Possible solutions to the tax issue are: leaving things status quo, requiring a flat national sales tax and streamlining state tax systems. "I believe the government should create a standardized tax system for the Net because it puts local businesses at a disadvantage," says Tom Somodi, 47, owner of IcanShopOnline.com, a virtual mall that targets the greater Milwaukee area.
Most everyone agrees that state tax structures need overhauling before any major tax changes are made. "This is a two-front war," says Pfister. "We want to see activity in the states because they need to simplify their tax structures, and at the same time. Congress needs to pass legislation to authorize the implementation of these changes."
What does it mean for netpreneurs? Not very much, according to Kent Johnson, KPMG's national partner of state and local tax solutions for e-commerce. "I can't see Internet sellers that don't have nexus having to collect taxes any time soon," he says. "I don't believe there's enough public or Congressional support."
Rob Marler, 32, and Brian Bangle, 30, co-founders of Maitland, Florida-based Directwireless.com, a site that sells wireless accessories, PDAs and paging services, point out that collecting taxes from out-of-state customers would force them to reduce prices. Bangle says, "We'd have to lower our profit margins to compete with normal retailers"
Don't expect any definitive action this year. William Nixon, former executive assistant to Senator William Roth, chairman of the Senate Finance Committee, says, "Internet taxation is a hot potato, and it's not something Congress wants to deal with in an election year. What will happen depends on who is in the White House next year and who wins Congress."
Mark Joyner, CEO of Aesop.com, a Los Angeles Internet marketing software company, understands. Joyner, 31, started an online petition to prevent Internet taxation. Nomorenettax.com has received more than 55,000 signatures to date. Joyner's ultimate goal is 500,000. "We'll e-mail our list and tell people to call their Congressperson and consider this issue during the next election," he says. Joyner certainly has the timing right: Historically, Congressional candidates seem to have better hearing just prior to an election.
To Collect Or Not To Collect
Internet taxation has two distinct sides. Here are a few more of the main players and where they stand:
- Utah Governor Michael Leavitt, chairman, National Governor's Association (he also served on the Advisory Commission on Electronic Commerce): "I [support] a level playing field, and if the states can't fix it, then we should scrap the sales tax and create fairness. But I think the federal government should keep out of the issue."
- Lisa Cowell, executive director of the e-Fairness Coalition: "We don't think the government should be in the business of picking winners and losers, and we think that tax law should be applied equally to all retailers."
- Senator Byron Dorgan (D-ND), proposed Internet legislation to define and simplify the collection of taxes from remote sellers: "It seems the solution is to require state and local governments to dramatically simplify things for the remote seller. When they have done that, then we can ask the remote seller to collect the tax, freeing the consumer from the burden of having to report it individually."
- Representative Christopher Cox (R-CA), co-sponsor of the bill to extend the Internet Tax Moratorium and co-author of the Internet Tax Freedom Act: "We cannot apply the tax policies developed for smokestack industries to the new economy."
- Grover Norquist, president of Americans for Tax Reform and a member of the Advisory Commission on Electronic Commerce: "It's transparently bad public policy to tax people in other states, and 70 years it hasn't been allowed."
- Senator Ron Wyden (D-OR), co-author of the Internet Tax Freedom Act: "Tax collectors have been trying to get around the Constitution to tax remote sales since Sears and Roebuck mailed its first catalog."
In Their Own Words
The presidential candidates on new Internet taxes:
Governor George W. Bush
"I applaud the House of Representatives for extending the moratorium on Internet taxation for five years. I also support a ban on all Internet access taxes."
Vice President Al Gore
"I supported the Internet Tax Freedom Act. I want to make our international 'cyberspace' a permanent 'duty-free zone.'"
Directwireless.com, (888) 844-6680, firstname.lastname@example.org
Richard-Marshall Inc.,, (800) 689-5981, www.oldeboards.com