WATPA: FW: How to tax the Internet

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From: Norman J. Jacknis (njacknis@ix.netcom.com)
Date: Wed Jan 05 2000 - 23:29:57 EST

Personally, I don't agree with the premise here, but we might as well be
prepared. This kind of article is only the start of what is going to be a
hotly fought battle affecting every Internet user.


---------- forwarded message ----------

"Let's face it," said Kostenbauder, "the Net is already taxed. It's just a
matter of collecting it."

Therein lies the rub, according to Jon Peha, an associate professor of
electric and computer engineering at Carnegie Mellon University in
Pittsburgh. "Technology can get you most of the way to solving the
problem," said Peha. "That's not the biggest problem, though. Making it
enforceable is the biggest problem."

How to tax the Internet
While politicians bicker and e-tailers quiver, one man may hold the
solution in his hands
By Alan T. Saracevic

Daniel L. Sullivan is the antithesis of dot.com cool.

He comes across more like a friendly college professor than a man who could
change the course of e-commerce. Sullivan says he knows how to tax the

As the debate over the possible taxation of the Internet played out in San
Francisco last week, Sullivan calmly bided his time.

After hours of testimony and proposals - all advocating or attacking Net
taxation, it was finally his turn to address the 19-member congressional
committee assembled to discuss the issues.

In a five-minute, highly technical presentation, Sullivan demonstrated how
his company - Taxware International Inc. of Salem, Mass. - would collect
tax on cyber sales from every jurisdiction in the United States - taking
into account an estimated 7,500 state and local taxing authorities.

As quickly as Sullivan's pitch started, it was over. No follow-up
questions. No discussion. The slightly fazed committee members went back to
the charged rhetoric of the debate.

"We have software that can be used to tax the Internet," Sullivan said in
an interview after his presentation. "For any of the proposals put forward,
our technology can act as the mind and heart of the solution."

Taxing the Internet has become the next, logical step in the growth of
e-commerce. The industry's hot growth pattern has caught the attention of
government officials who want a piece of the action. In turn, it's become a
highly politicized topic.

Shut out
To date, state and local governments have been effectively shut out of
collecting sales and access taxes, mainly due to the Internet Freedom Act
of 1997. Although the law does not prohibit the collection of sales taxes
on the Net, it did place a moratorium on taxes that target Internet access
services and banned the creation of new or discriminatory laws pertaining
to e-commerce.

Although some e-tailers collect sales tax, most don't, saying they don't
conduct business in one state or another, but rather their cyberspace
transactions are interstate commerce, which is not subject to local and
state tax laws. State and local government officials beg to differ, saying
if Net transactions are left untaxed, the resulting erosion of their tax
bases could have a serious impact on local revenues, and subsequently,
local services.

The debate centers on where an e-commerce store is based or where the
transaction is conducted. The billion dollar question: Who gets to collect
taxes on e-commerce transactions?

To help answer that question the Internet Freedom Act also created the U.S.
Advisory Committee on Electronic Commerce with the mandate of studying
e-commerce in relation to taxation.

The congressional committee met in San Francisco last week and heard 14
proposals on Net taxation. The group will hold one more hearing on the
topic in Dallas in March, making for a total of 37 proposals, before
delivering a report on April 1.

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