House
Energy and Commerce Committee to Consider New Internet Tax Measure
House
Energy and Commerce Committee Chairman Billy Tauzin (R-Louisiana)
recently announced the committees intention to consider a
new Internet tax measure in July. The new bill, being drafted by
Representative Cliff Stearns (R-Florida), would exempt digital items
(i.e. music, software and other intangible goods) sold over the
Internet from sales taxes even if Congress allows states
to collect taxes from other online sales.
Time
is running out on the Internet tax moratorium, set to expire in
October. Stearns measure appears to be the latest attempt
to find some common ground on this issue. In addition to prohibiting
states and municipalities from taxing digital items on the Net,
the bill will probably contain provisions that require states to
adopt a single, uniform tax rate similar to a bill in the
Senate sponsored by Senator Ron Wyden (D-Oregon).
The
debate on Internet taxation is being clouded by a coalition of states
that are in the process of simplifying their tax codes with the
hopes of getting Congressional approval to collect sales taxes from
remote merchants. Under a 1992 Supreme Court ruling, states, without
permission from Congress, cannot require out-of-state retailers
to collect and remit sales taxes unless the retailer has a physical
presence or "nexus" in the state. The coalition of states,
together with traditional brick-and-mortar retailers, are lobbying
Congress to convince them to buy into the simplification project
and grant permission to reach across their borders to collect the
taxes.
Unfortunately,
any extension of the moratorium, which has widespread support in
Congress, is being held hostage by the simplification issue. Several
members, particularly in the Senate, have indicated that they wouldnt
support an extension unless the simplification issue is included.
Representative
Stearns measure could be a sign that the debate is shifting
between extending the moratorium and giving states permission to
tax remote vendors to defining specific classes of activity on the
Net that would not be subject to taxation. This would be a dangerous
path to follow, as classifying different products and transactions
would significantly skew the playing field. In addition, such a
system is regressive in nature.
The
Internet tax moratorium expires in October, and it doesnt
appear any agreement is close to being reached on the simplification
issue. Representative Stearns measure will only serve to cloud
the issue further. Congress needs to pass a clean extension of the
moratorium before it is too late. The consequences of letting the
moratorium expire will have a chilling effect on the new Internet
economy.
Return
to Internet Index
Return
to Internet Taxation Index
|