E-Commerce Commission Readies Report For Congress

Arlington, VA - April 11, 2000 - The Advisory Commission on Electronic Commerce tomorrow (Wednesday, April 12, 2000) will present to Congress the results of its 10-month study of the issues of taxes and the Internet. Commission Chairman, Virginia Governor James. S. Gilmore, III, will present the report to Congressional leaders at 10 a.m. EDT in Room H-230 of the U.S. Capitol. House Speaker Dennis Hastert, Senate Majority Leader Trent Lott, and House Majority Leader Dick Armey will join with Governor Gilmore and other Commissioners in meeting with media representatives following the formal handover of the 150-page report.

The Report includes a majority policy proposal that provides direction to Congress and formal recommendations concerning privacy, the Digital Divide, and international tariffs. The majority proposal was supported by 11 of the 19 Commissioners; the recommendations were endorsed by 13 or more Commissioners. The majority of Commissioners voted to:

• Reduce consumers' tax burden by repealing the Federal three-percent excise tax on communications services;
• Forge a meaningful pathway to simplification of states' sales and use tax systems;
• Permanently prohibit states or localities from taxing Internet access subscription charges;
• Extend the current Internet tax moratorium legislated by the Congress on multiple and discriminatory taxation; and
• Clarify nexus standards that impact the obligation of businesses to collect and remit state and local taxes on remote transactions.

The Commission's Final Report recommends to Congress the need to bridge the "Digital Divide" to permit all Americans to participate in the Internet economy. It addresses the issue of privacy concerns, noting that any tax administering system for e-commerce should be developed in a manner that minimizes disclosure of consumers' personal information, and should contain sufficient security to protect that information. The Commission recommended that the appropriate committees of Congress should explore privacy issues associated with the collection and administration taxes on e-commerce.

"The report has received strong congressional backing," said Governor Gilmore. "The Commission has worked diligently to produce a document that provides value to the public and guidance for congressional action," he added. Governor Gilmore testified last week before the Telecommunications, Trade and Consumer Protection Subcommittee of the House Commerce Committee. He told the Subcommittee that, "The Commission fulfilled its public obligation to engage and educate the people of the United States on the policy of Internet taxation, and its statutory charge to report the results to Congress."

In addressing the issue of Internet access taxes and the elimination of the Federal communications excise tax outlined in the Commission's Final Report, House Speaker Hastert told the Information Technology Association of America in Chicago yesterday, "Taxes are an impediment to economic growth. Instead of retarding growth, we must encourage it. We must provide all of our citizens with the opportunity to join the information age." About the telecommunications tax, Speaker Hastert said, "The Federal government is hurting all Americans, and specifically the least privileged, with this regressive tax to a tune of $5 billion a year."

Among its conclusions, the Commission's Report suggests that Congress clarify the definition of nexus or "presence" thresholds that businesses must meet to fall under state taxation guidelines. Senators Judd Gregg (R-NH) and Herb Kohl (D-WI) will hold a press conference today to introduce legislation that would prevent states from forcing out-of-state businesses, which have no physical connection to the state, to collect sales taxes on their behalf.

Chairman of the California State Board of Equalization and Advisory Commission member Dean Andal proposed clarifying nexus standards during Commission proceedings. He said, "Just as the states of the original Confederation attempted to use their powers to gain economic advantage over other states to the detriment of the nation, so will states today. Fortunately, our Founding Fathers were wise to the states' parochial nature and empowered Congress to fulfill that goal and protect interstate commerce from the states' unquenchable thirst for more taxes."

The Commission, having met for the final time less than a month ago, will deliver formal copies of the report for distribution to Congress tomorrow. Copies of the report will be available to the public from the Commission's Web site at http://www.ecommercecommission.org on Wednesday, April 12 at 10:00 a.m. EDT.

For more information about the Commission and its meetings, the public may visit the Commission's Web site at http://www.ecommercecommission.org/.

About the Advisory Commission on Electronic Commerce

Appointed by Congress in October 1998 as part of the Internet Tax Freedom Act, the 19-member Commission has been tasked with studying the impact of federal, state, local, and international taxation and tariffs on transactions using the Internet and Internet Access. The Commission's recommendations are due to Congress no later than April 21, 2000.