The US Senate yesterday agreed to renew a ban on internet taxes
in the country for a further period of two years. The original ban,
in place since 1998, forbid states creating any new
internet-specific taxes. That ban expired last month amid
disagreement on whether to extend the ban or introduce new on-line
taxes.
The Supreme Court ruled in 1992 that states cannot require
e-tailers to collect sales taxes unless they have a significant
physical presence in the customer’s state. In ten US states,
consumers are meant to pay a tax on items bought on-line, but the
requirement is very difficult to enforce and often ignored.
The US charges sales taxes to consumers in off-line purchases.
These taxes were kept away from e-commerce to encourage its growth,
to the frustration of many US states which are losing potentially
billions of dollars of revenues. E-commerce sales currently account
for less than 1% of all retail sales.
The Senate voted 57 to 43 in favour of the new moratorium
contained in a bill which will now go before President Bush for
signature, regarded in this case as a formality. The new moratorium
is due to expire on 1st November, 2003.
