Gilmore Testifies on Net Tax Report

WASHINGTON (04/06/2000) - The chairman of an advisory commission established by the U.S. Congress to study the taxation of electronic commerce testified about the conclusions of the report before a congressional panel here today.

Virginia Governor James Gilmore, who served as chairman of the Advisory Commission on Electronic Commerce, told a House Commerce Committee subcommittee that despite the commission's failure to achieve a two-thirds majority vote on the report, its recommendations comprise a comprehensive package informing Congress about numerous tax issues raised by electronic commerce.

The 19-member commission voted 10 to 8 in favor of the report at its final meeting last month, falling short of the two-thirds vote necessary to make the report binding. [See "Advisory Net Panel Can't Agree," March 31.] Congress is not required to act on the report, but can use it as an advisory document as future bills are crafted.

Gilmore, who described the report as a "bold and constructive foundation for legislative action," told the subcommittee that, taken individually, some of the 11 recommendations in the report obtained a two-thirds majority, but he did not specify which ones.

The report, which is due to be formally submitted to Congress later this month, recommends a five-year extension of the current moratorium on new and discriminatory taxes on Internet sales to 2006.

In addition, the commission's recommendations include a suggestion that Congress eliminate a 3 percent federal telephone tax that's been on the books for more than a century. Originally established as a way to fund the Spanish American War of 1898 in the form of a luxury tax on the few Americans who owned a telephone, the tax has been long scheduled for extinction, but was finally made permanent in the late 1980s, Gilmore said.

The report also recommends prohibiting the taxation of digitized goods, including books and music, sold over the Internet and making permanent the current moratorium on Net access taxes.

The Information Technology Industry Council (ITI) and the Internet Tax Fairness Coalition support a five-year extension of the moratorium on new and discriminatory Net taxes, spokesmen for the two organizations said today.

The Senate Committee on Commerce, Science and Transportation is scheduled to hear testimony April 12 on legislation calling for a five-year extension of the moratorium on new and discriminatory sales taxes on the Internet. The bill is sponsored by the committee's chairman, Senator John McCain, a Republican from Arizona and a former U.S. presidential hopeful.

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