by Alexander Ponder

Two bills introduced late last year to pave the way for collecting sales and use tax on Internet sales have drawn fear from local government groups because they contain provisions that would severely limit the ability of local governments to tax telecommunications services. 

Sens. Michael Enzi (R-Wyo.) and Byron Dorgan (D-N.D.) introduced separate legislation, S.2152 and S.2153, respectively, that would provide Congressional assent to the Streamlined Sales and Use Tax Agreement (SSUTA).

Though the National League of Cities and other local government partners have long advocated for federal legislation in support of the agreement, NLC opposes the current bills.

?Local governments strongly support working with Congress and the telecommunications industry to simplify telecommunications taxes so that all providers can operate efficiently within local jurisdictions,? said NLC President James Hunt, councilmember, Clarksburg, W.Va.. ?However, we cannot allow telecommunications companies to dig up city streets and disrupt the lives of our constituents ? and their customers ? without just compensation for their actions.?

SSUTA is a multi-sate agreement designed to simplify tax laws.  Simplification measures provide for such components as the uniform definitions of goods ? every collecting jurisdiction would define peanut butter the same ? for example ? as well as other standardization measures such as uniform sourcing provisions, codifying destination-based sourcing as the standard, meaning that local government taxes are calculated at the destination of the product as opposed to the location from which the product was purchased. 

In exchange for these simplification measures designed to save industry untold administrative dollars, local governments would receive Congressional authorization to collect revenue on remote sales from sources such as the Internet and catalogue purchases.  This will recapture for local governments previously lost general revenue in fiscally difficult times. 

Revenue loss estimates from Internet purchases have been calculated in one study done for the National Governors Association to be between $21-33 billion dollars per year by 2008 for state and local governments. 

SSUTA is primarily designed to simplify and broaden the base for tax collection and it is the policy of NLC that these provisions should stand alone. 

The additional telecommunications language in the Senate bills imposes requirements on local governments beyond those agreed to in the multistate agreement that would limit the ability of local governments to impose and collect franchise fees, right-of-way fees and other local telecommunications taxes. 

The inclusion of the telecommunications provisions to the SSUTA legislation has led NLC, along with the Government Finance Officers Association and the U.S. Conference of Mayors, to oppose the legislation as introduced. 

NLC and its partner local government organizations will continue to work with Enzi?s and Dorgan?s staffs and other Congressional offices on efforts to achieve Congressional approval of the Streamlined Sales and Use Tax agreement without the telecommunication language that would both strip local government of taxing authority and control of important local resources.