Clinton Administration Opposes Proposal to Ban Internet Taxes

In its first policy statement on the Internet sales tax question, the Clinton Administration late on Friday opposed proposals to ban the collection of sales taxes on Internet purchases and instead urged consideration of plans to simplify the nation's tangled collection of sales taxes.

The remarks, reportedly by a senior administration official who asked not to be identified, came as the 19-member Advisory Commission on Electronic Commerce panel is preparing to convene on Tuesday in San Francisco to continue debate on whether taxes should be banned on goods and purchases purchased over the Internet.

The official said the White House opposes a proposal by Virginia Governor James Gilmore to completely exempt from sales taxes all goods bought from remote Internet vendors. Instead, the administration is suggesting carefully examining a tax simplification plan rolled out by the National Governors’ Association, Washington, to simplify tax collection by shifting most of collection work from retailers to the states. Under this plan, agents hired by states, called ''trusted third parties,” would decide if items are taxable, the tax rate and what total taxes are due.

The Gilmore plan “violates fundamental principals of tax neutrality and raises troubling questions,” the official said. He also said the Gilmore approach could encourage merchants to establish Internet kiosks in every store so consumers can make all of their purchases on line and avoid paying sales tax, he said.

But the official also said it also was premature for states to begin collecting sales taxes until they have reached a “real consensus” on how to simplify the array of sales taxes levied by 7,500 different states, cities, counties and parishes nationwide.

Not everyone agrees with the NGA’s plan, however. Commission member Grover Norquist, president of Americans for Tax Reform and a staunch opponent of the NGA’s plan, called the strategy dangerous.

“It would lead to a national sales tax [and] completely obliterate consumer privacy because the government will have a computer filled with everything you've ever bought in your life,'' he said. “And it will lead to higher taxes.”

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