"My philosophy is that this is a brand-new medium for the 21st century, which has the possibility of really empowering people educationally and commercially. And we should be striving for that goal, as opposed to trying to find ways to enrich government more, because there's no limit to the amount of riches that government wants."- Virginia Gov. Jim Gilmore

Defending You Against Internet Taxes

As chairman of the Advisory Commission on Electronic Commerce, Virginia Gov. James Gilmore led the successful effort to block the commission from recommending Congress adopt or allow any new Internet taxes. He's a big reason why the moratorium on new Internet taxes was extended - and why most online purchases remain free of state sales taxes.

Unfortunately, if you live in Tennessee, your governor favors creating new taxes on things you buy over the Internet from merchants in other states. Even worse, the leading Republican candidate for governor in Tennessee, U.S. Rep. Van Hilleary, recently spoke favorably about the hundreds of millions of dollars in new revenue the state would take out of average Tennessean's pockets if Congress were to allow states to impose new taxes that are now deemed by the U.S. Supreme Court to be unconstitutional. Hilleary's stance on Internet sales taxes is dissected in my recent City Paper column, Has GOP's Hilleary made gaffe on Internet taxes?

Virginia's current governor has made no such gaffe. He has an intelligent perspective and correct position on the issue, as demonstrated in a wide-ranging interview with News.com, Gilmore explains why the Internet should remain free of new taxes - and why online sales shouldn't be hit with new sales taxes that are currently prohibited by the U.S. Constitution and the Supreme Court's 1992 Quill decision. Some key quotes:

"Governments may very well have rushed in to do a patchwork taxation all across the country, adding increased burdens on the Internet and on individual people who are using the Internet."

"The truth of the matter is that the opportunities and benefits of a strengthened Internet industry outweigh any type of theoretical loss of revenue that there might be."

"I think that it's clear that we should not be taxing Internet access. I don't think we should be taxing downloaded products. And I don't think that we should be taxing retail either. In terms of the taxation of individual products, the main point I'm coming to is there (are) still plenty of opportunities for the gaining of revenue through the growth of the industry, which will be tamped down by trying to tax people."

"I think that you are going to see that all 50 states begin to develop these industries more and more. And that should be their goal, instead of simply trying to tax individual citizens, not just of their own state, but of other states as well. They should be working to build up that industry within their individual states."

"If a purchaser chooses to buy a remote good, from whatever location, then we are trying to benefit the working men and women of the country and individuals of the country who deserve an opportunity to engage in commerce with the least possible tax burden."

"The goal of the country ought to be to spread the benefit of the Internet as widely as possible. But one thing we know for sure, and that is that if you impose taxes on either access or downloaded products or even on traditional retail, you will discourage people who have the least money to spend from utilizing the Internet."

Gilmore also addresses the issue of "use" taxes - the tax states created to get around the Commerce Clause of the U.S. Constitution, which forbids states from levying cross-border taxes. Because they can't tax purchases citizens make in other states, most states passed a "use" tax that levies the same tax rate on items purchased out of state once they are brought into the state. Problem is, they are very difficult to collect.

Gilmore believes use taxes "should be eliminated," saying, "The actual collection of use taxes is small, relative to all other taxation that states and the federal government take in. It's not much money. And they could do without that money and just eliminate the use tax altogether and further free individuals. But that hasn't, of course, occurred yet. In any case, what I would caution against is constant efforts to impose use taxes upon individual citizens."