Internet Taxes Fail to Catch Fire
By CURT ANDERSON
06:03 PM ET 09/14/99
NEW YORK (AP) - House Republican leaders warned an Internet tax commission
Tuesday that the GOP-led Congress is in no mood to expand taxes on electronic commerce,
including sales taxes on purchases across state borders. ``This idea is not a popular one
in Congress or among the American people,'' wrote three dozen GOP lawmakers in a letter to
the Advisory Commission on Electronic Commerce, which is holding its second of four
meetings.
The 19-member panel of business and government officials was created by Congress
last year to recommend future tax policy on Internet business and is supposed to finalize
recommendations by April. That same law imposed a three-year moratorium on new Internet
taxes.
The GOP letter, signed by House Majority Leader Dick Armey and Majority Whip Tom
DeLay, both of Texas, said many Republicans were troubled by indications that the panel
was examining ``how to tax the Internet, rather than whether to tax the Internet.'' The
lawmakers urged the panel to focus on the international implications of U.S. tax decisions
and on how American business might be affected by ``complex and excessive state and local
taxes on e-commerce.''
``You should also know that there are many members that will oppose any new
taxes on the Internet,'' the GOP letter said. ``An academic exercise on new ways to tax
the Internet is not productive and does not reflect the intent of Congress in establishing
the commission.''
Such a position puts the House Republicans at odds with many state and local
government officials, who fear growth in Internet commerce will siphon away sales tax and
other revenue needed for schools, roads, fire protection and law enforcement.
``If state and local governments lose billions, be assured county governments
will have to incrase property taxes or income taxes to make up the difference - or cut
esential community services,'' said Larry Naake, executive director of the National
Association of Counties.
A major question for the commission, and ultiimately for Congress as well, is
whether to devise a way for states and local governments to require collection of sales
taxes on Internet purchases across state borders.
The U.S. Supreme Court has ruled that only Congress can force companies to
collect and remit sales taxes unless the firm has ``nexus'' in that state - a store, a
warehouse, or some other physical presence. This applies to catalog operations as well as
Internet commerce.
Some proponents of sales tax reform say there are ways to develop software that
would allow companies to collect sales taxes based on the destination of the goods
purchased. Meanwhile, Sen. Ernest Hollings, D-S.C., has introduced a bill in Congress to
impose a 5 percent national sales tax on all remote sales, including Internet and catalog.
The commission also heard Tuesday from several telecommunications and business
representatives who urged a recommendation that Congress repeal taxes on telephone
service, including the 3 percent federal excise tax.
``You're taxing the very things that are driving growth,'' said Jeffrey
Eisenach, president of the Washington-based Progress and Freedom Foundation.
