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Buying time

A group of state, county and municipal officials from around the country last week said they had reached an agreement on Internet tax legislation before Congress. This makes it possible for the measure to move forward.
The compromise hopefully is the first step in the process of shaping a sensible approach to taxing Internet commerce.
The Internet Tax Freedom Act has been in the works for some time. Lobbying by governors and local officials, however, had tied it up in the House Commerce Committee.
Their fear is that federal legislation will prevent them from tapping a huge potential source of tax revenue.
Proponents of the measure have fears of their own–namely, that a tangle of tax laws at different levels of government will put a choke hold on Internet commerce. In particular, small businesses would be ill-equipped to handle the paperwork burden.
As Rochester Business Journal law columnist Justin P. Doyle noted last year in an analysis of the legislation, businesses engaged in interstate and foreign commerce via the Internet could face some 30,000 taxing jurisdictions in this country alone.
Treasury Department officials have urged use of existing tax frameworks for Internet commerce. Simplicity and uniformity, as well as avoiding dual taxation, should be paramount, they said.
How would these goals be accomplished? That’s the real question.
The House legislation calls for a commission of federal, state and local officials to study the issue over a three-year period and propose ways to tax Internet commerce. During that period, a moratorium would be placed on new e-commerce taxes.
The bill’s sponsors want a permanent ban on taxes imposed on Internet sales and services, but agreed to compromise in order to get the measure out of committee.
With Internet commerce expected to top $100 billion by the year 2000, this is no minor debate. Stifling e-commerce makes no sense. At the same time, local business owners have reason to worry about competition from tax-free Internet sales.
The bill before Congress buys time, increasing the odds that a well-crafted policy will emerge.
–Rochester Business Journal

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