National organizations representing local governments today voiced their opposition to federal legislation that would essentially require them to sacrifice local telecommunications taxes in return for the ability to collect taxes on Internet sales.

?Congress is asking us to support a proposal that would provide states and localities additional sales tax revenue in exchange for preempting numerous local telecommunications taxes,? said Long Beach Mayor Beverly O'Neill, president of the U.S. Conference of Mayors (USCM).  She further commented that ?our loss in telecommunications revenue will far outweigh the little gain local governments may achieve in sales tax revenue.  Anyone can see this is not a balanced quid pro quo and is, therefore, unacceptable.?

S. 2152 and S. 2153, introduced by Sens. Mike Enzi (R-WY) and Byron Dorgan (D-ND), respectively, would provide congressional support for the Streamlined Sales and Use Tax Agreement (SSUTA), a multi-state agreement that provides for the simplification of sales and use tax laws in return for allowing states and local governments to collect sales taxes on all transactions, including sales over the Internet. 

Both pieces of legislation would also require states and localities to simplify telecommunications taxes in order to be authorized to collect the Internet sales taxes.  Local officials are concerned that the legislation could open the door for the telecom industry to push for an all-out ban on cities? abilities to impose fees on a range of telecommunication services, including rights-of-way fees, per-line subscriber charges and franchise fees.  Revenues from these fees are a major source of funding for critical local government services.

?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 James C. Hunt, president of the National League of Cities (NLC) and Clarksburg, WVa, Councilman.  ?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.?

Telecommunications companies as well as retailers will reap significant financial benefits as a result of the tax simplification effort.  But local officials are concerned that the telecom industry will push for a complete exemption from any local telecommunications taxes and are asking the question:  Why give telecommunications companies more benefits than anyone else?

Representatives from USCM, NLC and the Government Finance Officers Association (GFOA) have been working closely with the telecommunications industry to find a solution to the difficulties faced by the industry as it responds to various tax rates and jurisdictional issues.  Although significant progress in reaching agreement in several areas has been made, local government officials are now concerned that they have reached a point where the telecommunications companies are refusing to compromise on language in these bills, which is unacceptable.  

Although officials commended the efforts by Senators Enzi and Dorgan to resolve this issue, they expressed disappointment that a compromise could not be reached prior to the end of this year?s legislative session. 

NLC?s President Hunt said, ?We regret having no choice but to oppose these two bills.  We applaud the senators for their hard work on this legislation and appreciate their willingness to broker negotiations on this language.  We look forward to supporting a compromise bill that takes the concerns and finances of local government into consideration in the New Year.?

Collectively, the three organizations represent tens of thousands of city and county officials throughout the United States.

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