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Congress Urges Global Net Tax Ban

Direct marketers are hoping that a congressional bill recommending a permanent moratorium on global e-commerce tariffs will be adopted at the World Trade Organization’s Third Ministerial Conference in Seattle next month.

The recommended bill – introduced by authors of the Internet Tax Freedom Act, Rep. Christopher Cox, R-CA, and Sen. Ron Wyden, D-OR – was signed into law late last month and extends last year’s ITFA, which imposed a three-year ban on Internet taxes at the federal, state and local levels. The bill creates a national commission to study tax issues. Congress would like to see a permanent ban on tariffs for e-commerce vendors that ship goods from one country to another, increasing the one-year moratorium adopted last year by the 132-nation WTO under U.S. trade representative Charlene Barshefsky.

This is important for direct marketers because the bill “brings the issue of what is happening domestically into focus,” said Stanley Sokul, a Washington-based lawyer and a member of the commission representing the Association for Interactive Media, Washington. “It calls into attention the issue of cross-border shipments. And when people agree on the international level, it makes it easier for direct marketers to make their case on the domestic level.”

Ben Isaacson, acting executive director of AIM, said the bill is essentially the same proposal that AIM presented to the commission at its meeting in New York last month, which was endorsed.

Meanwhile, the commission – which must come up with a plan by April on how to tax Internet commerce – is divided between members who fear loss of government revenue to tax-free Internet business and those who argue that sales taxes or other taxes would hamper the medium’s growth.

According to Sokul, the commission is making some progress. It submitted a report to the Federal Register last week that increases the criteria for Internet taxation to 18 points from its original five, which included simplicity, no new taxes, no additional burden for sellers, no compromise of buyer privacy and treatment of buyers in all states as equal. The group will discuss the criteria again Dec. 14 at its next meeting in San Francisco.

In related news, representatives from Taxnet Systems Inc., Spring Lake, NJ, will propose a Net tax system later this month. The collection method routes taxes directly from consumers to government tax collectors. However, not all agree with the solution.

“They think they can collect taxes from all 50 states, but that doesn’t solve the real problem – how do you collect taxes from 7,000 taxing systems,” Isaacson said. “Even more importantly, the software cannot define whether a specific good is a luxury item or a recreational item, and whether it is a personal item or a business item. This is done at the point of presence.”

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