TAXES ON INTERNET SALES STUDIED; COUNTY OFFICIALS SAY FAIRNESS KEY

The federal government again is trying to allow state and local governments to collect taxes on items bought and sold over the Internet.

Cape Girardeau County officials say the only solution is one that is fair to all businesses: both those that sell over the Internet and those that sell at local stores.

County Collector H. Weldon Macke said Internet businesses get a tax break that gives them an unfair advantage because they don't have to collect sales or use taxes.

Members of the Cape Girardeau County Commission agreed. "I don't know why the local business community isn't up in arms," said Gerald Jones, presiding commissioner.

Proposed federal legislation would allow sales or use taxes to be collected on Internet sales, but it is a long way from becoming law. The House Commerce and Judiciary committees are expected to take up the measure, contained in the proposed Internet Tax Freedom Act, this month.

State and county government leaders have negotiated with Congress for a year on how best to address Internet taxes on sales. Internet sales have become a multibillion-dollar industry that is expected to continue to grow.

Some proponents argue that any attempt to require the Internet industry to pay taxes on Internet sales would be unjust because it is a fledgling industry. In addition, proponents say Internet transactions are so complex that it is virtually impossible to pay taxes because of the difficulty in determining where the taxes are owed. The nation has more than 6,000 taxing jurisdictions.

That same complexity spelled the end to state and local use taxes in 1996, Macke said.

Use taxes were designed to be collected on transactions across state lines, especially catalog sales, but the Supreme Court ruled use taxes illegal because each state and local government imposed a different tax.

"The Supreme Court ruled them illegal because they were not equal," said Macke.

This time, Macke said, local governments through the National Association of Counties Organization have developed a simplified system that reduces the number of taxing jurisdictions to 50. Under that plan each state could establish a taxing system as opposed to every taxing jurisdiction collecting taxes due them. A three-year moratorium also is proposed for taxes on Internet sales as part of that plan.

"We are not trying to interfere with an up and coming business," Macke said, "but it isn't fair to our local businesses."