Update: Wyden Suggests Expanding E-Tax Moratorium

NEW YORK-Sen. Ron Wyden, D-OR, co-author of the Internet Tax Freedom Act, told attendees at an e-commerce tax policy conference here this week that he will introduce legislation amending the act because of suspect practices by members of the Advisory Commission on Electronic Commerce.

The act imposes a moratorium on new state and local Internet taxes until October 2001. It also established the commission, which has until April to recommend a plan to Congress as to whether state and local taxes should apply to Internet sales and services. The commission consists of state leaders and business executives – two groups at odds over the debate.

Via a live broadcast, Wyden told the 270 attendees at the Conference Board’s 1999 Conference on Advanced E-Commerce Tax Policy that the new legislation would allow the act’s moratorium to stay in place until two years after the recommendation comes from the commission – as opposed to the concrete 2001 date – because there are some “powerful interest groups that would very much like to run out the clock on the commission.” The group is stalling with an explanation that the issues are very complicated, he said.

By extending the date, Wyden said, “Congress would have a chance to have a full and fair debate on the recommendation, but we wouldn’t allow for stonewalling and foot-dragging to impact the efforts to try to come up with some sensible principles.”

Also during the conference, Heather Rosenker, executive director of the commission, gave attendees an update on where things stand. A draft policy paper encouraging commissioners to move along on their decisions is being circulated in a subcommittee and will be shared with all of the commissioners before their next meeting in San Francisco on Dec. 14-15. She also said members of the public had submitted 30 proposals on applying sales and use tax on e-commerce. The commissioners had asked for the input during their September meeting in New York.

“We are very pleased about the number of proposals,” she said. “This probably best represents the growth of this industry and the excitement around it.”

Most of the proposals fell into two categories:

• Suggesting simplifying the U.S. sales and use tax system.

• Making sure the Internet tax system decided upon is voluntary.

Several proposals discussed using software solutions to ease the tax collection burden sellers face; eliminating the concept of “physical presence” when discussing nexus; offering a national tax rate; and suggesting not applying sales and use tax to e-commerce in any way.

Rosenker said the proposals will be evaluated by another subcommittee, which will make its recommendation to the commission on which ones will be presented in San Francisco. Parts of the proposals then will be incorporated into an “issues and options” paper and discussed at the commission’s last meeting in Dallas next year.

Meanwhile, Utah Gov. Michael O. Leavitt, chairman of the National Governors’ Association and a commission member, presented a proposal this week calling for a three-year standstill on any federal legislative changes to the states’ ability to require businesses outside their borders to collect sales tax on their behalf. He also called on states to radically simplify the existing state and local sales tax systems.

“The Internet is a powerful engine of economic expansion,” Leavitt said. “Many worry that compelling Internet businesses to collect sales taxes would impede growth and expansion. Today, I propose a three-year period during which no changes would be made in the ability of states to require businesses outside their borders to collect sales tax on their behalf.”

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