Net Tax Recommendation May Hinge on Business Bloc

FAIRFAX, VA. (03/13/2000) - The fate of a recommendation by the Advisory Commission on Electronic Commerce as to whether the federal government should impose taxes on the sale of goods and services over the Internet may rest with a pivotal bloc of six members representing businesses, who are being urged to support a policy that would lead to the collection of sales taxes from remote Internet sellers, according to the commission's chairman, Gov. James Gilmore of Virginia.

However, Gilmore, who spoke this morning at the 2000 Global Internet Summit at George Mason University, remained pessimistic that two-thirds - or 13 members of the 19-member commission - would be able to agree at its final meeting in Dallas next week on the thorniest issue before this group: whether remote Internet sellers should collect sales taxes.

But even if the commission fails to get a two-thirds backing on tax collections of remote sellers, Gilmore, who wants to prohibit sales-tax collections altogether, said a "majority position is quite possible, and I think members of Congress would be persuaded by a majority position."

Gilmore said there is "quite an effort" on the part of the protax supporters, a group led by Gov. Michael Leavitt of Utah, "to try to get them to swing out toward a protaxation policy."

The commission is roughly divided into three camps: seven members, including the three federal members, who are advocating remote collections; the six business caucus members, who recently released their own proposal on taxation; and five members - six if the chairman is counted - who oppose taxes.

The business caucus, which includes America Online Inc., The Charles Schwab Corp., MCI WorldCom Inc., AT&T Corp., Time Warner Inc. and Gateway Inc., last month released a proposal that called for an end to the 3% federal excise tax on telecommunications, prohibitions against taxes on Internet access and a ban on taxes against digital goods. The groups also called for an end to "disparate tax treatment of Main Street and Internet sellers" but didn't offer a proposal on how to make that happen.

Last week, Deputy Treasury Secretary Stuart E. Eizenstat gave a indication of how the three federal members of the advisory commission might vote, but stressed the importance of the sales tax. "It is clear that any answer - short of repealing the sales tax and replacing it with another revenue stream to pay for police and education - has to involve simplification of the current sales tax systems - the same issue that the Supreme Court identified in its decision several years ago," said Eizenstat.

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