Internet Bill Multiply Like Rabbits In Congress

by Mike Godfrey, Tax-News.com, New York

04 June 2001

The current US Internet tax moratorium expires this October, and there are now a number of bills in the Congress seeking to extend it in one way or another. Two more were introduced just last week:

Representative Christopher Cox, (Rep - Calif.), Representative Robert Goodlatte (Rep - Va.) and Tom Davis (Rep - Va.) introduced H.R. 1552 - the Internet Tax Nondiscrimination Act - which would extend by six years the moratorium on redundant or discriminatory Internet taxes. The Cox-Goodlatte-Davis bill is the House's scaled-down version of legislation introduced earlier this year in the Senate by Ron Wyden, (Dem - Ore.), which also would add six years to the current moratorium that went into effect in 1998. Wyden's bill contains extra clauses - unlike H.R. 1552 - that would take limited steps toward allowing states to simplify their various complicated tax regimes. That could allow them to begin collecting sales taxes from people who make online purchases from out-of-state businesses.

In the Senate, George Allen, (Rep - Va.), and Conrad Burns, Rep - Mont.) introduced S. 777, which shares its name with H.R. 1552, but would make the moratorium permanent.

(It's so tempting to say: 'Burns and Allen'; it really requires a substantial effort for this correspondent - showing his age - to get it the right way around. Perhaps they ought to change places: wouldn't most Congressmen, even older than yours truly, vote for a Burns and Allen Bill?)

In the Senate, Wyden and Allen-Burns face competition from The Internet Tax Moratorium and Equity Bill, introduced by Byron Dorgan, (Dem - ND), who serves with Wyden on the Senate Commerce Committee. This bill would extend the moratorium by three years and make more concessions to states seeking to collect out-of-state sales taxes.

Dorgan's bill was in turn cloned in the House by Representative Ernest Istook, (Rep - Okla.), earlier this month. Istooks version establishes a "national compact" for states seeking to simplify and unify their sales tax systems. Once the compact is set up under "broad guidelines" in the bill, it could be activated if 20 states become members.

Istook's drafting requires that states have uniform reporting requirements for merchants, an identical annual certified audit of retailer sales, and a mechanism for compensating retailers for costs they incur in collecting the sales tax from customers. The bill also would prolong the current moratorium on "new and discriminatory" Internet sales taxes through 2005.

Another, bipartisan, Senate bill, from Judd Gregg, (Rep - NH) and Herb Kohl (Dem - Wis.), the New Economy Tax Fairness (NET FAIR) Act, introduced in late March, would allow online remote sales tax collection only if states can establish that an online business has a significant point of location - or "nexus" - in the state in question.

The various business and anti-taxation lobbies that oppose on-line sales taxes typically claim that the existing patchwork of 7,000 or more sales tax regimes makes any extension of sales taxation onto the Internet effectively impossible; but many of the bills listed above contain wording that recognises the possibility of unified legislation. Progress made by the SSTP (Simplified Sales Tax Project) has a lot to do with this, because the Project is now quite close to gaining critical mass for a multi-state reform and harmonisation of sales taxes that would bring them within the scope of bills such as Istook's that require a minimum number of states to adopt standardised practices before new, internet taxes can be applied.

Vice President Dick Cheney recently called on Congress to make permanent the current ban on Internet access taxes and to extend the moratorium on Internet sales taxes, both of which are expiring in October. At present it seems likely that the access tax ban will indeed be made permanent, but that the moratorium will be extended only for a short period, if at all. But if action is to be taken this year, the time is fast approaching for Congress to start reconciling the torrent of draft legislation it is facing.

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