Coalition Lobbies Against ‘Onerous’ E-Commerce Taxes

The U.S. Advisory Commission on Electronic Commerce received a proposal from a broad coalition of anti-tax advocates yesterday that would lump general telecommunications taxes in with the Internet taxes that many politicians and consumer groups now oppose.

The E-Freedom Coalition, which consists of the Heritage Foundation, the Competitive Enterprise Institute, the National Taxpayers Union, Americans for Tax Reform, Citizens for a Sound Economy, the Progress and Freedom Foundation, Consumer Alert and the Institute for Policy Innovation, is seeking a permanent ban on discriminatory e-commerce sales taxes and Internet access taxes.

The coalition also proposes that county and municipal governments use a “pro-growth” formula to adjust sales and use taxes for Internet-related companies with “a substantial physical presence within the taxing jurisdiction.” The plan is designed to help generate the revenue that communities claim is being lost from e-commerce’s erosion of storefront retail sales.

The proposal, backed by Advisory Commissioner Dean Andal, would ensure that “Internet users are free of the onerous tax collection schemes many states and localities want to impose on companies operating completely outside of their jurisdiction,” the group argues.

Dynamic Debate

In two official meetings and numerous conference calls since its formation this summer, the Advisory Commission has focused on whittling down the many extraneous issues connected to the question of Internet taxation.

At the same time, the commission has tried to give a fair hearing to every local government organization and consumer and business advocacy group that has an opinion on the issue.

At its third public meeting, slated for December 14th and 15th in San Francisco, California, the commission plans to hear more proposals from the public on issues it has identified as central to the tax debate.

Throwing In Phone Companies

Unlike other anti-tax groups, the E-Freedom Coalition is also seeking a repeal of the three percent federal excise tax on telecommunications, a ban on discriminatory ad valorem taxation of interstate telecommunications, and the end of government-imposed fees for the installation of telecommunications cables. These fees and taxes, while not directly tied to electronic commerce, pose a barrier to the growth of e-commerce by forcing telecommunications companies to spend more money than their competitors on projects designed to expand the Internet’s reach and efficiency, the coalition argues.

“Governments are not starved for revenues, they’re just hungry for more ‘cash cows’ to fund wasteful and unnecessary projects,” National Taxpayers Union Director of Congressional Relations Eric Schlecht said. “Taxing the Internet isn’t about helping Main Street, or promoting tax equity, or funding essential services. It’s about greed. The E-Freedom Coalition has a better plan that helps consumers, not bureaucrats.”

Capitol Hill Rhetoric

Publicly throwing his support behind the coalition, Rep. John Kasich (R-Ohio) introduced a bill Wednesday that would make the current moratorium on Internet taxes in the United States permanent and would make the nation’s stance on such taxes and discriminatory tariffs in world markets official.

Since these goals have already been laid out in other bills that are working their way through Congress, Kasich’s bill simply serves to underscore the growing anti-tax sentiment for the online world. “When it comes to the growth of business online, any talk about taxes is entirely out of line,” Kasich said.

The House Budget Committee Chairman’s Internet tax views fall in line with his overall opposition to government-mandated funding of public technology programs. He has been an outspoken opponent of other federal initiatives such as the E-Rate, a fee that telecommunications companies must pay to help fund the expansion of the Internet to schools and libraries.

“It’s more than simply taxes,” he said. “We don’t want to create an atmosphere where government at any level becomes comfortable interfering with e-commerce. There are already too many instances where politicians feel they have to justify themselves by enacting countless taxes and endless regulations.”