Dear Majority Leader Lott and Minority Leader Daschle: 

The nation's Governors strongly oppose any efforts to extend the duration or expand the scope of the moratorium imposed by the Internet Tax Freedom Act.  The Internet Tax Freedom Act was the product of intensive negotiations and deliberate compromise between Congress and state and local leaders.  Changing the moratorium would unravel the delicate balance we achieved last year and undermine the work of the Advisory Commission on Electronic Commerce. 

The proposed expansion of the moratorium contained in S. 1611 represents a major assault on state sovereignty.  The levy of sales and use taxes is an inviolable right of the states.  S. 1611 would prevent  states from collecting taxes on mail-order and Internet sales that occur entirely within their own boundaries and have no interstate component whatsoever.  Furthermore, S. 1611 would not just be limited to remote sales, but would also prevent states from collecting taxes on many sales that occur in traditional retail stores.  This would clearly violate the Unfunded Mandates Act, seriously jeopardize public education funding, and substantially increase discrimination against Main Street businesses. 

 The commission has already met twice and has two more meetings scheduled before it reports its findings and recommendations to Congress.  As directed by Congress, the commission is attempting to deliberate the critical issues related to taxation and the Internet.  Any action by Congress to interfere with that mandate, such as extending or expanding the moratorium before the commission completes its work, would prematurely halt the serious and much-needed examination of these issues.   

Governors, together with the business community, are working hard to develop a system that is fair and that eliminates burdens on Internet sellers. We are optimistic that we can achieve such a solution.  Altering the moratorium today we think is unnecessary and unwise.  We urge you to reject S. 1611.  

Sincerely,