November 20, 2001 Senate Tables E-Fairness; Supporters Say Work Will Continue On November 15, the U.S. Senate approved, by a voice vote, legislation that provides for a two-year moratorium prohibiting any new Internet taxes. Notable for retailers and state legislators around the country, the legislation contained no e-fairness provisions, which would have set up processes by which states that worked to simplify their sales tax regulations could begin collecting sales tax on Internet commerce. The senate did consider e-fairness. In a 57-43 vote it moved to table an amendment from Senator Mike Enzi (R-WY) that would have extended a moratorium on new Internet taxes for four years while encouraging states to simplify their sales tax regulations. Under the Enzi amendment, once 20 states had adopted an "Interstate Simplified Sales and Use Tax Compact," Congress could then have voted to approve the compact, which would have allowed states to tax Internet companies and other "remote sellers." However, legislators noted that the closeness of the vote--and the extensive behind-the-scenes negotiations that preceded the vote--indicated that the issue was far from closed. "There is a lot of goodwill on both sides. This is by no means the end of the issue," said Senator Roy Wyden (D-OR), as reported by Reuters. Wyden had sponsored the two-year extension without simplification provisions. The vote came as a growing number of states are facing severe shortfalls in budgeted revenue. Forty-four states saw revenue growth fall from August through October, according to a November 1 report from the National Conference of State Legislatures. In many states, the economic slowdown, coupled with the severe economic fallout following the terrorist attacks of September 11, has significantly diminished sales tax revenues. Budget cuts have been passed or are currently being considered in 28 states, according to the report from the National Conference of State Legislatures. While noting that he believes his defeated amendment can be used as a "springboard for future legislation," Senator Enzi also voiced concern. "If it remains possible to avoid sales tax on items purchased through the Internet, our cities, towns, and states' abilities to continue to provide citizens with the services they depend on-like better schools, increased law enforcement protection, repaired streets to drive on, and, in short, a better way of life for us all, will be hampered," he said. Uncollected state sales taxes on electronic commerce were estimated at nearly $26 billion in 2000. Senator Byron L. Dorgan (D-ND), a co-sponsor of the rejected amendment, said, "State and local governments are concerned about funding for schools and fairness for Main Street retailers," as reported by the Associated Press. Recognizing that the Capitol Hill debate focused on new taxes on the Internet, this month ABA President Neal Coonerty wrote to the nation's governors urging them to equitably enforce all existing sales tax regulations. His letter argued that "by hiding behind the façade of a 'separate' Internet company, many national retailers are dodging their legal responsibilities" to collect sales tax in states in which they have a physical presence. Coonerty called on the governors to "immediately take concrete steps to end this discriminatory enforcement of existing law." And he noted to BTW that it was his strong hope that booksellers concerned with the e-fairness issue would write their state governors expressing their views, adding that booksellers could certainly adapt the language of his letter. [The full text of the letter was printed in the October 29 issue of BTW and is also available here.] - Dan Cullen Topics: Internet Commerce, Sales Tax Initiative,