House Leader Plans to Block Online Sales Tax

House Majority Leader Dick Armey has announced [1] he will work to block sales taxes on Internet sales. The ban he foresees would be of a short-term nature. Representative Armey plans to rally support for a three-to-five year ban on Internet sales taxes in conjunction with legislation currently before Congress to make the current ban on Internet access taxes permanent. The ban on Internet access taxes is set to expire in October.

Based on a 1992 Supreme Court decision, states are not currently able to require retailers without a physical presence in a state to collect sales tax in that state.

The issue of Internet sales tax is rapidly becoming prominent as Internet commerce increases. A study prepared at the University of Tennessee predicts that states will begin losing approximately $20 billion per year due to lost sales taxes on Internet commerce.

For Internet sales taxes to be effectively administered, the states would have to reach some sort of uniform agreement over issues such as what is taxed, when it is taxed, at what rate it is taxed, and how the taxes will be collected. Right now all states have separate taxing programs.