Clinton Signs $500B Spending Bill

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President Clinton signed an omnibus $500 billion spending bill into law this week that included many legislative proposals affecting the direct marketing community.

The direct marketing-related parts, which run the gamut from Internet taxes to postal affairs, all were added by Congress in the past month and include:

* The Internet Tax Freedom Act, which imposes a three-year moratorium on new state and local taxes on Internet access and establishes a commission to explore a taxation policy for e-commerce in the 21st century.

* The Children's Online Privacy Protection Act, which will, among other provisions, require online marketers to gain permission from parents before collecting information online from children under age 13.

* The International Postal Services Act, which requires the Postal Rate Commission to submit to Congress -- before July 1 of each year -- a report on the costs, revenues and volumes accrued by the U.S. Postal Service in connection with international mail. It also requires that before March 15 of each year, the postal service must provide cost, revenue and volume data for each international mail product or service so the PRC can analyze it in a fashion similar to how it analyzes rates for domestic mail.

While there were rumors that the Honesty in Sweepstakes Act -- which would require sweepstakes marketers who send solicitations to consumers to change the language and layout of their envelopes, would be included in the bill -- it was not.

Many online retailers were pleased that the Internet Tax Freedom Act had passed.

"We are glad that the government is taking an interest in electronic commerce," said Naomi Lefkowitz, deputy general counsel at CDnow, Jenkintown, PA. "We think that it will help the growth of the industry." CDnow is required to charge local sales tax on orders shipped to Florida, California, Pennsylvania and New Jersey because these are states where the company has shipping locations.

The Direct Marketing Association also was happy with the direct marketing-related parts of the spending bill.

"We don't believe that the Internet should be burdened with thousands of state and local taxes because that will harm the growth of e-commerce," said Mark Micali, vice president of government affairs for the DMA.

The Internet commission, which must be formed within 45 days from when Clinton signed the bill, will be made up of representatives from the government, business and consumer interests. Any of its recommendations will have to be agreed to by two-thirds its members, which, Micali said, "will ensure consensus and a far-sighted policy of recommendation."

The DMA was disappointed by an added amendment that lets the commission look at the question of sales-tax collection for non-Internet interstate sales transactions, such as mail-order and telephone sales, as opposed to purely interstate Internet sales. Micali said that's irrelevant to the whole Internet question.

"While in one sense the bill is trying to limit taxation, but now, in the other, it is moving in this other direction [toward taxation] in all forms of so-called interstate commerce," he said.

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