Lawmakers: Ban Net taxes forever

WASHINGTON -- Two U.S. lawmakers proposedon Monday making permanent the current 3-year ban on new taxesby states and localities on billions of dollars of goods andservices sold over the Internet.
Written by Vicky Stamas, Contributor
WASHINGTON -- Two U.S. lawmakers proposed on Monday making permanent the current 3-year ban on new taxes by states and localities on billions of dollars of goods and services sold over the Internet.

Sen. Ron Wyden, an Oregon Democrat, and Rep. Christopher Cox, a California Republican, said they would introduce bills "soon" to set in stone the moratorium on new Web taxes enacted by Congress in October 1998 and due to expire in October 2001.

The upcoming Cox-Wyden bill would solidify temporary bans on new "multiple" or "discriminatory" taxes on cyberspace, such as state and local levies on the monthly fees consumers pay to use Internet services.

Many of those taxes probably will be recommended for repeal by most of a 19-member blue-ribbon panel appointed by Congress to study the nettlesome Web-tax issue.

Chaired by Virginia Gov. James Gilmore, that Advisory Commission on Electronic Commerce, is due to report to Capitol Hill by April 2000.

"You can't squeeze the new economy into policies written for smokestack industries," said Wyden, who, along with Cox, authored the 1998 Internet Tax Freedom Act that set in motion the 3-year ban and created the Gilmore commission.

"With our Internet Tax Freedom Act, Chris Cox and I put a temporary stop to the reckless, special taxing of the Internet," Wyden added in the press statement. "Now it's time to make that ban on discrimination permanent."

Current ban works
Consumers, businesses and state and local governments have "thrived" under the existing ban on discriminatory online taxes, Wyden said.

In fact, Main Street retailers had one of their best holiday seasons, recording a nearly 8 percent jump in sales over last year, Wyden said. And state budgets ended fiscal year 1999 with a whopping $35 billion surplus, he added.

"The evidence is now in: keeping discriminatory taxes off the Net is good for consumers, entrepreneurs, and the governments that tax them," Rep. Cox said.

"Across the nation, sales tax revenues to the states are way, way up," Cox added. "In California, sales taxes grew 12 percent in 1999, thanks to spectacular growth in the new economy."

Like the 1998 Cox/Wyden law, the new bill would not bar the most controversial of potential Internet levies.

Chomping at the bit
Those are the myriad of sales and use taxes that thousands of U.S. states, cities, counties and parishes are chomping at the bit to levy on billions of dollars of CDs, books, gourmet foods and other goods sold annually over the Net.

Current law, as interpreted by the U.S. Supreme Court, bars states and localities from requiring businesses that do not have a "physical presence" within their borders to collect sales taxes on many of these goods.

But a majority of U.S. governors are pushing ahead with a strategy - tentatively backed by the Clinton Administration - that they hope will eliminate High Court concerns about taxing E-goods sold to consumers across borders.

The National Governors' Association said its so-called "zero burden" strategy would simplify tax collection by shifting most of the job of collecting sales taxes from harried retailers to the states themselves.

Under the controversial plan, agents hired by states, dubbed "trusted third parties," would, with the aid of credit card companies, decide three things -- whether goods purchased are taxable, and if so, the tax rate and total taxes due.

But Cox and Wyden warned: "Many of these proposals would be a bureaucratic nightmare for millions of Americans, and are of dubious constitutionality."

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