Net Taxes: No Rush

Three years ago Congress put a moratorium on taxing Internet trade. It runs out Oct. 21. The debate over renewing it centers on whether to impose state sales taxes on purchases over the Net.

Most states foresee a loss of sales-tax revenues as more commerce goes online at the expense of traditional store sales. And bricks-and-mortar retailers rightly argue that it's not fair for them to have to collect state and local sales taxes, while Web merchants don't.

Eventually, government should get a share of e-commerce revenues, and sales and use taxes should apply in a fair way to all merchants. But a lot needs to be straightened out before that day comes.

The original rationale of Congress's moratorium still applies: The still fledgling realm of Internet commerce needs some time to get established.

And before they can tax out-of-state purchases, states need to comply with the reasoning of a 1992 Supreme Court ruling that they should first rationalize the thousands of different sales-tax rates and rules so as not to impede interstate commerce.

A number of states, but not all, are trying to work out a less confusing pattern of sales taxation. This task has to move further than it has so far before the states can realize their online revenue hopes.

With e-commerce now slumping badly and this new industry still trying to find its place in the economy, the states' predictions of billions lost in revenue aren't holding up.

The wise path for Congress is to extend the moratorium, while keeping the concerns of states and local merchants clearly in mind.

Taxes will come in due time, after due preparation.

(c) Copyright 2001. The Christian Science Monitor