 | |
| |
TechnologyDaily Mobile
Financial Policy Issues In Focus
by Winter Casey
The technology sector is paying close attention to tax and financial issues pending on Capitol Hill. Topics of interest range from federal measures on taxing Internet vendors to growing anticipation for a national bill focused on data breaches.
Other issues of concern include corporate accounting standards and a recent ruling by the World Trade Organization regarding U.S. tax subsidies. Various groups also continue to push for legislation that would extend a research and development tax credit.
Techies Take Note Of Streamlined Tax Bills
The technology community has its eyes on two Senate bills introduced that would change how Internet vendors are taxed across state lines. Byron Dorgan, D-N.D., filed one measure, S.2153, and Michael Enzi, R-Wyo., authored the other one, S.2152.
"If Congress continues to allow remote sales taxes to go uncollected and electronic commerce continues to grow as predicted, other taxes, such as income or property taxes, will have to be increased to offset the lost revenue to state and local governments," Enzi said in a statement. "I want to avoid that."
According to NetChoice Executive Director Steve DelBianco and Elly Pickett, the deputy press secretary for Enzi, the only notable difference between the two bills is the title and how they address small businesses. "The two senators, along with stakeholders, are working on compromise language and have hopes to introduce one comprehensive bill in the 110th Congress," Pickett said.
The issue dates back to a 1992 Supreme Court ruling regarding a catalog business that sold office supplies. The ruling upheld a 1967 decision that no retailer should have to collect sales taxes from customers in states where the retailers have no physical presence. A quasi-governmental effort known as the Streamlined Sales Tax Project crafted a plan to simplify state sales-tax codes in order to foster uniform taxation of online commerce.
Currently 19 states have signed onto a Streamlined Sales and Tax Agreement that would require remote vendors to collect taxes. The agreement calls for Internet and mail-order companies to voluntarily report sales and submit to being taxed by the states. The Institute for Policy Innovation has issued a report against the initiative.
Only a congressional mandate could force all remote retailers to collect sales taxes and remit them to other states. State governments have pressured lawmakers in Washington to give them the power to collect sales taxes for online goods sold to people from other states.
According to NetChoice, the proposal spearheaded by the SSTP would generate only a small amount of state revenue that could be outweighed by compliance costs. "The tech industry is not paying enough attention" to this issue, DelBianco said. "A revolution is occurring."
In February, the House Small Business Regulatory and Oversight Subcommittee held a hearing on the measures. Supporters of the bills argued that they would simplify current streamlined sales-tax rules and create a more competitive environment for entrepreneurs.
The Information Technology Association of America has said that it supports the implementation of a streamlined sales-tax agreement. The group opposes state efforts to tax Internet access or to impose discriminatory taxes on Internet sales, computers and other IT services. ITAA favors legislation that would require companies to have a physical presence in a state for determining corporate taxability.
Also on the tax front, as part of its highlighted priority of promoting U.S. tech competitiveness, ITAA has urged a lower corporate tax rate.
Toward A National Standard On Data Protection
Senate Banking Committee Chairman Richard Shelby, meanwhile, is focused on protecting financial data. He said in January that the passage of legislation to curtail security breaches is a top priority for the panel in 2006.
The aim is to complement protections found in the financial-services law known as the Gramm-Leach-Bliley Act and in credit-reporting law. At this time no bills have been introduced, committee spokesman Andrew Gray said, but a measure is expected this spring.
This is a "big issue for small businesses," said Morgan Reed, vice president of public affairs at the Association for Competitive Technology. Data protection could "reach election-issue caliber."
NetChoice's DelBianco said the cost of identity theft is high and cited a strong need for a national standard on data breaches. Twenty states already have established varying e-commerce rules, and eight more are considering them, he said.
That patchwork of laws concerns groups like ITAA. Spokesman Bob Cohen said ITAA "supports a federal law that would take away the need for 50 state laws." The Business Software Alliance also backs efforts to address the standard for notifying customers of data breaches. BSA further wants House and Senate appropriators to dedicate the funds necessary to support research and development in information security.
Tax Breaks For The Tech Industry
On the tax front, the tech industry continues to push for breaks in the United States and abroad. A pending budget package includes an R&D tax credit that the industry considers vital. House and Senate lawmakers currently are working towards agreement on their competing bills.
Both the House measure, H.R. 4297, and the Senate bill, S. 2020, would enhance and extend a tax credit for R&D spending by businesses. The House bill also would extend by two years a law that increases the amount of money small businesses can spend on equipment purchases such as software. ACT, ITAA and the National Association of Manufacturers support an R&D tax credit.
Techies ultimately would like to see a permanent R&D tax credit, and the House Republican leadership this month announced a technology and competitiveness package that includes that idea, among other provisions supported by industry.
An appellate body to the World Trade Organization, meanwhile, ruled last month that U.S. tax subsidies for entities once known as "foreign sales corporations" are illegal. The decision against the United States ends a dispute over whether U.S. companies can exempt overseas earnings from domestic taxes.
"All U.S. industry, including the technology industry, is watching this," said Stephanie Childs, a vice president at ITAA.
The Unclear Future Of Accounting Rules
Another key financial issue for the tech industry is corporate accounting rules. The subject was in the news again this month, when House Financial Services Committee Chairman Michael Oxley, R-Ohio, informed the Securities and Exchange Commission that it has the authority to modify the 2002 accounting law he co-authored without further input from Congress.
Tech groups still complain of the burdens of complying with the law, and some business groups want changes that would ease regulatory burdens. Sen. Olympia Snowe, R-Maine, said in a letter last week to SEC Chairman Christopher Cox that she is concerned that the current law creates unintended burdens on small businesses, but Congress is not likely to consider revisions this year.
According to Bob Shepler, a director at NAM, there is a "good chance the SEC will allow some leniency" for small businesses. NAM is not seeking legislative changes but is looking for regulatory revisions, he said. He also noted that the SEC small-business committee this year recommended exempting small businesses from one section of the act.
As an "unintended" consequence of the law, ACT spokesman Mark Blafkin said some small businesses have emerged to help others comply.
NEW FEATURE
-Advertisement-
-Advertisement-
-Advertisement-
