Key Nevada lawmaker pitches tax plan for e-trade

Brendan Riley

Monday, March 13, 2000 | 4:57 a.m.

CARSON CITY - Lawmakers were told Monday that Nevada is losing millions in tax dollars and should join with other states to collect from companies selling tax-free over the Internet.

The reaction from members of the Legislative Commission, which handles policy issues between the lawmakers' regular sessions, ranged from enthusiasm to caution. No decisions were made.

The pitch for improved collections of existing sales taxes came from Assembly Taxation Chairman David Goldwater, D-Las Vegas, who said levies on cyber-commerce are already due. It's not a new tax, he said, merely an uncollected one.

Goldwater, on a National Conference of State Legislatures task force studying e-commerce taxes, said a national study shows states and local governments will lose $20 billion by 2003 on tax-free Internet sales. In Nevada, he said the loss would be about $225 million.

Sales taxes, as high as 7.25 percent when local and state levies are combined, account for 40 percent of the state's revenues.

Goldwater advocated an NCSL proposal to use a "trusted third party," which would see credit card records of e-commerce, determine sales or use taxes due under each state's tax laws, and collect and forward the tax payments.

"It's a seamless deal," said Goldwater, adding that cyber-merchants like it because they wouldn't have to collect taxes and also wouldn't face audits.

And Nevada merchants would no longer be at a competitive disadvantage that over time could create economic chaos in the state, he said.

State Sen. Bob Coffin, D-Las Vegas, who has an online book business, endorsed the proposal - but worried about the heavy trust that would placed in a third-party tax collector.

State Sen. Jon Porter, R-Las Vegas, said e-trade is flourishing and shouldn't be hindered by a government that turns into "a toll collector on the information highway."

Assemblyman Bernie Anderson, D-Sparks, wondered whether Nevada's efforts to collect on e-trade sales might cost it jobs from online businesses being encouraged to move to the state.

Government watchdog Knight Allen of Las Vegas said the NCSL proposal seemed too complicated given widely varying taxation methods. He also said Nevada already gets a lot of cyberspace-related revenue - such as the huge Comdex trade show held each year in Las Vegas.

Nevada's interest mirrors concerns among lawmakers and governors around the nation.

The National Governors' Association recently demanded that Congress refrain from permanently outlawing state sales taxes on e-purchases.

But the governors don't like the "trusted third party" proposal. Instead, the group is studying how to adapt the current tax system.

Gov. Mike Leavitt of Utah, chairman of the group, says most governors oppose a total ban such as that advocated by Sen. John McCain of Arizona.

But California Gov. Gray Davis has opposed Internet sales taxes, saying high-tech companies are driving a growing economy - and filling state tax coffers in the process.