Taxing Commission Reports to Congress

The ACEC wrapped up its work last week but failed to bridge internal disagreements. Its impending report will reflect the majority—no-tax—view only.

by Patricia Fusco
of internetnews.com
[April 3, 2000]

The Advisory Commission on Electronic Commerce late last week approved its final report due to Congress in April.

But the 19-member commission failed to produce the two-thirds support required to officially consider the plan a formal recommendation to Congress.

In a telephone conference call that was broadcast on the Internet, the panel voted 10-8 to send the report to Congress. Several participants representing state interests complained that some minority views would not even be included in the report.

In order to agree to report its majority-held recommendations to Congress, the final report will also provide a forum for Commissioners to express distinct positions on e-commerce taxation.

Virginia Governor Jim Gilmore, chairman of the Advisory Commission on Electronic Commerce, said Congress was waiting to hear from the commission and several key legislators supported the advisory group's conclusions.

"The formal business of this commission has come to a close," Gilmore said. "Now we take the ideas to Congress."

At a meeting of the commission in Dallas last week, the majority plan proposed by the business caucus garnered only 11 votes, short of the 13 votes required to make a formal recommendation to Congress.

Lead by AT&T Corp. (T) Chairman C. Michael Armstrong, the business caucus also wants to permanently eliminate existing Internet access taxes and the 3 percent federal excise tax on telecommunications.

The report also calls for extending the existing moratorium on new Internet access taxes for five years.

In 1998 Congress declared a three-year moratorium on new Internet taxes and created the advisory panel to examine the issue. The Internet Tax Freedom Act moratorium is due to expire in October 2001.

The plan also calls for exempting from taxation anything sold on the Internet in digital form, such as downloadable computer software, an electronic book, or a musical recording. The exemption would apply to "tangible" equivalents, equating to no sales tax on book, compact disc, or movies purchases over the Internet.

The report includes a call for greater attention on consumer privacy issues associated with the collection and administration of taxes on e-commerce and efforts to bridge the "digital divide" in order to allow all Americans access to participate in the Internet economy.

Although the group failed to file official recommendations, Governor Gilmore declare that the commission was successful in fulfilling the goals of its charter.

"As Chairman, I am pleased that the Commission will fulfill its charter in both letter and spirit," Gilmore said. "The Commission was hugely successful in elevating the visibility of this key issue, and in educating the public on the fundamentals underpinning Internet taxation and telecommunications regulations."

With a scheduled recess date of October 6, Congress has about 70 working days left for the remainder of this year. Due to time constraints, the 106th Congress may only have time to consider high priority legislation in its second session.

Gilmore believes that the Internet tax issue is hot enough to produce new legislation from the 106th Congress. He said that the proposed tax cuts included in the report are for the people, because businesses don't pay taxes on Internet access, consumers do.

"In the words of Lord John Russell before the British House of Commons, 'its impossible that the whisper of a faction shall prevail against the voice of a nation,' the work of the Commission is valuable and Congress will see this" Gilmore said. "We'll take the case to the American people and let them decide."

—End