I-Marketers Face a Taxing Problem

In the end, there’s death and … you know how the rest goes. The question is how much longer will e-commerce sites be able to avoid collecting taxes.

Recently, Congress’ Advisory Commission on Electronic Commerce met for the second time to discuss the fate of online merchants. So far, it seems the majority of members on the ACEC think their commission appointment requires them to create a new tax system and make the Internet just as taxable as “Main Street” America.

Even the techno-giant representatives serving on the commission have been unable to think of a good reason why the Net should be immune to taxation, as long as it’s done fairly. The only problem is, who should decide what’s fair – techno-giants and government organizations or the American business community?

What critics are missing is the entire basis for what the Net is – global. E-commerce allows any person to buy anything from anywhere and have it sent any place. There are no international tariffs on e-commerce, and the United States has no value-added tax on e-commerce purchases made overseas.

If the ACEC is truly a representative group of U.S. regulatory bodies, corporations and organizations, it must embrace its role as advisors to Congress and the administration about how to protect the e-commerce interests of the United States. The commission should not be worried about how local merchants can collect out-of-state sales taxes or how to derive local tax revenues from e-commerce sales.

This reasoning has become dwarfed by two other issues: States are losing money because of e-commerce and technology and the Internet alleviate the problems associated with collecting an out-of-state sales tax.

The real truth is that states are experiencing the biggest growth and surplus years in more than two decades. Further, more problems will arise when trying to collect sales taxes in a virtual environment. Just ask any transaction processor or fulfillment company.

Our defense of the status quo is in jeopardy. In just over six months, the ACEC must make a recommendation to Congress. Regardless of the content of that recommendation, it will be in the hands of Congress to decide the political future of this issue to extend the Internet tax moratorium or to create a tax regime encompassing e-commerce.

In either case, it is time for the Internet marketers and others in the industry to ask itself a few important questions:

How will the collection of one or many sales taxes affect your e-commerce business?

If you’re a solutions provider, how will the collection of sales taxes affect your merchant partners?

What would the car manufacturers and auto dealers do if Congress created a commission to further regulate automobile sales? If Congress created a commission to regulate airline ticket sales, how would the airlines and travel agents react? So, why is it that when Congress creates a group to regulate e-commerce, the Internet industry has been silent? Are we so unique, or do we believe the Internet is immune to any regulations because of the nature of our industry?

During inauguration on Capitol Hill, veteran representatives repeat an old saying to freshmen that’s guaranteed to get a laugh: “If it moves, regulate it. If it stops, tax it. And, if it dies, subsidize it.”

That phrase should drive home this point: You may not think you have to pay attention to Congress, but they are certainly paying attention to you.

The Internet is only slightly past the breast-feeding stage and is about to start teething. The industry now can either let the government stick a pacifier in our mouths or bite whatever regulators are bold enough to stick their “hands” near our mouth.

Write your members of Congress or, even better, visit them. Tell them about your company, its growth and how many people you employ (and projections for the next couple years). Join a trade association that is working with other interested companies to fend off this upcoming battle and grow the e-commerce industry. Tell your colleagues (and even your competitors) to do the same.

This issue is too critical to let everyday business concerns, such as quarterly earnings or market share, get in the way of the future of your industry and, more importantly, your career.

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