 | |
| |
TechnologyDaily Mobile
The Internet Tax Ban's Disappearing Act
by Teri Rucker
As the last grains of sand slipped through the hourglass Oct. 21, one of the rallying cries of the Internet tax debate -- we must not let the moratorium expire -- disappeared. Now it remains unclear how close senators are to a compromise on the issue, how much their eventual legislation will differ from the House-passed two-year ban, and whether the two bodies will be able to reconcile any differences.
Just when it appeared lawmakers were willing to accept a simple two-year ban, a new Senate proposal complicated matters last Thursday. That bill, S. 1567, would permanently ban Internet access taxes and bar multiple and discriminatory Internet taxes until Dec. 31, 2005. But it also would revive the controversial call to encourage states to simplify their sales-tax systems.
In addition, the legislation seeks to define telecommunications services, such as wireless Web access. States and telecom firms have been unwilling to support a permanent ban unless such services are clearly defined. A promise to address the issue of corporate income taxes and other business activity taxes this session also was included to appease those who say that issue is an integral part of the Internet tax debate.
While some industry groups hail the proposal as the much-anticipated compromise, others see it as an attempt to rehash issues that have been deemed too complicated to address right now.
"Let's take the two years and go home," said Neal Osten, director of the National Conference of State Legislatures' Commerce and Communications Committee. "Everyone loses something, everyone gains something."
Oops, They've Done It Again
The drive for a compromise on Internet taxes has resembled the carnival game Whac-A-Mole. Every time a proposal has been offered to appease one interested group, another group has popped up with objections.
Sen. Michael Enzi, R-Wyo., sponsored the latest bill. It is designed to revive the Internet tax ban and tackle the thornier issue of sales-tax simplification so states ultimately might win approval to tax online sales. Currently, states cannot do so because of a Supreme Court ruling that deemed it a burden for businesses to collect state and local taxes where they have no physical presence.
Other factors also complicate the debate. Internet service providers want a permanent ban on Internet access taxes, states and telecommunications firms want the term "access" defined, and some retailers want Congress to determine the terms of what constitutes a simplified tax system. States say they can and should be allowed to craft their own tax policies.
Barry Piatt, the spokesman for Byron Dorgan, D-N.D., said some observers think the Enzi bill, which Dorgan cosponsored, "represents a position that is making some progress. Whether it means there are votes [to pass it], it is uncertain."
Richard Sullivan, a co-chairman of the e-Fairness Coalition, added that Enzi's bill "is basically the same package as the compromise piece of legislation" senators were crafting before the Sept. 11 terrorist attacks. "I don't know how anyone can't support ... the moratorium on access," he said.
But few people object to the access-tax ban. They oppose the rest of the provisions in the bill. Osten noted that Enzi made a good-faith effort to address all points of view, but "at the same time, he didn't satisfy anybody."
Are We There Yet?
Dorgan is so adamant that lawmakers address the sales-tax issue before reviving the moratorium that he is willing to block consideration of a simple, two-year ban. His objections would prevent action on either the House bill, H.R. 1552 or the nearly identical Senate bill, S. 1481, because Senate rules require unanimous consent for votes on legislation that lack committee action.
It is unclear whether lawmakers who favor a simple ban will block consideration of Enzi's bill. If they do, it could result in a floor stalemate. "I am not confident they are going to reach some sort of agreement in the Senate," one industry source said.
Those pulling for a two-year ban have not lost hope. The Senate Judiciary Committee could consider S. 1481, which encompasses the simple, two-year ban introduced by Sens. John McCain, R-Ariz., and Ron Wyden, D-Ore. Wyden's spokeswoman said that bill "is still on the table."
Both the Commerce and Finance committees have jurisdiction over the issue and Commerce Committee Chairman Ernest (Fritz) Hollings, D-S.C., last week decided against a vote. He could schedule action on the bill, or Finance Committee Chairman Max Baucus, D-Mont., could move one of the bills to extend the ban.
Osten said he thought enough members of Finance support the two-year ban to approve a bill and send it to the Senate floor. Sullivan is just as confident that the Senate will pass Enzi's bill, and he anticipates that House lawmakers wish to introduce a similar bill.
However, shepherding legislation through committee and to the House floor is a lengthy process, and House leadership already has support for the simple two-year ban proposed in H.R. 1552. Last Tuesday, the House passed the bill by voice vote. No lawmaker argued against it, although some stressed the importance of addressing state sales-tax simplification.
Sullivan said House action on the sales-tax issue "is a 50-50 shot, so it is more likely were the Enzi bill to pass [that] something would be worked out in conference."
Reason To Be Nervous?
In the meantime, the moratorium has lapsed. While almost anyone familiar with the issue acknowledges that state officials will not slap taxes on Internet access by week's end, the Internet tax collector theoretically could come knocking anytime.
Osten noted that revenue departments in 11 states have levied taxes on the Internet, and imposing such taxes did not require an act of the state legislature. Those states were exempted when the recently expired moratorium was enacted three years ago.
But Osten added that most state legislatures have adjourned for the year, and governors have warned their revenue departments to refrain from Internet taxes because they are politically untenable. Sullivan also said the nation's governors and state and local officials have assured him that they will not impose new taxes on the Internet.
As state officials see revenue dwindling, however, they may be tempted to seek other sources of income, some say. During debate on the House floor, Rep. Christopher Cox, R-Calif., urged lawmakers to support H.R. 1552. "The whole economy is slowing down," he said, "so it is vitally important that we not backslide."
With lawmakers insisting that Congress address the more complex tax issues as part of the Internet tax debate, the battle "could spill into next year," Piatt said. "But when state legislatures start convening, if I felt real strongly about access taxes, I would start getting real nervous."
NEW FEATURE
-Advertisement-
-Advertisement-
-Advertisement-
