Governor says Tennessee relies on e-sales tax

Tennessee Gov. Don Sundquist said he would be forced to cut basic services

unless the state collects sales taxes from Internet-based transactions.

"Without fundamental changes in our tax structure, we will be unable to

prepare our people for tomorrow," Sundquist said in his recent budget address.

"Without it, you will be forced to cut basic state services. I know no

one wants to cut services in their districts, but what options do you propose?

What cuts can you make that affect no one? They'll also do grave damage

to our state."

Sundquist said local merchants were "falling prey to Internet competition,"

and that it was affecting state and local government.

"People actually go into the dress shop, try on a dress to make sure they

like it and that it fits, and then they go home and purchase it over the

Internet," he said. "The shop owner loses out on that sale, but so do state

and local governments. When that sale is lost, so are the state and local

taxes on that sale."

Sundquist said he refused to fund the budget with a sales tax increase because

Tennessee's sales tax burden is already the seventh-highest in the country.

"It's ridiculous that we have senior citizens in this state who pay a greater

percentage of their fixed incomes in taxes than our professionals and business

executives, who make hundreds of thousands of dollars a year but pay almost

nothing to the state in return," Sundquist said. "It's unfair, and it's

just not right."

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