House Subcommittee Holds Hearing on Extending Internet Tax Moratorium

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Extending the moratorium on Internet access taxes was the main subject of a hearing held yesterday by the House Subcommittee on Commercial and Administrative Law, chaired by Rep. Bob Barr, R-GA.


The hearing centered on a bill sponsored by Rep. Christopher Cox, R-CA, called the Internet Tax Nondiscrimination Act, that would make permanent the ban on Internet access taxes. The current moratorium expires Oct. 21.


A panel with four witnesses offered testimony. They were: Cox; Gov. James Gilmore, R-VA; Gov. John Engler, R-MI; and Robert Comfort, vice president and tax counsel for Amazon.com.


While the focus was on Internet access tax, in his testimony, Engler called on Congress to expand interstate sales tax collection for all remote sales, regardless of whether a company has nexus, or physical presence, in a state. Comfort's testimony also addressed interstate sales tax collection. However, he said there should be no expansion of the current rules on interstate sales tax collection unless there is substantial tax simplification among states.


Under a 1992 Supreme Court decision, states cannot require retailers to collect sales taxes unless they have a physical presence in that state.


The Direct Marketing Association yesterday urged the House subcommittee to support extending the moratorium.


"Extending the moratorium … is critical to keeping the on-ramp to the information superhighway open for all Americans," said H. Robert Wientzen, president/CEO of the DMA. "Instead of ramming through a scheme that will create hardship for small- and medium-sized businesses, Congress should extend the moratorium and not consider a new tax collection burden unless and until it sets objective parameters for significantly simplifying the more than 7,600 existing sales tax codes."


The committee has not yet taken up either of Cox's bills.


Meanwhile, a deal is reportedly is being negotiated by Senate Democrats and Republicans that would consider granting state and local governments more power to tax e-commerce if at least 25 states simplify their sales tax codes.


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