P1: IML/FFX P2: IML/FFX QC: IML/FFX T1: IML
WL040C-179 WL040/Bidgolio-Vol I WL040-Sample.cls June 20, 2003 13:22 Char Count= 0
LOOKINGAHEAD 421ACTIONS TAKEN TO RESOLVE
INTERNET AND E-COMMERCE
TAX ISSUES
As described so far in this chapter, there are a number of
Internet and e-commerce tax issues in need of resolution
at all levels of government. The issuance of the Treasury
study in 1996 followed by issuance of similar reports by
other industrialized countries, as well as work done by
a federal commission in 1999–2000, have led to helpful
discussion of the issues and possible solutions. Notable
activities are briefly summarized below.Federal Advisory Commission
on E-commerce
In addition to imposing a moratorium, the Internet Tax
Freedom Act (described earlier) created a 19-member Ad-
visory Commission on Electronic Commerce (ACEC). The
members included 8 representatives of state and local gov-
ernments (including one from a state with no sales tax
and one from a state with no income tax), and 8 repre-
sentatives from the e-commerce industry (including small
business), telecommunications carriers, local retail busi-
nesses, and consumer groups. The remaining 3 members
were the Secretary of Commerce, the Secretary of the
Treasury, and the United States Trade Representative. The
ACEC was to conduct a thorough study of all levels of
tax with respect to e-commerce and report to Congress in
April 2000. The ACEC report could contain legislative rec-
ommendations if they were tax and technologically neu-
tral and were approved by at least two-thirds of the Com-
missioners.
In April 2000, the ACEC issued a report describing pro-
posals of the majority. The ACEC was unable to reach the
required 2/3 vote to come up with recommendations on
most matters. The report did not include the views of the
minority. While the ACEC failed to provide legislative rec-
ommendations, the discussions and testimony that arose
from its existence and the issuance of majority and minor-
ity reports did heighten awareness of the issues and pos-
sible solutions. Common themes in both reports included
the need to simplify sales tax and telecommunication tax
systems and to not tax Internet access fees. The majority
and minority reports, along with the testimony presented
to the Commission, provide a rich source of information
on the nature and range of e-commerce taxation issues,
as well as possibilities for resolving many of these issues
(ACEC, n.d.).Streamlined Sales Tax Project (SSTP)
The SSTP involves a group of representatives from over
35 states and the District of Columbia who are work-
ing together to create a Model Act and Agreement for a
uniform and simplified sales and use tax system (SSTP,
n.d.). Language was approved by the participating states
in December 2000. While additional work is needed to fill
in some missing pieces, several states have reviewed the
Model Act and Agreement and enacted legislation to par-
ticipate. In addition, multistate vendors are also reviewing
the SSTP proposal to understand what it might mean forthem should states in which they have customers (whether
or not the vendor has nexus in the state) adopt the SSTP
proposal.
Features of the SSTP proposal include state level ad-
ministration of sales and use tax collections, uniformity in
the state and local tax bases, a central electronic registra-
tion system, uniform sourcing rules, uniform definitions,
uniform audit procedures, simplified tax returns, and con-
sumer privacy protections.Taxation Reports of Various Countries
and the OECD
In addition to the United States, the OECD, Australia,
Canada, the European Union, and a few other indus-
trialized countries have issued extensive reports on e-
commerce tax issues. Common themes in these reports
includeThe Internet and e-commerce present opportunities for
both governments and businesses.
New taxes should not be imposed because restricting
development of the Internet and e-commerce will only
harm the country’s economy.
Neutrality should be considered in applying tax laws to
transactions in e-commerce so that the tax law does not
distort behavior.
Multiple taxation must be avoided.
Tax systems should be simple in order not to hinder a
business’s expansion of its market into the large markets
offered through e-commerce.
Countries will need to work together to deal with tax
issues so as to avoid multiple taxation and undue com-
petition, update and coordinate treaty provisions, coor-
dinate the legal basis for taxing multinational transac-
tions, and coordinate enforcement powers.
Governments and taxpayers should work together to
identify and address issues.LOOKING AHEAD
E-commerce is a new business model for which existing
tax systems were not designed. While some e-commerce
transactions fit clearly within existing rules, many do not.
The issues are complicated and global in nature. Efforts
have been underway since at least 1996 to address these
issues at the international level, as well as state and local
levels. Work on identifying the specific issues and possi-
ble solutions will likely continue for many years due to
the scope and range of issues. At the international level,
the OECD is the likely avenue for resolving tax issues due
to the purpose of the OECD and the depth of study it has
performed to date. At the state and local level, states will
continue to work on simplifying their sales and use tax
system in the hopes of being able to collect sales tax from
remote vendors. Unfortunately, the states do not have a
strong record of working together to resolve issues and
not all states are participating in the SSTP. As the state
tax debate continues, so will the discussion of the proper
role of Congress in helping to resolve the issues. Finally,
although there has been little attention to them, a few