Fair tax for trade on Internet studied

Wednesday, Feb. 23, 2000 | 10:50 a.m.

Assemblyman David Goldwater, D-Las Vegas, says, "Nobody wants to tax the Internet." But he's working on a way to collect taxes that are already due, and hopes to convince other lawmakers to start a pilot project.

Sen. Mike Schneider, D-Las Vegas, also is concerned about untaxed e-commerce. He says the state will lose a lot of revenue if such sales continue to go untaxed.

They commented after a new study by the University of Tennessee, done for the National Tax Journal, said states and local governments will lose $20 billion in tax revenue by 2003 if Internet transactions remain untaxed.

The study suggests Nevada would have to increase its sales tax by 0.6 percent to make up the loss of revenue on cyber-commerce. Sales taxes, which run as high as 7.25 percent when combined with local levies, are a main revenue source for state government.

In talking about his plan, Goldwater, a member of a task force studying electronic taxation for the National Conference of State Legislatures, says, "This is a matter of fairness."

Goldwater proposes a "zero-burden tax collection system." He wants to involve local business, out-of-state Internet retailers and the state Taxation Department in working out the system.

Under his plan, to be outlined at a March 13 Legislative Commission meeting, the state would hire a third party who would see credit card records of e-commerce and decide on the amount of the tax.

In that way, the Internet retailer wouldn't have to worry about handling the tax or about audits by the state.

There's the technology to do this now, Goldwater says, adding that the big challenge is getting e-commerce retailers to agree. There's no incentive to participate if they haven't actually set up shop in Nevada.

But these cyber-merchants might be worried about a "humongous" bill if the tax is ever imposed, he said.

Schneider says the state should take the lead in any proposal because of the importance to state government, adding that Gov. Kenny Guinn is "already saying that in eight years we're out of money to fund the programs we have now."

Schneider also is worried that the federal government is looking at imposing a sales tax on cyber-commerce. "The federal government has been poking around," he said. "We want to keep the feds out because it (the sales tax) is a state revenue."

Guinn is "firmly opposed" to any federal taxation of the Internet, his press secretary Jack Finn said, adding that the governor feels the issue "warrants a lot of study."

Both Goldwater and Schneider agree Nevada's taxation system needs to be modernized. "We've got to be prepared if our tax base is eroded," said Schneider. "We will probably have to revamp the tax system. We're looking at the biggest change since the 1930s."