Commission Aims for Dialogue on Internet Taxes

When the Advisory Commission on Electronic Commerce meets June 21-22 in Williamsburg, Va., commission chairman Virginia Gov. James Gilmore will focus less on finding a quick solution to the Internet tax question and more on opening up a national dialogue on the question.

Gilmore believes that settling the issue of Internet commerce and taxation is the "most important technology initiative to this point in the Information Age," said Don Upson, Virginia's secretary of technology.

The commission, whose membership includes federal, state and local government officials and business leaders, was created by Congress last year as part of the Internet Tax Freedom Act, which placed a three-year moratorium on the collection of any sales tax on business transactions conducted over the Internet.

The panel was tasked with finding a way to deal with a medium that defies all traditional taxing models. Among the many issues: how to balance the revenue concerns of local and state governments against the need for small and large businesses to compete effectively in a global economy.

To date, numerous proposals have been bandied about, including a permanent moratorium on Internet sales taxes; an electronic middleman tax collector; a federal software standard that states and localities have to use to collect taxes; the model already used to tax catalog companies; or the laissez-faire model, simply letting all 30,000 tax jurisdictions take their shot at taxing Internet-based firms.

Upson believes that the best solution hasn't even been devised yet and will ultimately come out of the four commission meetings scheduled to take place over the next year.

"There are thousands of issues involved, and the mission is enormous -- bigger than all of us think," Upson said. "So the governor wants to put a process in place that gets the right input and develops appreciation among all parties for the concerns that all parties have so [that] hopefully they can all be addressed.

"So when the commission concludes, we'll have a consensus-driven proposal, one that will go to Congress and not just be cast aside but one that has such a broad consensus that there's no choice left but to pass it and enact it," Upson said.

On the first day of the Williamsburg meeting, commission members will meet to set up the panel's bylaws and address other organizational issues. On the second day, Gilmore is expected to invite experts and interested parties to speak and make presentations in an effort to begin to define all the issues involved. At the next meeting, scheduled for this fall in Silicon Valley, the commission will begin to sharpen its focus and start deciding what proposed ideas are feasible and what challenges those ideas present.

Upson suggested that the commission has a great opportunity but that everyone with a stake has to recognize that patience is the key to ultimate success. "This is a completely different game that we're involved in, and if we keep trying to play the old game, we may be in worse trouble," he noted.

"The challenge and opportunity are that we might be able to produce something that works to everyone's satisfaction. The danger is, if we don't, then the act expires, and you're right back to where you were: everybody trying to impose their own will on this medium. And good luck."

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