Chicago suburb launches ads against e-commerce

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The Chicago suburb of Niles, Ill., hopes other towns follow its lead in urging area residents to shop at local stores instead of buying goods through the Internet.

In a campaign launched on local cable TV earlier this month, Niles exhorts consumers to heed the twin threats of Internet shopping: local sales tax revenue that would be lost and exposure to fraud thanks to hackers and unsecure Web sites.

Niles officials said the campaign was triggered by the U.S. House's May decision to extend for five years a moratorium new Internet sales taxes.

"Our community relies heavily on local sales taxes and we're very concerned that if the Internet shopping continues to grow at exponential rates, our community and police and fire services will suffer," said Abe Selman, manager of the Village of Niles.

The middle-class community, home of the 41-year-old Golf Mill Shopping Center, derives an estimated $15 million to $17 million annually from local sales tax. Mr. Selman said the community has no idea how much has been lost already to sales on the Internet, where there is no sales tax, but community leaders are "highly concerned about the long-term effect of Internet shopping on our community's operations."

The $35,000 campaign, which consists of two 30-second spots, was created by Yesner Marketing, Des Plaines. One spot cites statistics to underscore the risk of fraud when shopping online; the second shows local citizens at a mall discussing advantages of getting a product immediately by buying at retail.

The cable TV effort will run through November.

A growing number of municipalities and states fear the Internet will undermine vital sales tax revenue, said Neal Osten, director of commerce and communications for the National Conference of State Legislators. Local governments nationwide will lose $10.8 billion in sales tax to the Internet by 2003 if current trends continue, the conference reported recently.

But the absence of sales tax is not a motivating factor for most online shoppers, said Forrester Research's Jay Stanley, an analyst of Internet policy and regulation research. Only 22% of online shoppers Forrester polled said they shop online to avoid sales tax, he said, citing a 1999 Forrester survey of 8,900 online shoppers.

"Local officials around the U.S. have created a monster, a horribly complicated tax system," said Peter Arnold, director of Hands Off the Internet, a coalition of Internet companies and users that opposes government regulation of the Internet. "The Village of Niles would be much better off devising a more fair and equitable system than on spending $35,000 on a campaign that's doomed to failure," he said.

Officials said Niles received several positive calls from local businesses along with a few negative e-mails regarding the campaign. Community leaders said they hope the movement will spread to other regions, but so far no one else has joined the fight.

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