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CNN Today

Commission Likely to Recommend Extending Internet Tax Freeze

Aired March 20, 2000 - 2:41 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: Should Internet sales be taxed? It is a question the advisory commission on electronic commerce has been unable to answer. The panel is currently wrapping up meetings on the issue, and it appears likely panel members will recommend extending the Internet tax freeze.

CNN's Brooks Jackson looks into why it's such a difficult decision.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Let's go shopping for a computer, just to see how this tax thing works.

UNIDENTIFIED MALE: The speakers are standard with the systems. They are stereo speakers.

JACKSON: Gateway sells computers both ways, in stores like this one and over the Internet.

JACKSON (on camera): Now that's $1,299, plus...

UNIDENTIFIED MALE: Ninety-nine dollars for shipping.

JACKSON: And?

UNIDENTIFIED MALE: Tax.

JACKSON (voice-over): Five percent Maryland sales tax, $68 and change. Gateway has to collect it from the customer by law if you buy it here -- but not if you order over the Internet. You should send in the tax yourself, but hardly anybody bothers.

Forty-five states have sales taxes, and all 45 also have use taxes on purchases made outside the state. But they're widely avoided and mostly uncollectable.

The chairman of a national commission on the problem suggests repealing use taxes.

GOV. JAMES GILMORE (R), VIRGINIA: You know what it would do? It would decriminalize all those Americans out there who are supposed to be paying this tax and aren't paying it and are criminals.

JACKSON: Other members see a looming threat to basic government services.

GOV. MIKE LEAVITT (R), UTAH: We may find out that it's just not feasible in the 21st century to even have a sales tax. And if that's the case, if we take the sales tax off everything, the we'd have to start asking ourselves the question, how do we pay for schools? How do we pay for law enforcement? How do we pay for roads?

JACKSON: It's estimated more than half-a-billion dollars in state taxes went uncollected last year. Another estimate predicts the figure will exceed $20 billion in the year 2003 -- a huge problem, potentially, and a solution nowhere in sight.

Brooks Jackson, CNN, Chevy Chase, Maryland.

(END VIDEOTAPE)

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