E-tax Commission Debates Physical Presence

(03/20/00, 8:22 p.m. ET) By Mo Krochmal, TechWeb

DALLAS -- The Advisory Commission on Electronic Commerce is trying to connect over nexus and is getting nowhere.

With just one day remaining to find agreement and create a document to send to Congress with its recommendations on Internet tax policy, the 19-member commission is struggling to reconcile the physical world with the Internet.

The Latin word for connection, nexus is a fuzzy legal concept that bears largely on taxation and how it should be implemented given the rise of the Internet.

Twice in the past 40 years, the U.S. Supreme Court has ruled that mail-order merchants can be required to collect taxes if their contact with a state -- nexus -- reaches a certain level. That level, however, is not clearly delineated, leading to different interpretations of what exactly is the threshold that must be met to consider a merchant having a physical presence in a location -- and the legal responsibility to collect taxes on transactions.

"We are trying to define what a physical presence is, that this is, this isn't," said Dean Andal, who is chairman of the California Board of Equalization, a state tax administrative unit, and a proponent of a liberal view of nexus.

Andal said opponents of any mention of nexus in the committee's report are behind the log-jam developing in Dallas.

"The four or five who represent the other side, don't want any nexus statement," he said. Those include Gov. Michael Leavitt of Utah, Gov. Gary Locke of Washington, and Ron Kirk, the mayor of Dallas, Andal said.

The commission earlier on Monday voted by an 11-7-1 margin to accept a business-written proposal that would extend a Congressional moratorium on new Internet sales and access taxes by five years. The vote was two less than the "super majority" needed to create a commission recommendation, a label that carries a more forceful weight of a finding than a simple majority.

The committee is set to complete a nine-month-long saga on Tuesday after conducting a session that extended into the evening on Monday. After announcing a 45-minute break for informal meetings, the commission still had not returned to open session two hours later.

Related Links:

Advisory Commission on Electronic Commerce

E-Tax Commission Seeks A Compromise

E-commerce Tax Proposal Fails

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