Governors Are Split on Internet Tax Question

ST. LOUIS -- The National Governors' Association meeting provided a platform for much agreement among state chief executives on information technology issues, but the question of exactly how to tax Internet transactions is not one of them.

"The NGA is of a split mind on this, as is the business sector and Congress, but we need to come to a consensus soon," said Wyoming Gov. Jim Geringer (R), co-chairman of NGA's task force on IT.

Geringer said he favored a volunteer system where several states might come together to create a system of taxation based on the point of consumption. But currently, "people are not focused enough on the solution, only on the process," he said.

Virginia Gov. James Gilmore (R), chairman of the Advisory Commission on Electronic Commerce (ACEC), which is performing a year-long analysis of the Internet taxation problem, said he could not take a position on how or whether to tax Internet transactions because of his role on the commission. But he said data has been presented on both sides of the debate.

"There are facts to say it's taking away from local retailers and that should be given back, but also [there is] the idea that it could boost commerce so much that it prompts a whole new economic activity," Gilmore said.

The ACEC, which has members from the public and private sectors, will be holding three more meetings, with the last occurring in the spring in Dallas. "We're going to see what kind of consensus we can make, if any," Gilmore said. "There are business and government officials weighing in, and they are all very opinionated."

Gilmore invited the public to visit the Commission's World Wide Web site (www.ecommercecommission.org) to share their views on the hotly debated issue.

Kentucky Gov. Paul Patton (D) saw the need to develop a system of taxing Internet transactions in order to continue to finance state and local government. Patton said if e-commerce transactions continue to go untaxed, "it would put local retailers at a 6 percent disadvantage in Kentucky."

Patton said an ongoing tax break on Internet transactions would make local retailers little more than display stores where people could go and decide on the items they want and then purchase them tax-free on the Internet.

Aldona Valicenti, chief information officer of Kentucky, said she did not think there was enough data in on the topic to make a final decision. "I think [taxation] will stifle what goes on, but not all of the data is in, and Gov. Gilmore is trying to collect that data."

Valicenti said one major question that needs to be answered is, "Do people purchase stuff that's not locally available, or could it be done locally? I just don't think we know yet."