission's work promises to have a lasting effect on Americans' shopping habits.
Austan Goolsbee, an economics professor at the University of Chicago, said most research indicates online sales next year could reach $200 billion to $1 trillion. His own study of 25,000 online buyers concluded that imposing a sales tax on remote commerce would cut spending by 30 percent.
"Internet sales are highly sensitive to local taxation," Goolsbee said.
In most states with a sales tax, people who buy things online or from out-of-state catalog companies are supposed to calculate and send in the sales taxes, but it is rarely enforced. In 1992 the Supreme Court said Congress would have to change the law to require one state to collect and remit taxes for business done in another state.
Commission members include government officials and executives from telecommunications and Internet industry companies such as AT&T Corp., computer maker Gateway Inc., America Online and broker Charles Schwab & Co.