Washington Report

Keeping Members Informed About Regulatory Issues

Contents
June 2000

INTERNET ISSUES

HEARING HELD ON INTERNET TAX BILLS; DMA'S USE TAX CHAIRMAN TESTIFIES

The Subcommittee on Commercial and Administrative Law conducted an extensive hearing June 29th on three bills: H.R. 4267, the "Internet Tax Reform And Reduction Act Of 2000," H.R. 4460, the "Internet Tax Simplification Act Of 2000," and H.R. 4462, the "Fair And Equitable Interstate Tax Compact Simplification Act Of 2000." The large number of witnesses included state legislators, local tax officials, retail executives, representatives from several associations, software company executives, and Frank Julian of Federated Department Stores, who serves as The DMA's Use Tax Committee chairman.

The summary of Julian's testimony states:

"Federated Department Stores, Inc., supports the 'Majority Policy Proposal' contained in the April, 2000, Report to Congress submitted by the Advisory Commission on Electronic Commerce (the 'ACEC'), which has been incorporated in H.R. 4267. Accordingly, we strongly support this bill.

The myriad of state and local sales tax systems that are in place today are too complex; these systems should be substantially simplified and made more uniform. In addition, we believe that all sellers that are required to collect sales tax should receive a meaningful collection allowance from the respective states to compensate them for the costs of collecting sales tax.

Finally, Federated believes that Congress should not pass any legislation that would give states the right to require sellers without physical presence in a state to collect that state's sales tax unless and until (i) the states substantially simplify their sales tax systems and make them more uniform, (ii) such simplification has been fully and fairly evaluated by an objective group, and (iii) all sellers are assured that they will receive a reasonable collection allowance for collecting sales tax. We believe it would be a big mistake for Congress to give prior approval to a simplification compact before the details of the simplification are known and evaluated. For that reason, we oppose H.R. 4460 and H.R. 4462."

Julian's testimony continues with a discussion and examples of the "burdensome complications and complexities of the current [tax] system", including exemptions for certain items which vary from state to state, differing tax rates among the 7,000 state and local tax jurisdictions, the need for a collection allowance for sellers, tax-exempt sellers, the challenge of maintaining customer privacy, and the problem of collecting from buyers who pay by check or money order rather than credit card.

If you would like further information about this topic, contact Ross Starek (202-861-2419 or rstarek@the-dma.org) or Mark Micali (202-861-2420 or mmicali@the-dma.org). If you would like a copy of Frank Julian's testimony, contact Elizabeth Scanlon (202-861-2418 or escanlon@the-dma.org).

INTERNET USERS ENCOURAGED TO VOTE FOR ICANN BOARD

The Internet Corporation for Assigned Names and Numbers (ICANN) is an international organization that coordinates domain names, IP addresses, and other technical functions for the Internet. ICANN will be making important decisions affecting the Internet, such as creating new domains (like "store" and "personal"), settling trademark disputes over domain names, and setting technical parameters for the Domain Name System.

The organization already has nine board members elected by representatives of business and technical groups, but in the fall there will be an election for five at-large board members, one from each of the five major regions of the world (Europe, North America, Asia/Pacific, Africa, and Latin America/Caribbean). Anyone age 16 or older with an Internet and a postal address is eligible to join ICANN as an at-large member. The New York Times reports that those who register by July 31 will be able to vote in the first election.

According to The New York Times, although ICANN defines itself as a standards-setting body whose role is "limited to the technical functions of the Internet, it has already made rules to protect trademark interests from so-called cybersquatters, or domain name speculators. And in their next meeting, scheduled to begin July 13 in Japan, the group is expected to begin moving on plans to add new top-level domains to supplement the popular .com, .net and .org suffixes."

It is important that ICANN's decisions reflect the interests of all Internet users and respect the rights of individuals online. The more people who register to vote and contribute to the decision-making process, the better ICANN's decisions will be.

The three public-interest groups conducting the campaign to get out the electronic vote are The Center for Democracy and Technology, Common Cause, and the American Library Association, and you can get further information and find out how to join ICANN by visiting any of their Web sites (http://www.cdt.org/, http://www.commoncause.org/, and http://www.ala.org/).

DIGITAL SIGNATURE BILL SIGNED INTO LAW (ELECTRONICALLY, OF COURSE)

President Clinton signed the digital signatures bill into law today. The bill makes it possible for electronically transmitted documents with some form of "digital signature" such as encryption keys to be considered as legally binding as hard copies. The new law should further enhance the growth of electronic commerce. The parties to digital contracts will be able to choose which technological system they will use to validate their documents. Certain crucial notices like final utility cutoff warnings, insurance cancellations, and mortgage foreclosure notices must still be sent on paper.

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