ISN’T THE INTERNET ALREADY TAX-FREE?
No. One common myth about the Internet and the moratorium on Internet
taxation is that the Internet is a tax-free oasis. Taxes apply to e-commerce, exactly the same way as they apply
to catalogue and mail order sales.
A significant number of online retail purchases, such as business to
business commerce and financial services, are services not subject to sales tax in any form, electronic or otherwise.
Many online transactions are for goods such as groceries that require the seller to have a “bricks and mortar”
presence in the buyer’s state in order to collect the sales tax, where the states ALREADY have an authority to tax sales.
WHO ARE THE LARGEST E-TAILERS?
According to a May 2001 Pew Internet & American Life Project study with
Federal Computer Week, ironically the government ranks in at $3.6 billion in e-commerce, over e-tail giant Amazon.com’s
$2.8 billion over the same period in 2000.
WHEN DOES THE MORATORIUM EXPIRE?
The first moratorium,
enacted in 1998, will expire on October 21, 2001. On June 14, 2001, negotiations were reached to extend the moratorium
for an additional five years. This extension is pending final Congressional approval.
WHAT CAN I DO?
NoInternetTax.org has launch an e-mail campaign, targeting our nation’s fifty governors and members of the House of
Our e-mail effort is an opportunity for elected officials to hear directly from the people
in support of the current national moratorium to allow the Internet to continue to develop into its full potential.
WHY IS PROTECTING THE CURRENT TAX MORATORIUM IMPORTANT TO THE FUTURE OF THE INTERNET?
While the Internet
is the most rapidly adapting technology in history, it is still in its infancy. That means it is still very vulnerable
to government control and regulation, especially taxation. Congress recognized that danger in 1998 and enacted a
three-year moratorium on new Internet taxes. That moratorium expires on October 21, 2001.
More than 30,000
state and local governments and 7,600 taxing authorities are now looking for loopholes to open the Internet to taxation
This could quickly become a crushing financial burden and an administrative nightmare for
everyone who uses the Internet, severely stunting its growth and development. All of us would lose because the Internet
would not develop into the full potential it otherwise could.
WHO IS PUSHING FOR TAXING THE INTERNET?
Very powerful and effective political forces are arrayed against the Internet on this issue. These opponents represent
more than 30,000 state and local governments and 7,600 taxing authorities, and include the National Governor’s
Association and the National Association of Counties.
However, even they are not unanimous on taxing the
Internet. For example, California State taxing authorities recently recommended a permanent ban on Internet taxation
and California Governor Davis has been a leading opponent of taxing the Internet, as has Governor Gilmore of Virginia.
Unfortunately, they are in the distinct minority.
WILL NoInternetTax.org’s E-MAIL EFFORT DO ANY GOOD?
Yes! It will provide critical support for those leaders like President Bush, Senator George Allen, Senator Ron Wyden,
Representative Christopher Cox and Virginia Governor Gilmore.
It will also put pressure on pro-tax leaders
like Utah Governor Mike Leavitt, Governor John Engler and North Dakota Senator Byron L. Dorgan (leading national
proponents of taxing the Internet), by showing them that they are out of step with the American people.
AREN’T STATE AND LOCAL TAX AUTHORITIES LOSING THEIR TAX BASE BY NOT TAXING THE INTERNET?
No. The General
Accounting Offices, in a report issued in 2000, noted, “little empirical data exist on the key factors needed to calculate
the amount of sales and use tax revenues that state and local governments lose on the Internet and other remote sales.
What information does is exist is often of unknown accuracy.”
As Senator Wyden so astutely pointed out during his
introduction of the Internet Tax Nondiscrimination Act, “Not a single community has come forward and proved that it is
being injured by its inability to impose discriminatory taxes on electronic commerce. There is no evidence that the states
have lost revenue by technology driven economic activity.”
Most every state in the nation is reporting a surplus and
does not need extra revenue. According to a report by the National Conference of State Legislatures (NCSL), states had a
$5.5 billion surplus for 1999. The report found that “…this is the third straight year that most states have faced decisions
on how to allocate these excess revenues.”
According to figures compiled by the CATO Institute, last year revenues
from personal income taxes rose 12.4 percent; sales taxes rose 7.3 percent; and corporate income tax went up 4 percent.
Twenty-one states have chosen to cut taxes and lower their existing sales tax collections by a total of $1.6 billion.
This decision represents a $1.6 billion net loss in sales tax revenues, approximately 1,000 percent more than the E-commerce
losses that are projected by the National Center for Policy Analysis.
WHY AREN’T INTERNET BUSINESSES DEFENDING THE INTERNET?
They are trying, but even with the Internet boom, there are relatively few large companies who conduct
business exclusively on the Internet.
Virtually all of them are losing money. Internet startups require massive
investments that take time to be successful. At this point, it is still largely up to the people to protect the Internet.