Municipal officials pushed on Internet taxation

The Advisory Commission on Electronic Commerce was formed in 1998 when Congress established a three-year moratorium on Internet taxation. The commission was charged with making recommendations to Congress on Internet taxes by April 2000.

The commission probably will not vote at this meeting on any of the 37 proposals put forth thus far. Virginia Gov. James Gilmore (R) proposed that the group refrain from voting.

"It is not my intention to call for a vote on policy options at this meeting," Gilmore said as the meeting opened.

Among the most complicated and important issues facing future Internet tax policy is the question of what should be done about sales taxes on e-commerce, said Alan DeFend, the commission's director of administration and research.

Sales taxes are in place throughout the United States but often are not enforced on Internet or catalog sales. Still, there are as many as 7,000 sales tax jurisdictions in the country, including those of states, counties and municipal governments, DeFend said.

"The moratorium didn't say states can't continue to use sales taxes," he said. "States say you can tax companies that have a presence in your state. Does electronic presence count?"

The commission will weigh several proposals dealing with sales taxes. They include one put forth by Utah Gov. Michael Leavitt (R) that proposes a voluntary payment system in conjunction with a third party to collect and redistribute the sales tax, DeFend said.

Another proposal, by Gilmore, proposes a permanent ban on Internet sales taxes, DeFend said.

In fact, the commission may not be able to reach a consensus on any one recommendation, said Stephen Feldhaus, a partner in the law firm Fulbright and Jaworski, Washington, D.C. "This is one stage in a long process," said Feldhaus, an expert in international tax and corporate law. "We have a long ways to go."

The Advisory Commission on Electronic Commerce's Web site is www.ecommercecommission.org.

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