URBAN ECONOMIC POLICY COMMITTEE

URGING OPPOSITION TO THE ADVISORY COMMISSION MAJORITY MEMBERS’ REPORT TO CONGRESS ON ELECTRONIC COMMERCE

WHEREAS, the Advisory Commission on Electronic Commerce (ACEC)was established under the Internet Tax Freedom Act in 1998 to examine the impact of applying state and local sales and use taxes to electronic commerce and remote sales, and to provide recommendations to Congress on whether and how states and localities should be allowed to collect such taxes; and

WHEREAS, the Commission held four meetings starting in June 1999 in Williamsburg and ending on March 21, 2000 in Dallas but failed to reach the broad-based consensus required by law (13 votes required but only 11 of the 19 members voted for the report)on the report submitted to Congress in April; and

WHEREAS, the report included numerous recommendations that would adversely affect state and local governments including:

• a five-year extension of the current three-year moratorium on state and local taxes on Internet access fees, multiple and discriminatory taxes;

• a five-year prohibition on taxing digitized goods (such as books, magazines, movies and music)downloaded over the Internet and similar items sold over-the-counter;

• new loopholes that would allow out-of-state sellers to use companies located in a local area with no obligation to collect sales taxes;

• the elimination of the local option sales tax on remote commerce;

• changes that would reduce state and local taxes on telecommunications providers at the expense of taxpayers; and

WHEREAS, a March 29 Washington Post article describes in detail how recommendations in the report would benefit industries that had representatives on the Commission, and it is estimated that the exemptions and tax breaks called for would cost an estimated $30 billion annually; and

WHEREAS, cities like Denver could lose as much as 50 percent of sales tax revenues if the recommendations are fully implemented, and many cities consider this issue to be the greatest challenge they have faced in more than a decade; and

WHEREAS, these recommendations would significantly erode state and local revenues and could undermine efforts currently underway in state and local governments to simplify sales and use taxes so they can be easily applied to all commerce; and

WHEREAS, the majority members made no recommendation to level the playing field between local retailers, who must collect state and local taxes and out-of-state sellers who are not required to do so,

NOW, THEREFORE, BE IT RESOLVED that The United States Conference of Mayors urges members of Congress to reject the ACEC majority members report and oppose legislation containing recommendations from the report, including proposals that simply extends the existing moratorium on Internet taxes without giving state and local governments the authority to require remote sellers to collect their taxes; and

BE IT FURTHER RESOLVED that The United States Conference of Mayors urges Congress to pass legislation that would authorize states (and the local governments within such states) to require out-of-state sellers to collect and remit their taxes, and enable states to participate in a multi-state compact to streamline and simplify their sales and use taxes.