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Posted on 11/30/2001 1:05:52 AM PST by 2Trievers

PRESIDENT GEORGE W. Bush on Wednesday signed a bill extending the moratorium on Internet taxation for another two years. It’s a shorter moratorium than Congress should have given, but it’s better than nothing.

The ban is necessary now more than ever to prevent fragile Internet-related businesses from being hurt by sudden taxation. If Internet consumers unexpectedly had to pay taxes on their online purchases, the rapid decline of electronic transactions would ripple through the economy, hurting online retailers as well as suppliers, software companies, etc.

It’s amazing that the federal government has been able to refrain from taxing, and allowing states to tax, Internet sales and services for as long as it has. The first three-year moratorium was a surprising show of restraint, and the new two-year extension is even more surprising given the past three years’ worth of trumped up arguments state and local governments have made in favor of Internet taxation.

State and local office holders have whined for years that Internet commerce “unfairly” escapes the long arm of the tax man. But they have yet to make a compelling case for allowing them to skim a portion of the proceeds of Internet sales and services.

Far from stealing money from public coffers, Internet commerce may actually save governments money. A good purchased online is brought to the customer by a delivery van that uses public roads. But it also allowed that customer to do his shopping at home instead of driving all over town searching for stores. And it saved the retailer from having to build a store to which a local government would have had to extend water lines, sewer lines, roads and trash service.

Government can only justify a tax in exchange for public services. It remains to be seen what services state and local governments provide to out-of-state retailers and Internet service providers. Until they can prove that they provide a service for which Internet-based companies are not paying, the federal government should continue to prohibit Internet taxation.

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