The Internet And Taxation

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The Internet and Taxation

A 19-member panel unknown to virtually all Americans is considering how to tax a virtual world that's home to millions: the Internet. The federal Advisory Commission on Electronic Commerce convened for the first time Monday in historic Williamsburg, Virginia, but the setting is the only thing that's serene. On both sides of the debate, fireworks have been flying for months.

On one side are consumers and businesses that buy and sell on line. Most of their transactions go across state lines, and sales taxes are not collected. They say imposing sales taxes on the Internet could stifle growth in an industry that is helping to drive the U.S. economy, and taxes could drive Internet firms overseas. On the other side are traditional retail merchants who collect sales taxes and the governments that rely on those taxes to pay for police, schools and roads. The retailers are losing business to the tax-free Internet. That cuts into the 36% of state and local government revenue that comes from sales taxes.

The commission's task is to recommend changes to Congress that both sides can live with. It is faced with the current system of more than 3,000 state and local sales taxes. And the products that are taxed, such as food and clothing, vary from state to state. For that reason, the panel, might consider something as radical as a national sales tax. Its recommendations are due to Congress in April 2000.

''America is a world leader in information technology. We are at the cutting edge of Internet commerce, and we want America to maintain that position of leadership,'' says Virginia Gov. James Gilmore, the commission chairman. The debate will affect ''every human being, every potential customer, everyon...

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...ead, marketing vice president for the Los Angeles-based research firm, were the lengths to which online shoppers would go to avoid taxes. Twenty-four percent said they would bypass well-known retailers that charge sales levies in favor of unfamiliar merchants that don't, to save on taxes. "That's a real indication of the concern about taxation," she said.

Richard Wolf, Billions of dollars hang over Internet tax debate. , USA Today, 06-22-1999, pp 01A.

J. Leffall, Lawyers tell e-commerce panel tax system needs overhaul. , The Washington Times, 05-31-1999, pp D13.

Szabo, Joan, Net returns: just when you thought it was safe to do business in cyberspace....(Tax Talk)(Column). Vol. 26, Entrepreneur Magazine, 09-01-1998, pp 70(3).

James T. Madore, Great Debate / Shoppers, governments in dispute over issue of online sales tax. , Newsday, 08-15-1999, pp F06.
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