Taxing Commission Approves Report to Congress

The Advisory Commission on
Electronic Commerce
late Thursday approved its final report due to
Congress in April.

However, the 19-member commission failed to produce the two-thirds support
required to officially consider the plan a formal recommendation to Congress.

The panel voted 10-8 to send the report to Congress. Several participants
representing state interests complained that some minority views would not
even be included in the report.

In order to agree to report its majority-held recommendations to Congress,
the final report will also provide a forum for commissioners to express
distinct positions on e-commerce taxation.

Virginia Gov. Jim Gilmore, chairman of the Advisory Commission on
Electronic Commerce, said Congress was waiting to hear from the commission
and several key legislators supported the advisory group’s conclusions.

“The formal business of this commission has come to a close,” Gilmore said.
“Now we take the ideas to Congress.”

At a meeting of the commission in Dallas last week, the majority plan
proposed by the business caucus garnered only 11 votes, short of the 13
votes required to make a formal recommendation to Congress.

Lead by AT&T Corp. (T)
Chairman C. Michael Armstrong, the business caucus also wants to
permanently eliminate existing Internet access taxes and the 3 percent
federal excise tax on telecommunications.

The report also calls for extending the existing moratorium on new Internet
access taxes for five years.

In 1998 Congress declared a three-year moratorium on new Internet taxes and
created the advisory panel to examine the issue. The Internet Tax Freedom
Act moratorium is due to expire in October 2001.

The plan also calls for exempting from taxation anything sold on the
Internet in digital form, such as downloadable computer software, an
electronic book or musical recording. The exemption would apply to
“tangible” equivalents, equating to no sales tax on book, compact disc or
movies purchases over the Internet.

The report includes a call for greater attention on consumer privacy issues
associated with the collection and administration of taxes on e-commerce
and efforts to bridge the “digital divide” in order to allow all Americans
access to participate in the Internet economy.

Although the group failed to file official recommendations, Gilmore declare the commission was successful in fulfilling the goals
of its charter.

“As chairman, I am pleased that the commission will fulfill its charter in
both letter and spirit,” Gilmore said. “The commission was hugely
successful in elevating the visibility of this key issue, and in educating
the public on the fundamentals underpinning Internet taxation and
telecommunications regulations.”

With a scheduled recess date of Oct. 6, Congress has about 70 working
days left for the remainder of this year. Due to time constraints, the
106th Congress may only have time to consider high priority legislation in
its second session.

Gilmore believes the Internet tax issue is hot enough to produce new
legislation from the 106th Congress. He said the proposed tax cuts
included in the report are for the people, because businesses don’t pay
takes on Internet access, consumers do.

“In the words of Lord John Russell before the British House of Commons,
‘its impossible that the whisper of a faction shall prevail against the
voice of a nation,’ the work of the Commission is valuable and Congress
will see this” Gilmore said. “We’ll take the case to the American people
and let them decide.”

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