INTERNET POSES BUYERS' TAX LOOPHOLE

During a recent month more than 15 million Americans bought something on the Internet. Taking advantage of what might be the last tax loophole, 99 percent of them didn't pay sales taxes.

Without knowing it, most broke the law.

States can't force out-of-state sellers to collect sales taxes, but 45 states require buyers to pay the tax anyway via use taxes.

Anyone in Missouri who purchases as much as $2,000 a year from out-of-state sellers without paying sales taxes is required to file a use-tax form and pay the use tax. This includes all items brought into the state for use from out-of-state purchases, the Internet and mail-order catalogs.

All businesses file the use form, and a lot of individuals file in Missouri, said Kay Dinolfo, public information officer with the Missouri Department of Revenue.

But apparently all individuals don't file the use-tax forms or they don't purchase over $2,000 out of state.

One report by The National Association of Counties (NAC0) indicates that Missouri loses about $63.5 million a year in taxes from out-of-state mail-order sales, which include catalog and Internet sales. Nationally, that figure tops $5 billion.

A lot of the increases in catalog sales over the past two years are credited to the Internet, which all translates into discussions of creating some type of special Internet sales tax.

The possibility of an Internet tax is something that needs to be looked at, said John Mehner, president and chief executive officer of the Cape Girardeau Chamber of Commerce.

Mehner isn't alone in his thinking: NACO unanimously approved a resolution asking Congress to impose a sales tax on all online purchases during NACO's 64th annual meeting in St. Louis. It claimed that within the next three years Internet sales could top the $100 million mark.

There needs to be a set of rules that everyone understands, said Mehner. And all businesses, including Internet merchants, should operate within those rules.

"It could be done," said Mehner.

At least eight states have Internet taxes, including Tennessee, one of the first states to assess an Internet access charge. Internet access providers in Tennessee must collect and remit sales taxes. The sales of goods there are treated the same as sales of tangible personal property through the more traditional channels.

Mehner said the Tennessee Internet law sounds good.

"That could be one of the answers," said Mehner. "Why can't we just extend the obligation to collect sales tax to all Internet merchants?"

Right now there are no clear-cut rules on Internet taxes, said Mehner.

"The whole thing comes down to leveling the playing field for our local merchants and businesses," he said. "Let's give any breaks we may have to the people who live and work here."

People should understand that the tax base from the city and county pay for the community's services: police, fire and others, said Mehner. "If they choose to buy catalog or online, those are tax dollars. They may be saving themselves a few dollars, but they are lessening the money we have to operate."

The chamber is concerned that the city and county will experience a drastic reduction in sales taxes, he said. "And we want to see local businesses do well," said Mehner.

The federal government is urging local and state officials to respect a temporary ban on taxing the Internet so it can develop. Last year the U.S. Senate overwhelmingly approved the Internet Freedom Act, a three-year temporary ban on taxing the Internet, barring state and local government from imposing any new taxes on it.