Governor wants to close ‘Net sales-tax loophole

Thursday, Nov. 16, 2000 | 11:12 a.m.

CARSON CITY -- Gov. Kenny Guinn wants to close a loophole that allows Nevadans to buy goods from out-of-state firms via the Internet and escape paying the sales tax.

A study by the University of Tennessee estimates Nevada's state and local governments could lose $190 million by 2003 in sales tax revenue, through Internet purchases.

"The state is entitled to this," Guinn's press secretary Jack Finn said. "This is not a new tax."

The governor is "trying to level the playing field," Guinn's Chief of Staff Scott Scherer said today. "His position is to treat everybody the same."

Internet sales tax could shape up as one of the major issues of the 2001 Legislature. Assemblyman David Goldwater, D-Las Vegas, already has asked for a bill draft to collect the tax.

A Nevada resident now can shop through the Internet and buy an item without paying a sales tax if the firm is located outside the state. But if the Internet company has a plant or office in Nevada, the sales tax is supposed to be imposed.

The governor, until this point, had not taken a stand on this issue.

But Scherer said today, "The more we lose on sales tax we can't collect, the greater the rate will be on those who pay."

Scherer and Finn emphasized this was not a new tax, but one the state was legally entitled to.

Scherer noted Nevada was a state that depends heavily on the sales tax, which finances about 37 percent of the state's budget.

There's a concern about fairness, he said. Businesses that locate here and sell the same items must collect the sales tax on the purchases, putting them at a disadvantage to the Internet companies from outside the state. The issue of fairness comes into play for the purchaser who pays more by buying in state as well, he said.

A national group is working on a system to simplify a collection system. Internet companies complain that each state has a different rate. In addition, the counties within the states have different rates. They say it would be a major expense to set up the system to collect the right amount on each sale.

The group, called the Streamlined Sales Tax Project, is composed of representatives from the National Governors Conference and the National Conference of State Legislatures.