*Commission Member Asks Clinton to Break Internet Tax Stalemate

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Dean Andal, Chairman of the Board of Equalization and a member of the U.S. Advisory Commission on Electronic Commerce, called on President Clinton yesterday to remove the Administration's opposition to a consensus proposal that is scheduled to be voted on at the commission's final meeting in Dallas next week.


The 19-member ACEC -- which consists of representatives of industry and consumer groups as well as state and local governments -- is charged with examining how a tax system should apply to e-commerce and making a recommendation to Congress based on its findings. The 13 commission members must reach a consensus and present their decision to Congress by April 21. Currently, there is a three-year moratorium on new, special and discriminatory taxes on the Internet.


The current proposal recommends that Congress enact legislation that: Extends the current moratorium on Internet taxes for five years; Makes permanent the current moratorium on Internet access charges; Clarifies the tax authority of the States for sellers; Prohibit sales and use taxes on digital products (software, music, video) and their tangible equivalents; Eliminate the 3 per cent federal excise tax discrimination against telecommunications providers;Encourage state and local governments to simply their sales tax systems and develop a uniform interstate tax statute; and,Codify the Supreme Court's "substantial physical presence" test for determining when an interstate seller is required to collect sales and use taxes.


The proposal was drafted by the six businesses on the commission -- America Online Inc., Gateway Inc., AT&T Corp., MCI WorldCom Inc., Time Warner and Charles Schwab.


In Andal's letter to the President he asks Clinton to instruct the three federal appointees to the 19-member commission to support a compromise package drafted by the six corporate members of the advisory commission. The appointees are Secretary William M. Daley, Secretary Robert E. Rubin, and Ambassador Charlene Barshefsky.


"The compromise is one vote short of the two-thirds majority needed for the commission to make a recommendation to Congress on the issues before the commission," said Andal. "If the Clinton-Gore Administration is honestly interested in promoting the expansion of the Internet and electronic commerce, they will join in support of this compromise."


Andal expressed concern that the three Clinton appointees on the commission would rather see stalemate than provide the necessary vote to make a recommendation to Congress. By siding with the pro-tax minority on the commission, the administration has promised to vote as a block to prevent any recommendation that does not call for taxation of the Internet.


"With the vast majority of Americans opposed to taxing both Internet access and electronic commerce, it is simply unbelievable that the Administration is pushing for the equivalent of the largest consumer tax increase in history."
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