The Views of the Association for Interactive Media 
as a Member of
The Advisory Commission on Electronic Commerce

As the Advisory Commission on Electronic Commerce (ACEC) begins its study of Internet tax issues, the Association for Interactive Media (AIM) is excited to be a direct participant in the process.  While the specific proposals to be considered by the ACEC are unknown at this time, AIM approaches the process with a few fundamental principles in mind. 

AIM realizes that the primary issue in the Internet tax debate is not new but rather, the Internet has provided a new measure of hype to a 30-year-old battle between state and local officials and the direct marketing industry.  This battle is based on the desire of state and local officials to force out-of-state sellers to collect use taxes.  In the 1967 Bellas Hess decision, which was affirmed in the 1992 Quill decision, the U.S. Supreme Court declared that states cannot force out-of-state sellers to collect their taxes (unless the seller has a significant physical presence or "nexus" in the state).  These decisions were grounded in the Commerce Clause of the U.S. Constitution, and based on the burdens such collection obligations would place on interstate commerce.  While technically still owed by consumers, most people understandably do not believe they owe taxes on out-of-state purchases — be they Internet, telephone or catalog sales.  This is because state and local officials would rather force powerless out-of-state businesses to act as collector, rather than directly raise the matter with their own citizens, who may respond angrily in the voting booth.

Next, AIM believes that the ACEC should not be dominated by discussions of use tax collection issues that state and local officials will instigate.  It is just as important, if not more important, for the ACEC to focus the nation's and Congress' attention on significant impediments which state and local tax regimes will cause, hampering future development of the Internet and electronic commerce.  These issues include those such as the local and state telecommunications taxation structuring, which causes consumer confusion and unequal competition, and significant international ramifications as the Internet begins to reach its potential as a medium of global economic commerce. 

Finally, AIM believes the ACEC must approach its task with an eye on the future rather than the past.  AIM will ask the ACEC to address fundamental Internet business questions.  Most importantly, the ACEC must recognize that current state and local tax regimes were built in the 19th and early 20th Centuries, and are based upon the means of commerce conducted in those eras.  The ACEC must carefully consider whether it is appropriate to graft those tax systems on a 21st Century means of commerce.  The Internet and electronic commerce should not be molded to fit an increasingly anachronistic tax systems.   

AIM will represent the views of the Internet and direct marketing industry, and will work to promote continued innovative online activity.  These views will be shaped by the participating member companies of the AIM Online Shopping Council.  As a result, AIM will give Internet executives the ability to help shape the debate and focus on areas of vital importance to the entire industry.  Only as a truly representative coalition will AIM have the ability to utilize it's influence and help guide the direction of this ACEC and future legislation. 

For more information, contact:

Ben Isaacson, Acting Executive Director, 202-408-0008
ben@interactivehq.org

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