Congress considers taxing Web shoppers

FORT WORTH, Texas - When Marie Gaudet feels like shopping, she pulls up a chair and sits down at her computer.

There, she can browse and shop at her leisure - without spending money on gas to drive to the mall or dealing with crowds - and save money.

"I do a lot more online than in the stores," Gaudet said. "There's no taxes, it's convenient, there are no hassles, and the prices are better."

That could soon change, at least the taxes part.

Congress is considering a plan to dip into Americans' wallets, develop a new tax system intended to create a "level playing field" for shoppers, businesses and governments, and help states collect sales taxes not being charged on many Internet purchases.

A separate measure calls for lawmakers to decide whether to let a temporary ban on Internet-access taxes continue when it expires Nov. 1. If the ban does not continue, it could lead to taxes and fees on broadband and dial-up connections and e-mail accounts.

Consumers are keeping a wary eye on Congress and the new tax and fee proposals.

Opponents, including the National Taxpayers Union and the Direct Marketing Association, say imposing additional taxes on consumers through the Internet is uncalled for because users already pay fees and other charges for Web service.

Another cost for Internet shoppers is shipping fees, which vary because of widely based factors such as weight of the item and the speed of delivery, although many shoppers look for deals in which shipping costs are waived.

Supporters, including Jewelers of America and the E-Fairness Coalition, say traditional retailers, as well as local governments and states, are losing out on big bucks as Internet sales continue to soar.

U.S. Sen. Mike Enzi (R., Wyo.) introduced a bill to tax Internet purchases now slipping through what some politicians consider a tax loophole.

"Simply put, if Congress continues to allow remote sales taxes to go uncollected and [if] electronic commerce continues to grow as predicted, other taxes, such as income or property taxes, will have to be increased to offset the lost revenue to state and local governments," Enzi said in a statement. "I want to avoid that."

Separately, lawmakers are expected to review the temporary ban on Internet-access taxes that expires Nov. 1. This moratorium, begun in 1998, has already been extended by lawmakers several times, most recently in 2004.

If it expires, states and other municipalities could put in place a variety of access taxes, similar to those on telephone bills.

If that were to happen, some say, there could even be a tax on e-mail or dial-up or broadband connections.

A measure has been filed to extend the moratorium for four more years, a proposal lauded by some tax groups.

"Given the potentially destructive impact that expanding or raising Internet and telecommunication taxes could have on this important economic sector, the remedy could not be clearer," said Jeff Dircksen, director of congressional analysis for the National Taxpayers Union. "Congress and the states should declare this tax territory permanently off limits."

Economists try to monitor online vs. in-store shopping trends. Some comparisons are hard to make because at any given time, there will be sales, coupons and special deals - online and in-person.

But the numbers speak for themselves.

In the first quarter of this year, e-commerce sales added up to $31.5 billion, up 3 percent from the last quarter of 2006, according to the census bureau of the U.S. Department of Commerce.

Some estimates, such as a study by the University of Tennessee, suggest that state and local governments lost out on more than $15 billion in 2003 and could lose out on more than $20 billion by next year.