October 1999

To Tax or Not to Tax, That Is the Question
Electronic Commerce Advisory Commission Meets in New York

By Wayne Whalen

The Advisory Commission on Electronic Commerce, a diverse group of telecommunications industry leaders and legislators appointed by Congress as a result of the Internet Tax Freedom Act, convened in New York City on September 14 and 15 to discuss whether or not to tax the Internet.

The second official gathering of this 19-member commission attracted prominent business executives and elected officials, including commission members David S. Pottruck, president and co-chief executive officer of Charles Schwab Corporation; C. Michael Armstrong, chair and chief executive officer of AT&T; Richard Parsons, president of TimeWarner, Inc.; and Robert Pittman, president and chief operating officer of America Online.

Virginia Governor James Gilmore III, the commission's chair, presided over proceedings where invited guests presented local, state, and federal tax issues associated with Internet access and telecommunications. The commission conducted question-and-answer discussions each day with the guest experts.

Commission member and Utah Governor Michael Leavitt proposed criteria for an Internet tax system, and the commission accepted his recommendations as a working list subject to change. Leavitt proposed radically simplifying taxes, creating no new Internet sales taxes, avoiding any financial burdens on the seller, eliminating multiple audits, and treating purchasers as equal as possible and not compromising their privacy. He also pointed out that the commission needs to acknowledge states' roles as sovereign taxing entities and examine global implications.

Regarding international issues, Stanley Sokul, a commission member representing the Association of Interactive Media, and Grover Norquist, a member representing Americans for Tax Reform, discussed the U.S. trade representative's position to make permanent the World Trade Organization's temporary moratorium on custom duties on electronic transmissions. The commission agreed to support this position.

The commission also named members to its report drafting subcommittee. In addition to Gilmore, Parsons, Pottruck, Pittman, and Sokul, the subcommittee includes Dean Andal, chair, California Board of Equalization; Gary Locke, Governor of Washington; Andrew Pincus, general counsel of the U.S. Department of Commerce; and Delna Jones, commissioner of Washington County in Oregon.

The commission's website (www.ecommercecommission.org) provided live coverage of the September meeting. The next meeting will take place December 14 and 15 in San Francisco. The commission expects to present its report to Congress by April 21.

Watch www.nysscpa.org for updates on the commission's activities and other e-commerce issues. Members interested in commenting on Internet tax issues can visit the website's e-commerce taxation section.

Selected Internet Taxation Online Resources

In addition to the Advisory Commission on Electronic Commerce's own website, www.ecommercecommission.org, below are several online resources on Internet taxation issues. Visit www.nysscpa.org for links to these and other
e-commerce sites.

E-commerce Sales May Decline if Taxes Are Imposed

http://www.bizrate.com/pressroom/release_40.xpml

In the Eye of the Hurricane: Internet Taxation

http://www.zdnet.com/pcweek/stories/columns/0,4351,2336478,00.html

Q&A: The Net Tax Commission's Chairman Talks About the Touchy Subject

http://www.businessweek.com/cgi-bin/bwdaily_full?right=dnflash/sep1999/
nf90903a.htm

Remarks by U.S. Secretary of Commerce William M. Daley

http://204.193.246.62/public.nsf/docs/86D2B29B25F99F19852567EB005C8161

The Sales Tax System and Compliance Costs for Multistate Retailers

http://www.ey.com/ecommerce/complexity.asp

E-commerce and the Transformation of Transactions

http://www.ey.com/ecommerce/complexity.asp

Perspectives on Business in Cyberspace: Selected E-business Issues