In a report released this week, Forrester Research reported that 80 percent of online sales activity went untaxed in 1999. The report comes in the midst of continued debate over the taxation of remote commerce.

Estimates of retail sales over the Internet are estimated at $13 billion, with Forrester projecting that number will bloom to $184 billion by 2004. This could mean an enormous amount of lost tax revenue for the states.

Currently, a Congressionally-mandated three-year moratorium on new Internet taxes is currently in place. Members of Congress are considering a five-year extension of the moratorium, which is set to expire in 2001. What many fail to understand is that the moratorium only prevents the imposition of new taxes on remote commerce, but does not preclude the collection of existing taxes. But as the Forrester report makes clear, that fact is being overlooked.

The Advisory Commission on Electronic Commerce, created by Congress to study the issue of taxes on online sales, has been working on the issue for nearly two years. The committee’s final report is due in April, although most experts believe they will be unable to reach a consensus.

Recently, the NRF Board of Directors adopted a resolution calling for a level playing field and equitable collection of taxes across all forms of commerce. The Forrester report serves to strengthen the argument for fair and evenhanded collection of taxes by the states.

If you have any questions, please contact Scott Cahill at (202) 626-8168.

The House and Senate are expected to meet on the CBI/Africa trade bill next week, despite the House not having appointed any conferees. Supporters hope to work quickly and have the final conference report passed before the Congressional recess in April..

The trade bill includes provisions for expanded trade with 48 sub-Saharan African nations. The Senate version also added a version of the Caribbean Basin Initiative (CBI), a 5-year reauthorization of the Generalized System of Preferences, and an extension of Trade Adjustment Assistance. The Senate versions of the Africa and CBI bills contain a provision that requires eligible apparel products to be made with U.S. yarn and fabric. The House version of the African trade bill, H.R. 434, which passed in July, contains no such provision. It is hoped that a commercially viable compromise on the yarn and fabric rule can be reached during conference negotiations.

NRF has been working closely with Members of Congress to get the trade package completed before the pressures of election-year politics wreak havoc with pending legislation. If you have any questions, please contact Erik Autor at (202) 626-8104.

This week the Appellate Body of the World Trade Organization (WTO) ruled that tax breaks granted by the U.S. to foreign sales corporations constitute a prohibited export subsidy under the WTO’s Agreement on Subsidies and Countervailing Measures.

Administration officials expressed their disappointment in the ruling. “The FSC rules are widely viewed as creating a level playing field with European tax systems and are important to our business community,” U.S. Treasury Secretary Lawrence Summers said. Congressional leaders also stated their displeasure, with some commenting they would hold hearings on the issue in coming weeks.

The U.S. has won two decisions at the WTO against the European Union on bananas and beef. One Administration official indicated a trade-off in which the U.S. would drop trade sanctions on those issues in exchange for similar consideration on the FSC decision would be difficult, given the different nature of the cases.

White House officials said the U.S. would ask for time to comply with the ruling. While disappointed with the result in the case, NRF is encouraged by the Administration commitment to respect U.S. obligations to the WTO but not do anything that would result in a competitive disadvantage for American companies.

If you have any questions, please contact Erik Autor at (202) 626-8104.

Retailers suing MasterCard and Visa got a boost when a federal judge certified their case as a class action suite. Plaintiffs in the case, including the National Retail Federation, Sears and Circuit City, say that retailers are unfairly forced to accept debit cards from the two credit giants. As a result, the retailers are compelled to pay exorbitant debit card transaction fees. The Wall Street Journal reports that, should the retailers win, damages before trebling are in excess of $8 billion. The National Retail Federation seeks an injunction against Visa and MasterCard's activities.

March 16-17, 2000 - International Trade Advisory Council, Washington, DC
March 21, 2000 - Credit Management Advisory Council, Washington, DC
March 22-23, 2000 - Taxation Committee, Washington, DC

RETAIL FACTOID

In 1995, retail sales in the U.S. were greater than those of the European Union and Canada combined.

Washington Retail Insight is published by the National Retail Federation, 325 7th Street, NW, Suite 1000, Washington, DC 20004. Please contact Mike Epstein at (202) 783-7971 or e-mail with comments, suggestions, or for subscription information.