State and local governments will lose close to $440 billion in sales tax revenues between now and 2011 if the federal government’s soon-to-expire moratorium on new Internet taxes is extended according to a new report by the National Governors Association (NGA).
The report was commissioned by the Institute for State Studies and prepared by the University of Tennessee with data collected by Forrester Research Inc.
The three-year-old moratorium, set to expire on Oct. 21, prohibits state and local governments from imposing new taxes on Internet sales and Internet service providers.
Congress is considering a total of 10 bills, seven in the Senate and three in the House, that would, if passed , either extend the moratorium by five years to 2006, or make it permanent.
The moratorium stems from state and local attempts to overcome a 1992 decision by the U.S. Supreme Court prohibiting state and local governments from taxing mail-order sales unless the seller has a physical presence in the taxing state.
Although the High Court said that the Commerce Clause of the U.S. Constitution prohibited states from taxing interstate commerce, it did note that they could only receive that authority from Congress. Since then, the nation’s governors have intermittently pressed for legislation that would enable states to tax remote sales, whether by mail, over the telephone, Internet, or any other direct response method.
The NGA urged members of the House and Senate to “factor in the new figures into their consideration” the 10 measures based on the report’s findings. Earlier studies indicated that state and local governments stood to lose close to $300 billion in tax revenues because of the moratorium.
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