Advisory Committee on Electronic Commerce Takes Next Step in Process

The Advisory Committee on Electronic Commerce took another step Friday in its congressionally mandated study of how and whether to tax products sold over the Internet. A work-plan subgroup of the panel met via conference call to come up with a list of key issues that the full commission should focus on at its next meeting, scheduled for Sept. 14 and 15 in New York City.

"With the limited number of meetings that we have, it's going to be crucial that we have a strong focus," stated subcommittee chairman David Pottruck, president and co-CEO of Charles Schwab&Co.

The following five issues were targeted, with state and local government concerns topping the list: how and whether to simplify state sales tax; whether to go to a uniform rate; how to wrangle with the so-called "nexus requirement," which holds that companies do not have to act as tax collectors in states where they do not have a substantial physical presence; and how to deal with other complexities of sales and use taxes.

A second key issue deals with the concerns of Main Street vendors and electronic sellers of both tangible and intangible goods, including the issue of fair play between virtual businesses and their brick-and-mortar counterparts.

Other issues take up the concerns of Internet service providers, telecommunications firms and consumer and low-tax advocates, including looking into the controversial theory that the economy will be better served if Internet-based businesses are exempted from paying sales taxes.

Finally, the subpanel recommended that the international implications of Internet taxation be studied, but chairman Pottruck worried openly about how effectively that could be done. "It's such a broad issue," he noted. "We can open that issue up and never get it closed."

The subpanel concluded that presenters for each issue should be invited to the New York City meeting, but there should be no speeches or opening remarks, just a question-and-answer session with the 19 commission members.

Pottruck noted in a transcript of the meeting that anyone wishing to voice their point of view will be invited to send it to the commission, as long as it includes a two-page executive summary and addresses the statutory mandate outlined in the Internet Tax Freedom Act, which placed a three-year moratorium on new taxes on the Internet and created the Advisory Committee.

To formalize the recommendations, the subcommittee is expected to meet one more time by conference call late this month; the commission itself will vote on the proposed agenda in a conference call to be scheduled just prior to the New York City meeting.

The Advisory Committee will meet on Sept. 14 at the Millennium Hotel and on Sept. 15 at the Digital Sandbox, both in New York City. It meets a third time in San Francisco on Dec. 14-15 and a final time in Dallas on March 20-21. A report on its findings is due to Congress by April 2000.