Will Tax Panel Holy War Ever End?

As the federally-appointed Advisory Commission on Electronic Commerce (ACEC) prepares to hold its final meeting next week, bitter divisions within the panel threaten to scuttle any potential for a compromise deal on Internet taxation in the United States.

The current proposal exempts such “digitized” goods as music, books or other data when sold via the Internet, while online merchants that sell bigger ticket items would face taxation after a three-year moratorium — during which state and local governments would work on simplifying and standardizing their tax codes.

Gilmore Seeking Own Deal

However, the plan does not have the support of such anti-tax foes as Virginia Governor James Gilmore, the commission chairman. Gilmore is engaged in his own war of attrition with six firms on the panel, known as the “business caucus.”

This group, which includes Time Warner, Charles Schwab, Inc., America Online, Gateway, AT&T and MCI WorldCom, have become the vital swing block needed to pass anything on the 19-member panel.

So, while it is quite nice that some member governors and companies are trying hard to work things out among themselves, it seems obvious to me that the plan will never fly unless Gilmore signs on.

Aside from a recent flap where Gilmore reportedly hinted — and then denied — that he would finally be open to a compromise position, the Virginia Governor has shown little inclination to approve any kind of tax on e-commerce. He has vehemently opposed past recommendations, saying that such deals between the companies and states “give carte blanche for Internet taxation to be imposed.”

Therefore, if Gilmore continues to sway the six-vote bloc, no compromise proposal stands a chance of reaching the two-thirds vote required to pass such recommendations.

Will Stalemate Last Forever?

If it turns out that Gilmore is simply posturing to get the best deal he can, then perhaps all of this jockeying back and forth will amount to something worthwhile.

On the other hand, if Gilmore’s goal is simply to filibuster until the debate dissolves into flinders, everyone loses. While the new economy continues to hang in limbo, the states suffer, e-commerce companies twist in the wind, and the good Governor makes more enemies in high places.

Let’s accept the inevitable and get this show on the road.