CongressLine – Internet Taxation – Who Will Prevail?

The Impact of the Internet Taxation Issue

There is no doubt that the issue of Internet taxation is weighing heavily upon interest groups and associations here and abroad. Studies, reports, proposals and White Papers are being published at an alarming rate. Two of the most recent studies were published by Ernst & Young and the United States Chamber of Commerce. The Ernst & Young study, which was presented to ACEC at the September meeting, found that “fundamental changes” must be made in the state and local tax system to reduce the extraordinarily high collection costs. The current exponential growth of electronic commerce can not accommodate our outmoded state and local tax system. The United States Chamber of Commerce White Paper, which was also delivered to ACEC at their September meeting, is entitled, E-commerce Taxation: Issues in Search of Answers.

The paper argues that no steps should be taken on Internet taxation until basic issues such as uniform dispute resolution and privacy issues have been resolved. (For the press release on the Paper, please go to: . For the full text of the White Paper , go to : .)

Then there are organizations, such as the Global Business Dialogue on Electronic Commerce (GBDe), comprised of the corporate leaders of the world’s foremost companies, which are putting forth their own proposals. At their meeting in September 1999, the GBDe advanced several Internet- related initiatives, including one on tax and tariffs. The GBDe opposes new taxes on electronic commerce and generally holds that e -commerce transactions should not be treated less favorably than other, non-electronic, forms of commerce. (For the text of the tax and tariff recommendations, please go to: – please page down to the “Tax & Tariff” section.)

U.S. Chamber of Commerce Press Release on Internet Taxation

U.S. Chamber of Commerce White Paper on Internet Taxation

Global Business Dialog on Electronic Commercer (GBDe) Tax and Tariff Recommendations

H. Con. Res. 190

Press Release on S. 1611

Text of S. 1611


The big players in the legislative arena concerning Internet taxation are Sen. McCain (R-AZ and current Presidential candidate), Sen. Wyden (D-OR) and Rep. Cox (R-CA). McCain and Wyden together successfully navigated the Internet Tax Freedom Act to fruition in 1998. On September 30, Cox and Wyden announced legislation to solidify the world wide ban on tariffs placed on e-commerce. H. Con. Res. 190 calls for the Administration to support the permanent ban on electronic commerce at the World Trade Organization meeting this fall. (The text of the resolution and a press release may be accessed at:, please click on “Cox-Wyden III: Global Internet Tax Freedom.”) The resolution is aimed at preventing what could become a stranglehold on electronic commerce if digital delivery were to be taxed. The GBDe also recommends that governments make permanent the WTO’s current moratorium on imposing customs duties on electronic transmissions.

Sen. McCain’s bill, S. 1611, was introduced on September 22 of this year. The legislation would make the current moratorium on Internet taxation permanent and also includes language calling for the U.S. to advocate the Internet’s tax-free status at the WTO conference this fall. (For a press release on S. 1611, please go to: The text of the bill can be accessed at:

Although skeptics are calling Sen. McCain’s legislation sheer presidential maneuvering, he and the other members who have introduced legislation have come down squarely on the side of creating the Internet as a tax-free zone to encourage and foster the growth of electronic commerce. State and local associations and organizations are on the other side, looking to make their case through the Advisory Commission that electronic commerce can be taxed at the state and local level without a chilling effect. Both sides are hoping that the ACEC report will support their position, however, there is already talk on Capital Hill that the Commission may need more time to prepare its recommendations. Who will prevail? Only time will tell.

As a last minute addition to this article, today (October 15, 1999) the Advisory Commission on Electronic Commerce published in the Federal Register an invitation to all interested parties to submit proposals on state and local taxation of electronic commerce. The text of the invitation can be accessed at

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