The Washington Post is reporting that a majority of US Governors will urge lawmakers this week to reject the extension of the moratorium on Internet access taxes unless it is tied to the opportunity for states to create a streamlined system to collect online sales tax.

The moratorium, which has been in place since the fledgling days of the Internet to help foster e-commerce growth, is set to expire October 21, 2001.

"If you care about a level playing field for main street retail businesses, and local control of state's governments and schools, extend the moratorium on taxing Internet access only with authorization for the states to streamline and simplify the existing sales tax system," a draft of the letter says.

The issue is quite complex and has challenged lawmakers to rethink the entire concept of transactional taxes in the 21st century.

At issue for the states is the recognition that an estimated $13 billion in uncollected sales tax revenue in the next couple of years will force them to make cuts in spending on education and other vital state services.

At issue for businesses is the fact that there are over 7,500 state and local taxing jurisdictions in the United States, making it onerous and often impossible for small e-tailers to adequately manage the tax collecting and reporting burden.

Sources close to the issue feel that because of time constraints, the moratorium on Internet access Tax will likely be extended.