Metcalfe's column: Wake up and smell the coffers

Wake up and smell the coffers: Internet taxation is the wave of the futureYou just filed your 1998 federal and state income tax forms and may be feeling proud about contributing so much to the public good. You may be looking forward with excitement to the creativity and effectiveness with which various levels of the government will put your hard-earned dollars to work.

Or you may be like me. You may not feel pride, but resentment. You may resent being forced to fill out all those forms and pay up, seeing so much of what's yours frittered away by power-hungry politicians and their burgeoning bureaucracies. You may resent that if you don't pay up, the government will send citizens with guns to your house to collect.

So it's with considerable trepidation that I choose to raise the subject of Internet taxation. And I'll dare to argue for more of it.

Don't bother sending me angry e-mail pointing out that our representatives in Washington just passed the Internet Tax Freedom Act ( Indeed, the act forbids access, bit, multiple, and discriminatory taxes on the Internet. So, you might say, leave well enough alone.

But the act is only a three-year moratorium. It commands that a commission be formed to study Internet taxation for two years and then make policy recommendations. The commission is off to a bad start, though. It's already tangled up in a lawsuit filed by state and local governments disputing its membership.

Now, I hope we can do better on Internet taxation than we have on Internet pornography. We put our heads in the sand on pornography until the first Communications Decency Act was passed by a clueless Congress. Then we let professional civil libertarians file lawsuits to try to clean up the mess. The mess, of course, persists to this day, along with the porn and more lawsuits. Nothing like a lawsuit to clear the air, eh?

This time, why not try being proactive about Internet taxation? Face it, the Internet won't be some alternative tax-free utopia. Commerce on the Internet is already in the tens of billions and booming. Internet commerce will be taxed. Has to be. Get over it.

So what technologies, standards, and systems are needed to support the variety of taxes likely to be levied?

Unless we answer this question, we are likely to be taxed not on what's best but on what's easiest. We'll be forced to waste time filling out forms and schedules. And the Net will fall far short of its full economic potential.

I asked my nearest Internet father, Dave Clark at the MIT Laboratory for Computer Science (, if the Internet Engineering Task Force ( is working on protocol standards for Internet taxation. He grimaced and said no; the IETF is in the private sector, so it's not their job to figure out how to tax the Internet. Clark then smiled and suggested I ask the government to commit taxpayer funds to conduct research in this area.

The Internet is certainly not the first worldwide electronic network to handle commerce and inspire taxation debates. Consider the telephone network. Taxes on catalogue sales by phone, for example, have moved a lot of commerce around. Today you will find that most of the big warehouses are in the states with the fewest people. Such as Nevada.

Say you're shopping on the Web. You see something you want and you order it. Say the Web server you saw it on, the Web server handling your payment, the seller's address, the delivery company, your location, and the delivery destination are all in different ZIP codes. Who charges what taxes and how?

Of course, the governors and mayors of all the involved jurisdictions would each like a piece of the action. And if your transaction is international, two federal governments and perhaps the United Nations and who knows who else will want a cut.

So the Pay-As-We-Go Internet (TM) that I've been advocating ( needs a new and no doubt unpopular infrastructure for taxation. Let's pull our heads out of the sand now and get working on it.

Time to pre-empt cluelessness again.

Internet pundit Bob Metcalfe invented Ethernet in 1973 and founded 3Com in 1979. Send e-mail to or visit