Congress Debates Electronic Commerce and Taxation

By Rigsby, Deborah; Otero, Juan | Nation's Cities Weekly, July 2, 2001 | Go to article overview

Congress Debates Electronic Commerce and Taxation


Rigsby, Deborah, Otero, Juan, Nation's Cities Weekly


Congress continued its debate on electronic commerce and taxation last week as the House of Representatives held a hearing on legislation to extend the moratorium of the Internet Tax Freedom Act, which will expire this October.

The House Judiciary Subcommittee on Commercial and Administrative Law listened to alternatives for tax policies on remote sales conducted over the Internet and on Internet access. One of the components of the Internet Tax Freedom Act, enacted in 1998, is a three-year prohibition on new taxes imposed on Internet access and on multiple or discriminatory taxes on Internet commerce. The current moratorium expires on October 21, 2001.

The National League of Cities has written Congress urging that more hearings occur on e-commerce taxation before any bill is marked up by House and Senate committees. NLC is supporting a streamlined system for sales tax administration where collection of local sales taxes is continued where established.

In a letter to House Judiciary Committee Chairman James Sensenbrenner (R-Wisc.), NLC stated that last week's hearing would do nothing to resolve the competitive disadvantage faced by local brick-and-mortar stores that must pay local sales taxes, and thus operate at a six percent to eight percent disadvantage with remote vendors not required to collect these existing taxes. Additionally, the erosion of state and local sales tax revenue was noted, where the University of Tennessee has estimated a loss of $20 billion in 2003.

Congressional hearings must address measures to "help state and local governments maintain their sales tax revenues, which are the single most important source of funding in the United States for education, and also cover 27 percent of total national transportation spending, and most local public safety, health and sanitation service costs," NLC continued.

The hearing focused on two bills sponsored by Rep. Christopher Cox (R-Calif.): H.R. 1552 and H.R. 1675, both known as the "Internet Tax Nondiscrimination Act." H.R. 1552 would extend the current moratorium for five years, banning multiple and discriminatory taxes, permanently extend the moratorium's ban on Internet access taxes and end the grandfathering of some states that were taxing Internet access at the time when the Internet Tax Freedom Act was originally enacted. H.R. 1675 differs only in that it would permanently ban multiple and discriminatory taxes on e-commerce.

"There is no state or local government interested in imposing new access taxes to the Internet," Gov. …

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