Wednesday, 9 February 2000
http://www.azstarnet.com/public/dnews/LX8069.html
By Howard Fischer
Capitol Media Services
PHOENIX - State lawmakers stepped up to the plate on the issue
of taxing Internet transactions - and opted to do nothing.
The House of Representatives has rejected proposals to ban the
state and cities from imposing sales taxes on items and services
bought on the World Wide Web. Instead, legislators chose to simply
reaffirm the existing practices of the state Department of Revenue
while they study the issue for another year.
That move disappointed Rep. Barry Wong. The Phoenix Republican
said the only way Arizona is going to become a magnet for new
Internet-based firms is if the state gives them a jump start by
forswearing any claim for taxes.
Wong said he may try to resurrect the issue later this session.
State revenue officials currently use the same practices in place
for catalog sales to determine when to levy a tax.
That means the state levies its sales tax when an Arizonan orders
something over the net from an Arizona company. That tax, under
Arizona law, technically is paid by the seller but normally is
passed on to the buyer.
A sale by an Arizona company to someone outside the state is exempt
from the tax.
Arizona cannot tax an out-of-state firm that sells to an Arizona
resident.
The law does require the Arizona resident to pay a ``use tax,''
equivalent to the state sales tax, on out-of-state purchases.
That law, however, is rarely enforced against individuals, though
some corporate buyers may find themselves audited if they do not
pay use taxes.
Wong wants an outright ban on all taxes on Internet sales, but
he was willing to settle for a three-year moratorium.
``Arizona needs to be a major player in the new economy'' by attracting
these Internet firms to Arizona, he said.
Rep. Jeff Hatch-Miller, R-Paradise Valley, said Wong's proposal
has implications far beyond people buying a few items on the Internet.
For example, he said, a local new-car dealer could simply set
up a computer in a showroom. Then, after shoppers looked through
possible options, they could be shown to the computer where they
could order the car over the Internet - savings thousands in state
and local sales taxes.
``There are so many unintended consequences; we really need to
be cool on this,'' Hatch-Miller said.
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