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E-commerce tax pitched as teacher's aid

Legislation introduced in the Senate would for the first time impose a federal tax on goods sold over the Internet, a market momentarily considered off-limits to politicians.

Legislation introduced in the Senate would for the first time impose a federal tax on goods sold over the Internet, a market momentarily considered off-limits to politicians.

The Sales Tax Safety Net and Teacher Funding Act, introduced last week by Sen. Fritz Hollings (D-South Carolina), would supplement teachers' salaries by imposing a five percent tax on goods sold on the Internet and through catalogues. It is currently in the Senate Finance Committee, where Hollings is the ranking Democratic member.

"There's an education crisis in this country, said Maury Lane, Hollings's director of communications. "Bypassing legitimate taxes by going through the mail or the Internet is not the best way to ensure we educate our children," he said.

The bill would reverse the current hands-off attitude taken to taxation of e-commerce. Many policy makers, including the Clinton administration, consider the Internet a budding market that is best left untaxed.

The measure would also impinge on the work of the Advisory Commission on Electronic Commerce, which is currently addressing the issue of how best to tax the Internet under cover of a three-year moratorium on taxes on Net retailers.

"There are a lot of things out there that don't show a hands-off approach," Lane said, citing online pornography as an area in which the government has interfered. "You assume that people want a hands-off attitude--I don't think they do," he said.

The bill has its opponents. The Association of Online Professionals sent an email Saturday condemning the bill, saying it would "punish companies for engaging in electronic commerce." The email said the Hollings bill is based on the idea that state and local governments are losing revenue because of e-commerce.

"In reality, those taxing authorities are enjoying their highest tax collections in decades thanks to the healthy economy. Further, the bill assumes that no sales taxes are being imposed on e-commerce, when in fact 42 states already have sales taxes on e-commerce," the email read.

Lane said that the bill would not mean double taxation. For example, if a three percent sales tax was already in effect, the consumer would simply be charged a tax of five percent and the extra 2 percent would go to the federal government, Lane said.

"We do this to supplement teacher salaries," Lane said. "This is a retail tax. Everyone thinks it's an Internet tax."

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