E-Commerce Commission Reconvenes, Wrestles With Taxation Issue

With the issue of Internet regulation shifting front and center on the global agenda, the 19-member National Advisory Commission on Electronic Commerce reconvened Tuesday for a two-day meeting in New York.

The commission — made up of Internet industry executives, trade lobbying groups and local, state and federal officials — will once gain grapple with the issue of whether there should be a tax imposed on Internet goods and if so, how it can be levied fairly.

Established after Congress passed a three-year moratorium on Internet taxation in October 1998, the commission carries no regulatory weight. It will make its recommendation to Congress before its April 1, 2000 deadline.

The meeting will pick up where the commission left off at its inaugural meeting in Williamsburg, Virginia in June. At Williamsburg, 17 of the commission’s 19 members said that they believe there would have to be some kind of tax imposed on Internet commerce.

Battle Lines Are Drawn

Like any issue that affects the pocketbook or wallet, the prospect of Internet taxation has stirred up excitement on both sides. Taxation proponents argue that e-commerce is a legitimate taxable industry and that brick-and-mortar competitors that pay taxes suffer unfairly from a tilted playing field.

Opponents say that government taxation will stymie the growth of the Internet and lead to a complicated system of red tape that will spawn unfair taxation and overlapping jurisdictions.

In June, an Ernst & Young study concluded that 1998 e-commerce sales accounted for some $170 million (US$) in lost state and federal taxes. That figure contrasts with the more than $4 billion lost by the mail-order industry in 1998.

Both sides of the issue are apparently well-represented within the commission, although it is clear by the 17 votes for some kind of taxation that a sense of compromise is more prevalent than polarization.

Still, the commission has seen its share of political maneuverings in its short lifetime. Mississippi Senator Trent Lott purportedly used his influence to get former Netscape chairman Jim Barksdale removed from consideration for the commission and replaced by a local official, tipping the scales in favor of government — and its unequivocal position of taxation.

In Williamsburg, commission chair and Virginia Governor Jim Gilmore pushed for the hiring of Virginia public relations executive Heather Rosenker as executive director. Rosenker’s husband works for an industry-lobbying group that has donated over $250,000 worth of Arlington, Virginia office space to the commission. She was ultimately hired, but not without dissension from some commission members.