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A few taxing thoughts on the Internet

January 7, 2011
Delegate John Doyle

A few years ago the U.S. Congress passed a law which temporarily bans most states from taxing Internet access charges. This moratorium exempted the nine states which had already levied such taxes. West Virginia is not one of the nine exempted states.

Since that action, efforts have been made to make that moratorium permanent. The bill that would do so is called the "Internet Tax Freedom Act." Most observers presume that if the moratorium is ever made permanent even the nine states that now tax Internet access charges would be banned from doing so.

I certainly hope that would be the case. I think the present situation is unfair to the states that are under the moratorium. This is similar to the federal law that allows only three states to permit betting on sporting events. I think it's fundamentally unfair for the Congress to ban some states from an activity but not others.

I generally don't like the Congress prohibiting states from doing anything permitted by the U.S. Constitution. But if the Congress is going to prohibit states from doing something, surely it should prohibit all states equally from doing so.

Having said all that, I would oppose any efforts to have West Virginia tax Internet access charges, even if the eventual resolution of this question is that the Congress lifts the moratorium and permits all states to levy such taxes. I think the Internet should be a "tax-free" zone in West Virginia.

I think it's important to encourage West Virginians to use the Internet. Our state's population uses the Internet less than the national average. This is one more example of West Virginia not being in the nation's economic mainstream. I think exempting the use of the Internet from taxation would be a small aid in moving us in the direction of that mainstream.

Fact Box

Don't forget our town meeting at the Harpers Ferry Town Hall on Saturday, Jan. 15 at 1 p.m. We'll talk about the upcoming regular session of the state Legislature.

Let us, however, not get carried away. Some of the most economically successful states in our federal union (Texas and South Dakota among them) now tax Internet access charges.

This is a separate question, by the way, from whether or not states should be permitted to require online sellers to collect sales taxes that are due and owed by their customers. Taxing Internet access charges is taxing the actual use of the Internet. Requiring online retailers to collect sales taxes (as their brick-and-mortar competitors are already required to do) is not taxing the use of the Internet; it's just being fair.

One West Virginia tax that I think needs changing is the business personal property tax. This is a tax on inventory and equipment. Very few states have such a tax and it's a big reason West Virginia has difficulty competing with her neighbors to attract new businesses. Not every tax on business is a "job-killer," but I'm convinced this one is.

Eliminating it would require an amendment to the state constitution. Doing that takes a two-thirds vote of each house of the state Legislature and a majority of citizens voting at a referendum. Last year such an amendment passed the House of Delegates with my support but was not taken up by the Senate.

This question came up in the discussions leading up to the decision by Macy's to locate a big distribution plant (over 1,000 jobs) in Berkeley County. I was involved in those discussions, and I assured Macy's that the effort to eliminate the business personal property tax will continue until we succeed in ditching it.

Oddly, I became involved in the Macy's discussions because of my efforts to require "remote" (online, mail order and telephone) retailers to collect sales taxes. Frank Julian, one of the Macy's executives who helps make siting decisions, is also Macy's representative to the Streamlined Sales Tax Governing Board. That organization includes 24 sales-tax states that are trying to get the ability to require remote retailers to collect sales taxes. I was president of that board during 2009.

Through this effort Julian and I have known each other for about nine years. Macy's strongly supports requiring all retailers to collect taxes on sales of taxable products and services when those sales are made over the Internet, by mail order or by telephone.

Mr. Julian contacted me and asked me many questions about tax policy, what our area is like and even electric service. We had several phone calls and at his request I went to a meeting he had with the Berkeley County Development Authority. I'm glad I was able to help both Julian and Berkeley County. I do not officially represent that county, but that's OK. Many of the jobs at the new Macy's plant will go to Jefferson Countians.

 
 
 

 

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