No Internet Tax Proponents Issue Ban Proposals

An e-Freedom Coalition of more than 20 consumer, taxpayer and public policy organizations presented a plan to ban online tax collections this week.

The group unveiled its plan at a Washington news conference with House Budget Committee chairman John Kasich, R-OH, and Rep. John Boehner, R-OH, who pledged to introduce legislation to make some of the coalition’s recommendations law. The group warned of the dangers of proposals to impose new tax collection schemes on the Internet.

Specifically, the group – which includes representatives from the Heritage Foundation, National Taxpayers Union, Americans for Tax Reform and Consumer Alert – proposed a permanent ban on sales and use taxes that apply to online commerce.

The plan takes the form of a proposal to the federal Advisory Commission on Electronic Commerce, which Congress created last fall after it passed a three-year ban on new Internet taxes. The commission has until April to recommend whether state and local taxes should apply to Internet sales and services.

Shortly after the proposal was presented, the National Governors Association, Washington, released a statement saying the electronic commerce tax proposal “discriminates against Main Street businesses, violates the Constitution and hurts low-income taxpayers.” The NGA said it was disappointed Kasich would endorse a proposal “that so clearly benefits one type of business at the expense of another.”

Ron Nehring, director of national campaigns at Americans for Tax Reform, disagreed. “That’s an increasingly irrelevant distinction, as more and more traditional retailers seize the Internet as a low-cost means of instantly accessing a global market.”

Gov. Jim Gilmore, R-VA, chairman of the Advisory Commission on Electronic Commerce, also submitted a proposal last week that is likely to spark debate at the commission’s next meeting Dec. 14 in San Francisco. The proposal, called No Internet Tax, asks for the following:

* Elimination of all sales taxes from remote Internet-based sales of goods, services and information to consumers.

* A cut in taxes on American consumers by more than $3.3 billion by eliminating the federal excise tax on local and long-distance telephone service.

* A grant of more than $1.7 billion annually in federal tax revenues to states to compensate them for any foregone sales taxes on Internet commerce that fund local government services.

* The elimination of the digital divide by permitting each state to spend federal welfare dollars to purchase computers and Internet access for needy families.

* A ban on international taxes and tariffs on U.S. electronic commerce to maintain U.S. global competitiveness in software and Internet industries.

Gilmore said the proposal creates an even playing field for all American businesses that wish to compete in interstate commerce over the Internet by making Internet-based transactions a tax-free zone regardless of where a business has physical presence.

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