E-Commerce Advisory Commission to Seek Public Comment on Internet Taxation

As it prepares to meet in New York on September 14 and 15, the Advisory Commission On Electronic Commerce plans to get public input on the issues of taxation in cyberspace. The group’s Work Plan subcommittee, meeting Friday afternoon to develop a list of tax-related issues to explore, agreed to review written comments from organizations, companies and individuals. A handful of respondents will then be invited to testify in person at the New York meeting, the group decided.

As reported, the 19-member Advisory Commission was formed last fall to study the impact of federal, state, local and international taxation and tariffs on Internet transactions. The Commission must submit recommendations to Congress next April on whether and how to address taxation in cyberspace. The group launched its quest in June in Williamsburg, Virginia, discussing how to fairly apply tax standards without fostering a discriminatory taxing method that hinders the explosive growth of Internet commerce.

Setting the Agenda

Meeting by conference call Friday, the work group agreed on five general categories they plan to explore. The structure of state and local taxation, the complexities of the sales and use tax issues, and other tax administration questions comprise the first discussion topic. The second topic will be the relationship between electronic merchants and physical stores. The general focus of that discussion will be on the issues of fairness and competition. “I think you almost can’t talk about the electronic sellers without thinking about the implications of physical retailers,” Work Group Chairman David Pottruck, President of Charles Schwab and Company, argued.

The work group designated as the third topic what the current tax levels are and how various groups want them to be changed. Such discussion would likely include consumer advocates and anti-taxation groups on one side and state and local taxing authorities and others who advocate some degree of taxation, Pottruck said. Internet service providers, including cable and other broadband Internet services, and their access fees comprise the fourth topic. In that area, existing taxes on those companies and current proposals for additional fees or taxes would be discussed.

Overseas Competition

Finally, the group agreed to address, if only broadly, the question of international e-commerce. Several members of the panel expressed concern that the Advisory Commission, as a body of solely U.S. members, has no authority over international Internet policy and markets. However, they agreed the group should at least present to Congress an overview of the issues involved in overseas commerce, since cyberspace makes international commerce more accessible and potentially more profitable for many companies.

“We’re certainly going to want to make sure that domestic sellers, remote sellers — domestic distant sellers — are not disadvantaged vis-a-vis foreign distance sellers. So I do think that it’s not just a tariffs issue or a customs issue. It is a discrimination between national and international sellers,” said George Vradenburg, of America Online, who represented President Bob Pittman on the conference call.

Virginia Governor James Gilmore agreed. “I think we should be sure that topic includes the issue of placing ourselves at a competitive disadvantage to other potential taxing regimes around the world,” he said.

The group plans to issue by mid-August a public notice of the New York meeting and a call for papers on any of the subjects that are within the scope of the Advisory Commission’s Congressional mandate. Based on those written comments and further discussion among the committee members, the group plans to develop specific issue outlines for the New York meeting. They will then use that face-to-face meeting to question witnesses and gather further information.