WILLIAMSBURG, Va. -- States were unable to collect just $170 million in sales taxes in 1998 because of Internet sales that often aren't taxed, says a new study released Tuesday at the opening session of a federal commission on e-commerce tax policy.
The study, by the Ernst & Young accounting firm, estimated the loss at only one-tenth of a percent of total state and local government sales tax collections nationwide. Forty-five states collect sales taxes."This study demonstrates that tax revenues for state and local governments are being minimally affected be e-commerce," said Thomas Neubig of Ernst and Young.
Nonetheless, government officials at the opening session of the 19-member Advisory Commission on Electronic Commerce said the explosive growth of Internet commerce could threaten to undermine basic services such as education and police protection if it erodes existing tax bases.
"We don't want to be an impediment to this technology," said Dallas Mayor Ron Kirk. "But government has a fundamental role in meeting people's basic needs. We need a tax structure that allows government to do that."
Other commission members, however, said the panel must not ask Congress to impose a new national sales tax on e-commerce or impose any taxes on such things as Internet access.
"We're not here as the tax collectors for the current tax regime," said Stan Sokul, consultant for the Association for Interactive Media.
The Supreme Court has ruled that one state cannot force another state to collect and remit sales taxes for businesses located in its borders. Although most states technically require consumers to figure and pay sales taxes on purchased from out of state, it is rarely enforced.
Later, the commission planned to decide how to solicit private money to operate and still avoid any perceptions of a pro-business bias. Congress provided no money when it created the panel last year. But the panel could not resolve the issue Monday.