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Trade group: No deal near on mail-order tax loophole

November 7, 1997

NEW YORK (AP) _ Mail-order consumers will get to keep their sales-tax break, at least for now.

A trade group said Thursday that despite discussions with states, no deal had been reached on how to collect approximately $1.2 billion in annual sales taxes from consumers who buy merchandise through the mail from out-of-state companies.

Chet Dalzell, a spokesman for the Direct Marketing Association, on Thursday said reports that a plan would be announced today were premature.

He said the group planned no announcement.

Mail-order companies also said no agreement has been made to impose new sales tax regulations. L.L. Bean and Lands’ End said their current tax-free policy would stand and they’ve told the few concerned consumers who have called that nothing had changed.

The companies and the association, however, said they will continue their discussions with the states, as they have been for years.

Consumers who buy from companies that sell through the mail, by telephone, cable television or over the Internet are subject to their state’s sale tax, just as if they had gone to a local store. But states have no way to compel out-of-state merchants to collect the taxes on their behalf.

As a result, direct marketers and catalog retailers have generally ignored the task. State and local governments have complained that they are losing taxes on $215 billion in annual mail-order sales.

The companies have waged legal battles to maintain the exemption from collecting sales taxes, which the Supreme Court has preserved for businesses that do not have a physical presence in a state.

If there is an agreement, it would be voluntary, said Mark Slosberg, a partner at KPMG Peat Marwick in New York who has followed the issue.

Even if there is a voluntary agreement, states might have to first adopt laws involving such tax collections, said the marketing group, which has more than 3,600 member companies from the United States and 49 other nations.

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