Commission tackles e-commerce tax issue

A Congressional commission formed to make recommendations on the future of Internet taxation is hearing a raft of proposals yesterday and today during a conference that may shed some light on the future of electronic commerce tax policy.

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

The members may take up and vote on some of the 37 proposals put forth thus far, Alan DeFend, the commission's director of administration and research, said yesterday.

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, DeFend said.

Sales taxes are already in place throughout the US, but are often not enforced on Internet or catalogue 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 Governor Michael Leavitt, which proposes a voluntary payment system with a third party to collect and redistribute the sales tax, DeFend said.

Another proposal, by Virginia Governor James Gilmore, proposes a permanent ban on Internet sales, 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 Washington law firm of Fulbright & Jaworski. "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 ishttp://www.ecommercecommission.org/.

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