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Article published May 3, 2004
States should tax online sales, not broadband Internet
access
Congress is considering renewing and making permanent
the ban on taxing Internet service.A moratorium on taxing cable modem and
digital subscriber line (DSL) accounts was passed in 1998 in order to let
Internet access spread without the burden of taxation.The moratorium should at
least be extended, if not made permanent, for the same reason. Internet access
is becoming necessary for schoolchildren and businesspeople and many
workers.Congress shouldn't raise the priceof such access by allowing it to be
taxed. That will only impair the ability of low-er income families to afford
Internet access.But some senators complain that states need the money they could
raise from taxing broadband accounts. They complain that if Internet accounts
aren't taxed, states will simply be forced to raise income and property tax
rates.The solution should be obvious to them. Continue to hold the line on
taxing Inter-net access, but allow states to tax the growing number of purchases
being made online.States are losing billions of dollarsevery year because sales
that used to be made at local businesses are being made online.Traditional
retailers help to build their communities. They bring jobs, buildfacilities and
pay state and local taxes. They should not be penalized by the
government-subsidized growth of Internet sales.But they are at a competitive
dis-advantage as long as they are requiredto collect sales taxes for the state
while their online competitors are not. And thisis a disadvantage imposed by
Congressas it prevents sales taxes on Internet purchases.States have been
working on a method of collecting online sales taxes, simplifying the multitude
of tax rates online merchants would have to handle. The arguments against
expanding the sales tax to online purchases are dwindling.Members of Congress
are busy debating whether it is more important to keep Internet access priced
low so more people can afford it or to allow states to raise needed revenue.They
can do both. Just leave access untaxed and tax Internet sales.