GAO: Net tax losses anyone's guess

Figuring the total for lost taxes from Internet sales is a murky science,

according to a government report released Monday.

The report from the U.S. General Accounting Office concluded that states

and localities may be losing anywhere from $300 million to $3.8 billion

in 2000. The new study is part of an ongoing effort to assess the merits

and drawbacks of taxing Internet transactions as lawmakers debate the issue

on Capitol Hill.

"There is a whole bunch of parameters that you have to have to come

up with a precise number," said James R. White, the GAO's director of tax

policy and administration.

For that reason, GAO officials developed a lower and a higher scenario

for what is being lost in Internet sales tax, White said. He added that

officials took into account estimates of Net sales, tax-exempt products

and users, and different taxing rates.

According to the higher estimate, about 2 percent of overall state and

local sales taxes would not be captured, or roughly $3.8 billion in 2000.

The lower scenario came in at $300 million.

White said the GAO also forecast the potential losses in 2003. Because

the Internet is so dynamic right now, such projections get even more clouded.

The high scenario for 2003 is that state and local governments could

fail to capture $12.4 billion in taxes, while the low scenario is $1 billion,

White said.

The Internet poses new challenges for taxation, such as determining

the place of purchase for a product bought online, White said. That situation

makes it difficult to decide how much a product should be taxed.

Sen. George Voinovich (R-Ohio) requested the Internet taxation study.

Voinovich is a proponent of taxing Net commerce.

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