E-COMMERCE: No ‘Net taxes-for now

Commission wants freeze till 2006

On April 14, the Advisory Commission on Electronic Commerce (ACEC), a congressionally appointed group of legislators and private-industry executives that has deliberated over Internet sales taxes for nearly two years, issued its final report to Congress. The group recommended that the current Internet tax moratorium – which is scheduled to expire in October 2002 – be extended through the end of 2006.

That’s good news for catalogers marketing on the Web, says the Direct Marketing Association’s senior vice president, government affairs Jerry Cerasale. “The proposal is pro-taxpayer and will help ensure the continued growth of the Internet,” he says.

Although the ACEC recommended the tax moratorium extension, it failed to come to any near-unanimous agreements. Instead, the group released several recommendations supported only by an 11-8 majority, including:

– establishing standards for simplifyingstate tax systems

– a permanent ban on ‘Net access taxes

– eliminating a 3% federal excise tax on telecommunications

– defining nexus standards for a company’s physical presence and providing specific examples

– establishing a new advisory commission to oversee states’ tax simplification efforts.

In his statement to the House Commerce Committee, ACEC chairman and Virginia Governor James Gilmore stressed the importance of electronic commerce in terms of its power to change all the existing rules. “Old rules do not work well in this new borderless economy. Change is everywhere, and government has to change as well,” he said.

Although both the DMA and its subsidiary agency, the Association for Interactive Media (AIM), praise the ACEC report, several opponents in Washington say it lacks credibility because it does not have a two-thirds majority required to make it a formal recommendation. Several Democratic congressmen have already come down on the report publicly. “If we’re going to exempt one part of the economy from taxation, we’re talking about raising taxes in another part of the economy,’ said Rep. Ed Markey (D-MA) in a statement.