Dear Director Crippen:
In the last several years, the Congress has had concern about the appropriate policy to pursueregarding state and local government taxation of sales over the internet. Although a state or localgovernment currently may collect sales tax on internet purchases by its residents, enforcement isdifficult and minimal revenue is collected. The Supreme Court has ruled that states and localgovernments cannot require remote sellers to collect and remit sales tax on purchases by theirresidents. The Court has, however, said that Congress could impose such a requirement.
The debate about the desirability of Congress giving state and local governments theauthority to require remote sellers to collect and remit sales tax has raised a variety of economicconcerns. It would be helpful to the Finance Committee’s consideration of the question to have astudy that evaluated the numerous economic concerns raised by both sides of the debate. Inparticular, the committee would like to know which concerns are consistent with conventionaleconomic theory and appear to be qualitatively important. In addition, it would help to understandwhich of the economic issues can only be addressed through internet tax policy and which can beaddressed by state and local governments independent of internet tax policy.
The economic issues addressed should include but not necessarily be limited to:
i efficiency issues including non-neutral taxation, interstate tax competition and of the public sector, and the social benefits from growth of the internet;
ii equity issues including equal treatment of consumers and the digital divide;
iii high compliance costs imposed on remote sellers required to collect taxes for stateand local governments;
iv the loss of state and local tax revenue;
v and the stability and growth characteristics of state and local tax systems.Thank you for your attention to this important issue. If you or your staff have questions aboutthis request, please contact Dean Zerbe or Pat Heck of the committee staff at 224-4515.
Cordially yours,
Charles E. Grassley
Chairman
Max Baucus Ranking Member
Source: Ranking Member’s News
