Copyright 2000 The Washington Post
The Washington
Post
View Related Topics
March 21, 2000, Tuesday, Final Edition
SECTION: FINANCIAL; Pg. E01
LENGTH: 772 words
HEADLINE:
Proposals Seek Delay Of Internet Sales Tax
BYLINE: John
Schwartz , Washington Post Staff Writer
DATELINE:
DALLAS, March 20
BODY:
The majority
of a congressionally appointed Internet taxation panel called today for a
moratorium on Internet taxes, simplification of a patchwork of state sales
taxes, and elimination of the 3 percent federal excise tax on telecommunications
services. But it was unclear whether any of the votes on these issues would
matter.
Opponents of the package of proposals argued that it lacked the
"supermajority" of votes that Congress demanded before the Advisory Commission
on Electronic Commerce could submit recommendations.
Even as the
nation's retailers and state and local politicians argued that keeping the
Internet a tax-free zone would wreck Main Street and weaken the ability of local
governments to provide basic services, the members of the commission spent much
of the day in pitched battles over procedural points.
"I've never spent
so much time on rules since I was on student council," complained an exasperated
C. Michael Armstrong, chairman and chief executive of AT&T Corp. and a
member of the commission.
This is the fourth and final meeting of the
commission, a 19-member body formed as part of the Internet Tax Freedom Act of
1998 to make recommendations to Congress about taxation on the Internet. The
group is scheduled to deliver its report before April 21.
But members of
the panel have so far been unable to amass the 13 super-majority votes on any
issue the law requires before the group can make recommendations.
After
a testy confrontation with commission member Mike Leavitt (R), the governor of
Utah, the commission's chairman, Virginia Gov. James S. Gilmore III (R), said
the panel would deliver a report to Congress based on proposals that gained a
simple majority of votes.
The group then voted in favor of a proposal
submitted by the members of the commission representing online businesses. That
proposal would extend the current three-year ban on new taxes on Internet access
or moves to single out Internet transactions for special taxes for another five
years, and would eliminate a decades-old federal telephone tax.
Representatives of the Clinton administration declined to vote on any
proposal, saying that the commission had strayed from its original goal of
finding broad agreement on Internet taxation issues. "We looked forward to
supporting one package that had consensus support," said Andrew Pincus, general
counsel of the Department of Commerce. "We felt that without that real consensus
there couldn't be that support."
Local officials and traditional
retailers oppose the online business plan, saying that it gives Internet-based
companies a dangerous advantage over traditional retailers.
"I consider
this to be the most serious threat we've faced in the 34 years I've represented
this industry," said Mickey Moore, president of the Texas Retailers Association.
Representatives from Tandy Corp., Wal-Mart Stores Inc. and smaller retailers
said at a news conference before the commission meeting that allowing
Internet-based companies to sell their wares without collecting sales taxes will
hurt traditional "bricks and mortar" retailers.
Even those big retailers
that hope to profit from Internet sales said they, too, will lose business
because they are required to collect sales taxes in any state where they have
stores. This question of how to define "nexus"--a company's physical presence in
a state for the purposes of taxation--is one of the thorniest issues remaining
before the commissioners.
The commission spent more than two hours in
closed-door negotiations to consider an alternate proposal from the Leavitt-led
group, but Gilmore said any movement away from the online business proposal was
unlikely.
"If I were the pro-tax group, I would take this and live to
fight another day,' " Gilmore said to reporters outside the ballroom. Even if
the Leavitt-led group did come up with a tax proposal, Gilmore said, "I would
not support it, the commission would not support it and I believe a majority of
the American people would not support it."
Lisa Cowell, executive
director of the pro-tax E-Fairness Coalition, said some elements of the
proposals would lead to absurd results. She cited a recommendation that taxes be
dropped not only on goods that are delivered electronically, such as music,
software and articles delivered over the Internet, but also the physical
versions of those products--such as magazines, CDs and shrink-wrapped software
programs.
"This proposal just exempted from taxation Hustler magazine
while continuing to require people to pay taxes on shoes and food for their
children," Cowell said.
LANGUAGE: ENGLISH
LOAD-DATE: March 21, 2000 
