Virginia Governor Mark Warner (D) said Thursday his state would continue to be a key player in a national effort to equalize the sales tax burden between Internet and Main Street retailers.

In launching the first overhaul of the Virginia tax code since the early 1900s, the chief executive of one of the nation's most tech-heavy states reiterated his support for a multi-state effort to tax online sales.

"The system is not fair when citizens pay tax on purchases in stores but not on purchases through catalogues or over the Internet," Warner said in a position paper distributed to members of a legislative tax reform commission.

Currently, consumers in most states are required to pay "use" taxes on all items bought online or through catalogs, but very few do so. For their part, Internet merchants must collect sales taxes on Internet sales only when the buyer lives in the same state where the business has a physical operation, such as a retail outlet or shipping center.

Virginia is part of a coalition of nearly 40 states working to streamline their tax laws in an effort to convince Congress to make online sales tax collection mandatory nationwide. To that end, Warner's reform plan calls for the state to continue participating in the national process and, if that process produces a compromise on taxing e-commerce, to amend the Virginia tax code to bring the state into compliance with the multi-state pact.

"I would just generally say judging by phone calls we're getting today, there's a broad misunderstanding of the national effort to approach Internet taxation in a comprehensive and unified way," Warner spokeswoman Ellen Qualls said Friday morning. "Virginia is not stepping out of the herd from other states on this issue. We just want to lay the groundwork for when that national effort is realized."

In outlining his plan yesterday, Gov. Warner also said he would consider extending tax obligations to services, which generally are not taxed in most states.

"Virginia's economy is increasingly based on services, yet our tax system does not reflect that fact," Warner said. "We need to look at how we base our sales tax on the economy of our Commonwealth so that the tax burden does not fall on just a few."

While Warner's tax reform plan is expected to meet opposition in the Republican-controlled legislature, the issue of taxing e-commerce may be one where both parties agree.

Delegate Harry J. Parrish, the Republican chairman of a key finance committee in the House of Delegates, said it's a matter of equity. "Not to tax those things [products sold online] makes it very unfair for our merchants that have bricks and mortar stores. What we're trying to do is balance the equity in tax laws so that everyone pays their fair share but no one has to pay more than they should," he said in an interview.

The governor did not say whether his ideas about taxing services should extend to those offered online, such as Internet access and other fee-based information services. Under a federal law slated to expire in November, states are prohibited from imposing taxes that single out Internet services. Qualls declined to comment on that possibility, saying only that such a level of specificity about the governor's plan would be premature at this point.

Josh Levi, vice president for policy at the Northern Virginia Technology Council, acknowledged that the governor's words on the national Internet sales tax plan were nothing new. But he said the NVTC remains concerned about the burden that such a plan would place on technology companies and small online merchants in particular.