When it comes to levying sales taxes on e-commerce, Massachusetts Gov. Paul Cellucci, Colorado Gov. Bill Owens and Virginia Gov. James Gilmore have emerged as the gubernatorial Big Three opposed to the practice.
Moments after testifying before the U.S. Senate Budget Committee on Internet Taxation this week (Wednesday), Cellucci talked to Stateline.org Senior Writer Blair S. Walker about why he believes the Internet needs to remain tax-free.
It's worth noting that Massachusetts has a high-tech focus, not to mention so many Internet start-ups that the Bay State's Republican governor has taken to calling his state the "dot commonwealth."
Stateline.org: Why are you so convinced that levying state sales taxes would be a major blow to e-commerce?
Cellucci: Right now if you buy over the Internet you have to pay a shipping and handling charge. So now if you add a sales tax on top of that, I just think it's going to be a drag on a powerful tool of economic expansion that's creating jobs here and around the globe. I don't think we should get in its way. The debate, ultimately, in the (Senate) committee hearing all came down to: `How do we collect a sales tax? The National Governors' Association wants to create a new bureaucracy and have people voluntarily be part of it. Sounds like another IRS to me -- I don't like that idea at all. I don't think we need a new bureaucracy, I don't think we need to inconvenience businesses, I don't think we need to inconvenience citizens. This is a new era . . . it's the Information Age and I think we have to adjust our tax policies to reflect that.
Stateline.org: Do you acknowledge that some states might be hurt by not being able to tax Internet sales?
Cellucci:Well, so far it hasn't happened. My sales tax revenue was up 8 percent in the last six months of 1999. And you heard Senator (Barbara) Boxer (D-Calif.) say that sales tax revenues were up in California. So we haven't seen it.
Stateline.org: What percentage of Massachusetts' revenues come from sales taxes?
Cellucci: We have a limited sales tax. It's around 20 percent (of total revenues). We have an income tax, so we're not a big sales tax state.
Stateline.org: You mentioned that 450,000 new jobs have been created in your state over the last seven years. What percentage are Internet-related?
Cellucci: A significant percentage are high-tech. I can't tell you how many are Internet, but every day there's a new Internet company starting up. Some companies that I've talked to are hiring 20 people a month, they're growing so quickly.
Stateline.org: You've made your misgivings about taxing the Internet quite clear. Despite that, what do you think the ultimate solution to the problem will be?
Cellucci: I heard Senator (Phil) Gramm (R-Texas) talk about perhaps the solution is, on major items like motor vehicles and large appliances, that might be the cut-off point (to the existing Internet tax moratorium). And when you get to books and clothing and all the other stuff you can purchase over the Internet, maybe it is too complicated to try to collect this tax. Who knows? We'll see.