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Friday, August 24, 2001 - Page updated at 12:00 AM

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Locke pushes for Net sales tax

Seattle Times business reporter

The looming expiration of a three-year ban on new Internet taxes has revived the debate over whether state and local governments should be able to tax purchases made on the Web.

This week, a group of 42 governors — including Washington Gov. Gary Locke — urged Congress not to extend the Internet-tax moratorium, which applies mostly to Internet-access fees and which expires Oct. 21, unless lawmakers also allow states to create a uniform system to collect taxes from out-of-state online businesses.

Northwest e-commerce retailers say they aren't bracing for an imminent wave of new taxes come October.

"We're not worried about it," said Jennifer Lind, spokeswoman for Kent-based outdoor retailer Recreational Equipment Inc. (REI). "It is really a non-issue for us — in every state (where we have a store), we collect sales taxes."

At REI, online transactions accounted for about 13 percent of sales last year.

While laws require online shoppers to calculate and pay taxes to state authorities, few do, and a 1992 Supreme Court decision forbids states from requiring out-of-state businesses — online, catalog, or otherwise — to calculate and collect taxes on orders placed from states where the business has no physical presence.

Seattle-based Amazon.com, the world's largest online retailer, collects sales taxes from Washington customers, and spokesman Bill Curry said the company is not opposed to collecting state or local taxes from out-of-state customers. The problem, Curry said, is that with more than 7,600 tax jurisdictions in the country, it's almost impossible for retailers to sort out what taxes customers should pay.

In 1992, the U.S. Supreme Court agreed that out-of-state retailers should be spared from the burden of sorting through tax jurisdictions. Because the court decision governs Internet and catalog sales, the Internet-tax moratorium approved by Congress applies mainly to Internet-access fees.

The governors say the moratorium should continue only if Congress lets states develop a system that would enable online retailers to easily calculate sales taxes.

The governors, backed by brick-and-mortar retailers, contend such a system would eliminate what they say is an unfair competitive advantage for Web businesses.

Jan Teague, president of the Washington Retail Association, said her group has worked with Locke's office for two years to come up with a streamlined system.

"The retailers are just asking for all the businesses to be treated the same," she said.

By that logic, Amazon's Curry said, every merchant would collect sales taxes based on where buyers live.

NoInternetTax.org, a Bellevue-based interest group that opposes Internet taxation and regulation, criticized Locke for joining in the governors' lobbying effort.

"With the recent downturn in the economy, we feel if you're going to impose taxation on the Internet, that could further the downward spiral," said Brett Mecum, political director for the interest group.

Even if Congress and the states eventually agree on a streamlined Internet tax system, online retailers say they'll survive.

"People shop for reasons other than sales taxes," Curry said. "They shop for selection, convenience and price."

Jake Batsell can be reached at 206-464-2718 or jbatsell@seattletimes.com.

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