Copyright 2000 The New York Times Company
The New
York Times
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July 18, 2000, Tuesday, Late Edition - Final
SECTION: Section C; Page 6; Column
5; Business/Financial Desk
LENGTH: 417 words
HEADLINE: Passage of Cellular Phone Tax May Solve
E-Commerce Riddle
BYLINE: By DAVID CAY
JOHNSTON
BODY:
In the debate over taxing
goods and services sold over the Internet, a vexing issue has been which
jurisdiction's taxes to apply. The place where the product is shipped? Where it
is used? Where the bill is sent?
Opponents of taxing sales over the
Internet have said it can be impossible to tell where a
customer is in cyberspace and, thus, sales and use
taxes cannot be applied.
But thorny as that issue has
been made to appear, Congress last week found a way to solve it for that most
portable of devices, the cellular telephone. And there was no dissent.
By voice vote and with White House support, both houses approved
legislation specifying that each cell phone will have a "primary service area"
for the purpose of state and local taxes. Users pay between $4 billion and $7
billion annually in state and local cell phone user taxes, the industry
estimates, and sorting out those taxes has been costly for the companies.
While a customer simply gets a single line on the bill listing state and
local taxes, the cell phone provider must track calls made as that customer's
phone is used in different cities and states so that taxes can be paid to each
jurisdiction, said Chris Putala, a vice president of the Cellular
Telecommunications Industry Association, an international group.
For
most cell phones the primary service area will be the address where bills are
sent. But in other cases, like phones issued by national corporations to
employees in many places, a primary service area will be declared for each phone
and will ordinarily be tied to the area code. Thus a New York company issuing
cell phones to employees in North Carolina would owe taxes to North Carolina and
to whatever city there the company declared as the primary use address.
Senator Byron Dorgan, Democrat of North Dakota, who sponsored the Senate
version of the bill, said, "This is one of those cases where it was in
everybody's interest to create simplification.".
The tax bill was
sponsored in the House by Henry Hyde, an antitax Republican from suburban
Chicago.
Lisa Cowell, executive direct of the E-Fairness Coalition, a
group of merchants advocating uniform application of sales taxes regardless of
whether a sale takes place in a store, by telephone or online, said the bill's
passage made it clear that the Internet taxation issue could be resolved.
"A lot of politicians have stopped hiding behind this bogyman of 'it
can't be done' because no one knows where the customer is," she said.
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LOAD-DATE: July 18, 2000
