E-Commerce Proposal Sweetened with Waiver of Book Taxes
2/10/00

A subgroup of the Advisory Commission on Electronic Commerce (ACEC) is trying to drum up support for its Internet tax proposal by urging Congress to waive in-store sales taxes on information products—books, music, and so on—for a five-year period.

The group, known as the Business Caucus, comprises six ACEC members who work for big businesses involved in Internet commerce: America Online, Time Warner, Gateway, AT&T, MCI WorldCom, and Charles Schwab Corp. After other members of the congressionally appointed commission began to divide over the issue of whether Internet sales should be subject to taxes, the group put together a proposal designed to be a compromise between the two camps.

The proposal was submitted to the rest of ACEC this week. Members will discuss it at the commission's next meeting in Dallas, TX, on March 20-21. This will be ACEC's final face-to-face meeting before submitting its recommendations to Congress in April.

The proposal calls for a five-year extension of the current federal moratorium (which expires in October 2001) on the creation of new sales taxes on Internet purchases. During that five-year extension, sales of "digitized goods and products and their non-digitized counterparts" would be exempt from sales taxes of any kind, both when purchased online and in traditional stores. The proposal does not specify whether the exemption would apply only to books and music available for sale in digital formats, or to all information materials with the potential for digitization.

The Business Caucus plan also encourages state and local governments to work with the National Conference of Commissioners on Uniform State Laws to draft a Uniform Sales and Use Tax Act within three years after the current moratorium. This act would simplify state and local tax laws to make it easier for merchants to apply and collect appropriate taxes.

Also included in the proposal are definitions for establishing a company's official nexus in a state for taxing purposes and a recommendation that the current moratorium on new taxes on Internet access be made permanent.

The proposal does not have the support of the e-Fairness Coalition, an organization of national merchants, manufacturers, associations, and others connected to retailing. The coalition, of which NACS is a member, believes a five-year extension of the Internet sales tax moratorium is too long. The proposal has also come under fire from the National Conference of State Legislatures, which is concerned that the plan asks Congress to preempt state and local governments' ability to enact and collect sales taxes.

The complete proposal is available on ACEC's web site.

Related Links:

"NACS Joins Group to Voice Concern Over Web Sales Tax" (NACS, 2/2/00)
"E-Commerce Tax Panel Looking for Compromise" (NACS, 1/31/00)
"E-Commerce Commission: When in Doubt, Do Nothing" (NACS, 12/17/99)
"Groups Survey Consumers on Internet Sales Taxes" (NACS, 12/15/99)
"ACEC to Consider 14 Internet Sales Tax Proposals" (NACS, 12/8/99)
"NACS Presses for Equal Treatment on Web Sales Taxes" (NACS, 11/18/99)

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