U.N. and EU gearing up to regulate the Internet.
By Dave Kopel & Jennifer Holder
Anyone who uses the
Internet is likely to have read e-mail hoaxes about Internet taxation, with scenarios ranging from the Federal
Communications Commission imposing a per-minute Internet access charge, to some sort of tax levied by the United
Nations to finance a global army. These forwarded messages are specious, but they are grounded in plausibility.
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Uncle Sam and Net Taxes
While I wholeheartedly concur with Mr. Regan’s May 16th column, “Tell Uncle Sam To
Leave E-Biz Alone,” I question why Congress hasn’t turned its attention to the domestic front.
In its joint
resolution, Congress asked the Bush administration to make the growth of online trade a top priority and called upon
WTO members to refrain from building up trade barriers.
As one representative commented, “We need to keep
the Internet international and ensure that e-commerce is not obstructed by the potentially confusing and conflicting
laws of nearly 200 nations.” So why not apply this logic at home?
In 1998 Congress recognized this and imposed
an Internet moratorium forbidding the imposition of discretionary taxes. Congress has yet to act on the looming October
expiration of the moratorium. Meanwhile, over 7,600 tax entities wait in the wings seeking to impose a patchwork of
taxes on e-commerce.
The states may cry that they are losing their tax revenue base to e-commerce, but the
numbers don’t lie. Most states consistently run a surplus and the Cato Institute reports that last year, revenues
from existing sales taxes rose 7.3 percent.
The Internet’s benefits, accounting for one-third of our economic
growth in recent years, have come about largely because it has been allowed to develop relatively free from
governmental interference, namely regulation and taxes.
Minor changes in Internet taxation and regulation
have far-reaching effects we cannot accurately predict. Taxation of the Internet results in decreased innovation
and higher prices, stemming from increased overhead and decreased competition.
While I applaud Congress for
recognizing barriers on the world stage, it seems necessary to remind them that ignoring 7,600 potential stumbling
blocks would create the maze of taxation and regulation at home that they are seeking to avoid abroad.
Executive Vice President, NoInternetTax.org
The Washington Times
A11 (Copyright 2001)
I agree with your assessment that Sen. George Allen
will have to “buck the tide” to get his bill that permanently bans Internet taxation passed (“No new Internet taxes,”
Editorials, May 17). As you may know, a measure to extend the moratorium sailed through the House earlier this week.
Meanwhile, the Senate continues to negotiate the moratorium, with 7,500 hungry tax entities awaiting their decision in
Should we lift the moratorium, extend it or make it permanent? Lifting the moratorium would create
a tax collection under our structure nothing short of a nightmare. If pro-tax lobbies are successful, electronic
commerce entrepreneurs would be forced to interpret and attempt to manage a myriad of tax rules, regulations and rate
structures across America.
To solve this, a number of proposals have been floated, calling for the creation
of a “tax cartel,” among other schemes. But to “level the playing field” as pro-tax advocates such as Sen. Byron L.
Dorgan would like, states would have to streamline their tax structures, thus reducing tax rate competition between
local authorities, ultimately resulting in a de facto national sales tax on interstate commerce that limits the control
tax authorities have over establishing and defining their own tax rates.
The states may cry to Congress that
they are losing their tax revenue base to electronic commerce, but the numbers don’t lie. Most states have
consistently run a surplus, and the Cato Institute reports that last year, revenues from existing sales taxes rose
If the states are so in need of this “lost revenue,” which by best estimates represents less than
1 percent of their total revenues, why then have 21 states chosen to cut taxes and lower their existing sales tax
collections by a total of $1.6 billion?
Extending the moratorium would allow for significant debate to continue
on the issue, but it is nothing short of a stalling measure, leaving the inevitable question yet to be addressed.
The truth is that minor changes in Internet taxation and regulation have far- reaching effects we cannot accurately
The Internet is worthy of defense for the revolutionary impact it has had on all of our lives. It has
created jobs, economic growth, prosperity and opportunities for all Americans.
As Mr. Allen and Sens. Conrad
Burns, Judd Gregg and John W. Warner have advocated with S. 777, we must make permanent the moratorium on the Internet.
President Bush is on board. All that’s left to make the moratorium permanent is a nod from Capitol Hill.
Executive vice president
By Andrea Singh
August 16, 2001
Forty-three governors have signed a letter
being sent to Congress this week urging that a federal 1998 moratorium on Internet taxes not be extended, unless the
states are given an opportunity to develop a plan to collect online sales taxes on their own.
Among the governors
not signing was New York’s George Pataki and Virginia’s James Gilmore III, who served as chairman of a federal advisory
commission that recommended the extension after more than a year of public hearings.
A spokeswoman yesterday said
Pataki had long opposed Internet taxes because of concerns they would stunt growth of Internet commerce, a view shared by
Gilmore. She would not elaborate further.
The governors’ letter, signed during a recent meeting of the National
Governors Association and made public yesterday, expressed other concerns.
“If you care about a level playing field
for main street retail businesses, and local control of state’s governments and schools,” a draft of the letter said,
“extend the moratorium on taxing Internet access only with authorization for the states to streamline and simplify the
existing sales tax system.”
Supporters of Internet sales taxes have argued that millions, or perhaps billions,
of sales-tax dollars are going uncollected when people purchase products through the Internet. Additionally, they say
the moratorium gives firms that sell online an unfair advantage over so-called brick-and-mortar stores.
including many technology companies and business groups, worry like Pataki that Internet-sales taxation could snuff out
the still-young and fragile e-commerce sector. They add that there are roughly 7,500 state and local taxing jurisdictions
across the country, making it onerous, if not impossible, for e-tailers to collect proper taxes based on where the
The issue has vexed policy-makers and defied compromise for more than a year. The moratorium is
slated to expire Oct. 21. Currently, an online sales tax is charged only if an Internet retailer has a brick-and-mortar
presence in the consumer’s state.
Under a U.S. Supreme Court ruling, online companies who do not have a physical
location in a consumer’s state cannot charge that consumer a state tax on a purchase. For example, if a New York resident
makes an online purchase from a company in another state, that company cannot charge state tax to that consumer.
“It’s up to the consumer to calculate that tax and remit it to the state at the end of the year,” said a spokesman for the
National Governors Association. “But many aren’t aware of that.”
The letter refers to the association’s “Streamlined
Sales Tax Project” as one possible solution. That project hopes to set up a single system for determining how people who use
online commerce will be taxed. Then, individual states could set their own rates, a representative said.
there are 32 states participating in the project, and six other states, including New York, are keeping a close eye on it,
the spokesman said. Information about the project can be found at www.nga.org/nga/salestax/1,1169,,00.html.
Judiciary subcommittee recently passed a measure by Rep. Christopher Cox (R-Calif.) that extends the moratorium without
addressing the sales-tax issue, and the full committee is expected to vote on the bill early next month.
intensive negotiations were going on before the recess in the Senate, where there is greater support for tackling the
sales-tax issue as a part of extending the moratorium.
Jennifer Holden, a spokeswoman for NoInternetTax.org, a group
fighting the idea of an Internet tax, said the governors can expect the battle to intensify over the next months. “We feel
Internet tax is simply unconstitutional,” Holden said. “And there’s definitely going to be a fight over this issue [in Congress]
Newsday Wire Services contributed to this report.
Copyright © 2001, Newsday, Inc.
By Jake Batsell
Seattle Times business reporter
The looming expiration of a three-year ban on new Internet
taxes has revived the debate over whether state and local governments should be able to tax purchases made on the Web.
This week, a group of 42 governors — including Washington Gov. Gary Locke — urged Congress not to extend the
Internet-tax moratorium, which applies mostly to Internet-access fees and which expires Oct. 21, unless lawmakers also
allow states to create a uniform system to collect taxes from out-of-state online businesses.
retailers say they aren’t bracing for an imminent wave of new taxes come October.
“We’re not worried about it,”
said Jennifer Lind, spokeswoman for Kent-based outdoor retailer Recreational Equipment Inc. (REI). “It is really a non-issue
for us — in every state (where we have a store), we collect sales taxes.”
At REI, online transactions accounted for
about 13 percent of sales last year.
While laws require online shoppers to calculate and pay taxes to state
authorities, few do, and a 1992 Supreme Court decision forbids states from requiring out-of-state businesses — online,
catalog, or otherwise — to calculate and collect taxes on orders placed from states where the business has no physical
Seattle-based Amazon.com, the world’s largest online retailer, collects sales taxes from Washington
customers, and spokesman Bill Curry said the company is not opposed to collecting state or local taxes from out-of-state
customers. The problem, Curry said, is that with more than 7,600 tax jurisdictions in the country, it’s almost impossible
for retailers to sort out what taxes customers should pay.
In 1992, the U.S. Supreme Court agreed that out-of-state
retailers should be spared from the burden of sorting through tax jurisdictions. Because the court decision governs Internet
and catalog sales, the Internet-tax moratorium approved by Congress applies mainly to Internet-access fees.
governors say the moratorium should continue only if Congress lets states develop a system that would enable online retailers
to easily calculate sales taxes.
The governors, backed by brick-and-mortar retailers, contend such a system would
eliminate what they say is an unfair competitive advantage for Web businesses.
Jan Teague, president of the Washington
Retail Association, said her group has worked with Locke’s office for two years to come up with a streamlined system.
“The retailers are just asking for all the businesses to be treated the same,” she said.
By that logic,
Amazon’s Curry said, every merchant would collect sales taxes based on where buyers live.
Bellevue-based interest group that opposes Internet taxation and regulation, criticized Locke for joining in the governors’
“With the recent downturn in the economy, we feel if you’re going to impose taxation on the Internet,
that could further the downward spiral,” said Brett Mecum, political director for the interest group.
Even if Congress
and the states eventually agree on a streamlined Internet tax system, online retailers say they’ll survive.
for reasons other than sales taxes,” Curry said. “They shop for selection, convenience and price.”
Jake Batsell can be
reached at 206-464-2718 or firstname.lastname@example.org.