TAXING NET SALES.

• Author: Speizer, Irwin
• Position: Industry Overview - Statistical Data Included

Charles Collins leads an effort to make sure the state gets its due from e-commerce on the World Wide Web.

James Hill Stockton, third-generation owner of Norman Stockton Inc., has developed a sixth sense for Internet shoppers. They're the browsers who check the Winston-Salem haberdashery's high-end suits -- some selling for up to $1,200 -- then leave without buying. A few weeks later, they're back, seeking alterations on suits exactly like those they were perusing. Where did they get them? The Internet. By buying from online retailers, they can skirt paying the 6% state sales tax, saving themselves up to $72 on a $1,200 suit.

Stockton privately calls them chumps and has started making them pay dearly for alterations, which are free if you buy from him. But he knows they are onto something. He has joined other bricks-and-mortar retailers lobbying Congress to pass legislation that would help states collect sales taxes on purchases from out-of-state vendors. "I'm not saying tax the Internet. Let's just have a level playing field."

He didn't need to go to Washington, D.C., to find a champion for his cause. One works in Raleigh. Charles Collins, director of the N.C. Department of Revenue's sales-and use-tax division, is responsible for an estimated $5 billion a year of state taxes. But these days, he's more concerned with the $110 million to $140 million a year he doesn't collect -- from remote sellers such as catalogs, television shopping channels and the Internet "e-tailers." It's the Net that really has him worried. The explosive growth of dot-com retailing -- Forrester Research Inc. estimates that $20.2 billion of merchandise was sold over the Web in 1999, up from $8 billion in 1998 -- could double the amount of lost N.C. sales tax by 2003, Collins says. Without a solution, that amount could continue to grow.

As co-chairman of the Streamlined Sales Tax Project, a coalition of state revenue officials, Collins guides the latest effort to create a system for states to collect sales taxes on Internet and other out-of-state transactions. His work has transformed him into a minor celebrity. Before he started the project, he typically got two or three calls a year from reporters with questions on North Carolina tax issues. Now, after 30 years in the state Revenue Department, he finds himself fielding four or five calls a week from reporters around the country.

Collins, 54, still talks like a bureaucrat, but these days he is a bureaucrat on a quest. "Some of those other projects, one of the reasons they were never able to come up with recommendations is because they had voting members from state government, local government, business -- they had so many varying backgrounds and motives that I don't think they were really ever able to come together. The people at the table in our group are the ones who have the experience, who know what it takes to come up with compliance."

Not everyone is excited about the prospect of...