December 31, 2001, 12:00 AM

Online sales tax will still be an ongoing issue in 2002.

Despite a moratorium that put off addressing Internet tax for two more years, groups working to resolve the issue will still have much to do.

Despite a moratorium that put off addressing Internet access and other related online taxing for two more years, groups working to resolve the issue of levying tax for online goods will still have much to do.

The National Retail Federation, which supports an equal amount of tax for online retailers as offline ones, will continue to work on the Streamlined Sales Tax Project, which is working in tandem with several state governments to make the tax laws simpler. Currently, there are thousands of different juristictions on which to levy taxes, a logisticial obstacle that could make collecting sales tax impossible for small direct marketing companies that may be selling goods on the web today.

The Direct Marketing Association, which wants the moratorium on Internet tax to be permanent, is less optimistic that tax laws will be worked out to make it easier for all retailers to collect. "This whole simplification effort is a step in the right direction, but it may not achieve what it set out to achieve," says Lou Mastria, director of public and international affairs at the DMA. "Of the roughly 13 to 16 states that have adopted this effort, they’re all taking different models for tax simplification." That means not every state will have the same tax requirements because they are not using the same model. "The effort smacks of chaos so far," he says.

But historically, direct marketers have been able to fend off onerous taxing. Mastria points out that the issue is similar to the one cataloguers have fought with states for 30 years: State governments have been trying to overturn the Supreme Court ruling in a1992 case that denied states from collecting sales tax from out-of-state cataloguers. "From a historical perspective, states have tried to get their hands on cataloguers money since the 60’s," he says. "We need to keep on top of this unholy marriage between Internet access tax and Internet sales tax. Congress has agreed with not taxing Internet sales and the big retailers are trying to make it a divisive issue by linking the two things together. They are not the same issue."

Although trade groups on both sides of the Internet tax issue claim that their goal is to level the playing field, it remains to be seen on which field they are actually playing. So far, the rival organizations are waiting on Congress to get a chance to step up to bat. The moratorium will be up for debate again in Congress in 2003 and lobbying for both sides is certain to continue.


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