Assemblyman says Internet companies should pay their share

A Las Vegas lawmaker says he opposes regulation of the Internet or imposing new taxes on those who buy electronically, but that companies selling through the 'Net must pay their fair share.

"The Internet is the greatest communication tool ever," Assemblyman David Goldwater, D-Las Vegas, told fellow members of the Legislative Commission.

But he said the amount of goods purchased through the net is growing geometrically and, because Internet buyers don't pay sales tax, threatens the ability of government to raise money to provide services.

"The people still demand services and the Internet is affecting our ability to provide services," he said.

He said Supreme Court rulings and Congress have barred states from interfering with the Internet but that something must be done to get those companies to pay sales taxes when people living in other states buy from them.

Goldwater cited a study saying Nevada governments stand to lose $225 million by 2003 if no way is found to tax Internet businesses.

"When we're talking about $225 million out of our state and local governments, we're talking about affecting services," he said.

He said not charging 7 or more percent in taxes on every purchase also gives Internet companies a powerful competitive advantage over "main street businesses."

Goldwater said many of those companies would be willing to collect the taxes except for the red tape and paperwork.

So he said the plan being looked at by state legislatures across the nation is to hire a "trusted third party" to collect the taxes. That would be a company that does nothing except keep track of all thee tax rates and, probably by Zip code, figure out the tax on every purchase for Internet companies.

He said even though that idea sounds complex, it could actually simplify the system because the state would be able to rely on that "trusted third party" company to do all the calculations for out-of-state and Internet purchases and send the check to each state every month.

Sen. Bob Coffin, D-Las Vegas, said he agrees something must be done but has reservations about the plan.

"I worry about whether there can be such a thing as a trusted third party," he said.

He said he also wants to encourage Nevada's congressional delegation to fight any attempt in the U.S. House or Senate to "make a knee jerk move" and tie states' hands or lock in the current system of no taxes on Internet purchases.

Sen. Jon Porter, R-Las Vegas, agreed that "you cannot in any way, shape or form interfere with" Internet business.

"I would hope as governments we would not create a toll booth for the superhighway," he said.

But he agreed some way of protecting state revenues must be found so that local governments don't lose money they need to pay for vital services.

The commission took no action on Goldwater's report. He said more information and possible legislation would be coming as the 2001 Legislature approaches.