WASHINGTON-In a development that complicates future wireless e-commerce and diminishes Democratic presidential front-runner Al Gore’s high-tech luster, a congressionally-mandated advisory panel in Dallas last week failed to reach two-thirds majority agreement on key Internet tax policy issues.
Blame is being directed at the Clinton administration, whose three representatives on the 19-member e-commerce commission were reportedly part of a bloc that refused to vote on proposals to extend the Internet sales tax moratorium until at least 2006. They also refused to repeal the 3-percent federal excise tax on telecommunications service and to impose a permanent ban on Internet access taxes.
The current moratorium on an Internet sales tax sunsets in October 2001.
The inability of the panel to reach a super majority on e-commerce tax issues means that instead of sending a formal recommendation to Congress next month, Virginia Gov. James Gilmore (R)-chairman of the Advisory Commission on Electronic Commerce-will forward majority proposals backed by a coalition comprised of himself, anti-tax advocates and commercial interests.
Gilmore attempted to put the best face possible on the collapse of e-commerce tax negotiations in Dallas.
“I am pleased that we were able to come to a majority decision on these key public policy issues,” said Gilmore. “The Commission’s final report will provide an invaluable resource to Congress as it deliberates key Internet questions.”
Gilmore and ten others on the panel also will tell Congress they interpret a 1993 Supreme Court ruling to mean that Internet service providers and World Wide Web pages in a state are not tantamount to having the kind of physical presence required by law to collect state sales taxes.
Clinton administration representatives on the panel from the Treasury Department, Commerce Department and U.S. Trade Representative appeared to align themselves with Utah Gov. Mike Leavitt (R) and other state and local leaders who fear a massive loss of revenue if Net sales taxes cannot be collected.
The debate over e-commerce and telecom taxes has put the Clinton administration in a precarious position. The administration, needing money for pet social programs and being sympathetic to states, is not keen on repealing the 3-percent telecom tax or embracing a long-term ban on Internet sales taxes.
But Clinton, who is counting on Gore to carry out his political legacy, does not want to appear to be a high-tech obstructionist in a manner that may hurt Gore’s presidential aspirations.
As such, the administration is trying to straddle the political fence on sensitive e-commerce and telecom tax issues without hurting Gore’s image as a champion of high-tech.
While the White House apparently agrees there should be a permanent prohibition on Internet access taxes, it has its own ideas about other high-tech taxes.
In a speech here last week, Treasury Deputy Secretary Stuart Eizenstat called on states and localities to develop a simplified sales tax system within two years for Internet and brick-and-mortar retailers alike. That is very different than an extended moratorium on Net sales taxes that Gilmore, high-tech firms and some in Congress want.
Despite support from the telecom industry and some in Congress for repealing the 3-percent telecom tax, the administration is balking.
“Phase out of this tax is a worthy policy objective and should be considered, but must be weighed against other worthy objectives including proposed tax reductions, and must not be allowed to threaten the important priorities on maintaining fiscal discipline, paying down the national debt, extending the solvency of Medicare and Social Security, and maintaining core government functions such as health care and education.”
The wireless industry supports the abolition of the 3-percent telecom excise tax, a surcharge it and some lawmakers see as an obstacle to the emerging e-commerce business that carriers want to exploit in the near future.
