LEAGUE OF CALIFORNIA CITIES
1400 K Street
Sacramento, CA 95814
(916) 658-8200
December 13, 1999
The Honorable James Gilmore
Chairman
Advisory Commission on Electronic Commerce
Washington, D.C.
SUBJECT: California Cities' Position on Submittals to the Advisory
Commission on
Electronic Commerce
Dear Chairman Gilmore:
The League of California Cities is an organization that represents all 474
cities in the State of California. We are very interested in the topics of
the Internet, e-commerce and their impact on both the business community and
on the revenues of cities and state governments throughout the U.S.
Recently, a group of city officials has been working with the League to
review the 37 submittals to the Advisory Commission on E-Commerce. We are
pleased to see that a majority of these proposals identified the need to
"level the playing field" in consumer sales between traditional brick &
mortar sellers (where sales tax is collected) and remote web and mail order
sales (where consumers are supposed to voluntarily submit and pay the use
tax but rarely do) as the most important issue. We agree that this should
be the first issue that the Commission deals with.
Sales and Use Tax revenues are by far the #1 General Fund revenue source for
cities in California. A study done for the League of California Cities
shows that sales and use tax revenues make up 35% of an average city's
General Fund Revenue. In some cities in California, the figure is as high
as 80%! General Fund Revenues are at the core of a City budget since they
are the funding source for critical services to all of our citizens such as
Parks & Recreation, Libraries, Street Maintenance, Police and Fire. This
means that cities have the most at stake (and at risk) as we look at how to
level the playing field between payment of these revenues in traditional and
newly emerging areas like remote web and mail order sales.
We believe that a solution to this dilemma will involve collection of the
consumer use tax by remote web and mail order firms. At the same time, we
feel a need to address the requests from the High Tech and Business
Community for simplification and uniformity of the sales and use tax system.
In looking at the 37 proposals submitted to the Commission, we found a
surprising amount of common ground with our views on how this matter can be
addressed. In particular, the League and its member cities are very
supportive of the concept of simplifying state and local tax systems to make
them easier to manage and to comply with. We understand the need and the
LCC Position on Submittals to Commission on E-Commerce
Page 2
interest by both the high tech community and more broadly the business
community in general in making these changes.
In California, we are aware of efforts in the Silicon Valley region to
streamline the building permit process. This was done in a cooperative
effort involving the 27 cities, the 2 counties and representatives from the
high tech firms in the region. The result of their work was the development
of standardized permit forms, interpretations and a reduction of building
code amendments (from 400 to 11).
We think that a similar streamlining process in the sales and use tax system
is possible, not only in California, but also throughout all 50 states.
This is an admirable goal, and we are certainly ready to roll up our sleeves
and once again work with both the high tech community and the other
government agencies involved to help make this happen.
At the same time, we have concerns about some of the elements of each of the
37 plans. As a result, we are unable to endorse any of the plans submitted
to the Advisory Commission on E-Commerce. Rather, we would suggest that the
Commission continue to explore the various plans and craft a system that has
some of the best and most equitable elements of each.
We continue to be interested in working with the Commission and its staff in
this regard, and we look forward to working together on a solution to this
very important issue in the weeks and months ahead.
Yours very truly,
Chris McKenzie
Executive Director
cc: League Board of Directors
U:\V\W\B\LCCPosition on
Submittals to Commission re E-Commerce
