BY ANNE MICHAUD
The Cincinnati Enquirer
Ohio's counties, depending as they do on sales taxes, have more to lose to Internet sales than other local governments because consumers aren't paying county taxes on Internet purchases.
This week, the National League of Cities said commerce over the Internet poses an increasingly dangerous threat to cities' financial health.
County leaders are also organizing at the state and national levels to tax the Internet, and support is strong in southwestern Ohio.
In Hamilton County, part of the sales tax is earmarked to build Reds and Bengals stadiums. The county is already finding its stadium budget a tight fit.
"There are fewer and fewer sales for local merchants," said Hamilton County Commissioner John Dowlin. "It's expanding the bad situation we already have with catalogs."
Booming Butler County is confronting less tax pressure, but is watching national legislation about Internet taxes carefully, said Commissioner Courtney Combs.
"At this point it's not as serious, but Internet sales are rising at a good clip," he said. "We've got no way of replacing that revenue." Even more than local governments, state governments have a lot to lose, said Brad Cole, a senior policy analyst with the County Commissioners Association of Ohio.
Ohio receives the first 5 cents on the dollar of each sale. Counties collect any amount on top of that -- a half-cent in Butler, where the sales tax rate is 5.5 percent, or 1.5 cents in Hamilton, with its 6 percent tax.
The National Association of Counties (NACo) estimates that governments lose $5 billion annually to sales over the Internet or through catalogs. NACo is pushing for federal legislation to tax the Internet, catalogs, telephone sales and the like.
A bill that just passed the House calls for a three-year moratorium on Internet taxes, said Ralph Tabor, associate legislative director for NACo. In the meantime, Congress would appoint an advisory committee to study the effects on local governments and make recommendations.
One hurdle is that a given state, like Ohio, can have tax rates that vary by county. Mr. Tabor said he expects that industry lobbyists will work for one sales tax rate per state, as are the cases in Kentucky and Indiana.
Eight states are taxing Internet access. It's a simpler formula, but industry representatives oppose it. The House bill would require each of those eight states to revote the Internet access tax.
When Hamilton County commissioners spoke with underwriters in January to sell bonds for the Bengals stadium, the subject of Internet sales eating into the county's revenue did not come up, said Commissioner Tom Neyer Jr.
But, he predicted, "It probably will next time."
