Net Gain -- Or Loss?
Congress tackles the issue of Internet taxes.
Entrepreneur advocacy groups are lining up in support of the
Internet Tax Freedom Act, which is already halfway out of the
congressional station on its way to 1600 Pennsylvania Ave. The bill
would prohibit state and local governments from imposing new taxes
on monthly access charges from ISPs.
Sen. Ron Wyden (D-OR) and Rep. Christopher Cox (R-CA), the
sponsors of nearly identical bills (S.442 and H.R. 1054,
respectively), fear local governments will kill the wave of
emerging Web-based businesses by taxing them and their ISPs to
death. Although some groups oppose the Internet Tax Freedom Act,
their opposition has lost some of its edge, especially since the
Clinton Administration has voiced its strong support of the act,
which could go before Congress within the next few weeks.
In a letter to the House and Senate commerce committee chairmen,
R. Bruce Josten, senior vice president of the U.S. Chamber of
Commerce, said: "Today's patchwork of state and local
taxes on the Internet interferes with the free flow of electronic
commerce and, if current trends continue, will reduce the potential
of the Internet as a new frontier for commerce."
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The bill would also prohibit state and local governments from
levying sales taxes on purchases by local residents via
out-of-state Web sites. The bill mimics the status quo of
direct-mail companies, which only have to collect sales taxes in
states where they have a physical presence. Both bills extend their
no-new-Net-tax moratorium for a fixed period: the Senate bill until
January 1, 2004, and the House bill for six to eight years after
passage.
"Is it fair to expect a two-person company doing business
out of someone's home to collect sales taxes for states and
cities across the country, or pay business license fees from coast
to coast?" asks Sen. Wyden. As Web businesses continue to
proliferate, we hope these and other applicable questions are
addressed very soon.
Stephen Barlas is a freelance business reporter who covers
the Washington beat for 15 magazines.