Congress urged not to tax Internet commerce By Jennifer Jones InfoWorld Electric http://www.infoworld.com/cgi-bin/displayStory.pl?991116.icnotax.htm Posted at 4:05 PM PT, Nov 16, 1999 Several state and local government groups on Tuesday urged Congress not to make any sweeping changes to the way Internet-based commerce is taxed. Instead, the groups - which include the nation's governors, mayors, and other decision-makers - suggested that local governments overhaul entirely existing sales-tax systems. Specifically, the groups, led by Utah Gov. Michael Leavitt, want states to work toward a system that would make it easier to collect taxes that can be levied under existing legislation. Congress has barred local and state government from introducing any new taxes until in the year 2001, but standard sales taxes are supposed to be imposed on any electronic-commerce activity that involves a consumer. Business-to-business transactions are exempt. However, current statutes do not require states to collect taxes on goods shipped across state lines, because doing so is difficult and burdensome to businesses. Technically, buyers of electronic goods are supposed to come forward and send in appropriate taxes on the items they buy. But few of them do, said Mark Nebergall, president of the Software Finance and Tax Executives Council, a Washington-based group that represents finance and tax executives of major software companies. Leavitt and the National Governors Association (NGA), the National Association of Counties (NACo), the National League of Cities (NLC), and other groups in and around the Washington area want to create an environment which makes it easier for businesses to turn over the taxes owed. "The proposal that Gov. Leavitt put forth would collect taxes from all sellers but for the Internet and catalog companies, it would do so on a voluntary basis," said Ralph Tabor, NACo's associate legislative director. Tabor said the proposal suggests governments prompt Internet retailers to collect taxes by offering incentives such as a small cut of the funds collected for those companies that participate. The proposal would put third-party interstate entities in charge of collection. The Leavitt proposal stands in contrast to a proposal Virginia Gov. James Gilmore put on the table last week, which called for a complete ban on Internet taxation. "By imposing new tax collection millstones on Internet-based entrepreneurs, or reporting all sales transactions to third-party collection agents of the government who would view the private purchases of each consumer, the evidence is clear that government would severely inhibit economic growth of the Internet economy," said Gilmore in his Nov. 9 proposal. Gilmore is chairman of the Advisory Commission on Electronic Commerce, which was appointed by Congress in late 1998 to map out Internet taxation strategies. According to Nebergall and others, however, the commission may have trouble reaching a consensus on the message it will send to Congress on how to proceed on the taxation issue. The group will hold its third policy meeting Dec. 14 and 15 in San Francisco, where the group could begin voting on how it will come down on the issues in its report to Congress due early next year. Congress next year is expected to see a flurry of Internet tax related activity. The National Governors Association, based in Washington, is at www.nga.org. The Advisory Commission on Electronic Commerce, in Arlington, Va., is at www.ecommercecommission.org.
