US Net Tax Negotiations Reach Small But Significant Agreement

by Mike Godfrey, Tax-News.com, Washington

22 June 2001

As the October deadline for expiry of the current Internet tax moratorium gets closer, discussions on the tax have begun to hot up on Capitol Hill. Although it is too early to detect any clear signs of a final decision, Senators have at least agreed a first stage in which it was decided that states will be forbidden to impose any new tax regimes without first clearing them with Congress.

At a conference sponsored by the Computer and Communications Industry (CCIA) this week, Senator Ron Wyden, D-Ore., told delegates: 'There will have to be an affirmative vote on the floor of the United States Congress before any new taxing regime goes into effect.' Senator Wyden, an advocate of extending the moratorium, added: 'That principle has been agreed to and we have won on what I consider to be a key point, in that you don't let the horses out of the barn and then say we can go try to get them back in if you can herd them all up.'

It is a small step but an one important in this debate. Senator Wyden has been at loggerheads with Senator Byron Dorgan, D-ND. Although they would both like to see states simplify their tax systems before entering into agreements on the net tax, Dorgan is arguing for the states to adopt a 'one rate per state' approach while Wyden would like to see the endorsement of a single rate 'nationwide'. They are also disagreeing on whether or not to continue the prohibition on taxing electronic goods such as music or literature over the Internet.

So although there is a long way to go before the crux of the decision is reached, the agreement between the two sides is a significant one. 'Everybody was pretty surprised when they woke up last week and heard a deal had been reached,' Wyden said.

However, there is another issue that all concerned are agreed upon: 'We're all in agreement that we need to move quickly, because the clock is ticking and October is coming,' Wyden said. 'I'd like to get there this week.'

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