U.S. Congress Receives Net Tax Report

WASHINGTON (04/12/2000) - Now that the Advisory Commission on Electronic Commerce has presented its report on Internet taxes to U.S. Congress, the question is what, if anything, will U.S. lawmakers do with it.

Virginia Governor James Gilmore, who served as chairman of the commission, presented the report at the U.S. Capitol today, calling it a "cohesive and comprehensive framework" that lawmakers can use as they consider legislation that deals with the taxation of electronic commerce.

But even as Gilmore presented the report, which is not considered binding because it failed to gain a two-thirds majority vote from the 19-member commission, there were signs that support for some of its recommendations, particularly one pushing for a five-year extension of the moratorium on new and discriminatory Internet taxes, is not as firm as Gilmore suggested.

"This morning when I presented (the report), it was met with great enthusiasm," Gilmore said here today in a speech at the National Press Club. He said leaders of both the House and the U.S. Senate were especially receptive to the report's recommendations that Congress eliminate the 3 percent telecommunications tax that appears on every U.S. phone bill and that Congress do away with Internet access taxes.

Congressional leaders also said they would present legislation to extend the Net tax moratorium beyond its current expiration date in 2001, Gilmore said.

The moratorium, which went into effect as part of the Internet Tax Freedom Act of 1998, prohibits local tax authorities from passing any new taxes that would affect e-commerce or taxes that apply only to Net sales. Under the act, Internet sales receive the same sales tax treatment as catalog sales.

At least two bills calling for an extension of the Net tax moratorium have been introduced, but one of them was dealt a setback yesterday when its sponsor, Senator John McCain, a Republican from Arizona and chairman of the Senate Commerce Committee, postponed a vote within the committee on the measure.

McCain's bill would have extended the moratorium to 2006, the same date as the commission recommendation, but the chairman decided to postpone the vote "in deference to many colleagues, both Republican and Democrat, who were asking for more time to examine the subject," said Mark Buse, staff director of the Commerce Committee.

In another vote of no confidence in the Advisory Commission on Electronic Commerce Net tax report, the National Governors' Association today sent a letter to House and U.S. Senate leaders urging them to reject it. The letter, signed by 36 U.S. governors, says the report failed to ensure that all brick-and-mortar stores and Internet shopping sites can compete on a level playing field.

The governors' association also wrote to Senator McCain, saying his legislation to extend the Net tax moratorium isn't necessary now because the moratorium doesn't expire for another year and a half.

However, House Majority Leader Dick Armey, a Republican from Texas said the House was eager to act on the report's recommendations and predicted passage of a five-year extension of the moratorium "because this is what the American people want."

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