The Direct Marketing Association and the Association for Interactive Media yesterday stated their support for the proposal put forward this week by the Advisory Commission on Electronic Commerce. The commission ended its final session Tuesday deadlocked over Internet taxes.
If it had been adopted by two-thirds of the commission, the proposal would have provided Congress with a blueprint of how to address e-commerce taxation issues. Only 11 members of the 19-member panel voted in favor of the plan, thus failing to reach a “super majority” of 13.
The recommendations supported by the DMA and AIM are that Congress should:
* Make permanent the ban on Internet access taxes;
* Eliminate the 3% federal excise tax on telecommunications;
* Establish standards for simplification of state tax systems;
* Define nexus connection standards for a company’s physical presence and provide specific examples for out-of-state taxation;
* Establish a new advisory commission to oversee states’ tax simplification efforts; and
* Extend the current moratorium on Internet taxation for an additional five years.
“While it is disappointing that the Business Plan did not receive the two-thirds vote necessary for a formal recommendation to Congress, we nevertheless think that the majority vote it did receive warrants it being passed along to Congress for its consideration,” said DMA president and CEO H. Robert Wientzen, president & CEO, in a statement.
A major sticking point in the discussions was the issue of nexus, that is, what constitutes physical presence in a state for an Internet company, Ben Isaacson, executive director of AIM told DIRECT Newsline. Nexus may constitute whether the company has a headquarters or a fulfillment center in the state, whether it is a subsidiary, where the company’s Internet service provider is located, and even what type of advertising the company does. A newspaper or billboard ad could constitute physical presence, he explained.
“We’re looking for federal legislation to quantify nexus,” Isaacson said. “We’re close. We got down to a couple of points that the Administration wants to work out.”
On Monday, a simple majority of the panel approved resolutions recommending a five-year extension of the existing moratorium on new Internet taxes. It also approved a congressional action expanding the U.S. Supreme Court’s 1992 decision prohibiting states from taxing mail order sales unless the seller has a physical presence in the state to include Internet and telephone sales.
The resolutions were approved 11-1, with seven abstentions, including the three members appointed to the commission by President Clinton, who previously expressed opposition to domestic and international taxes on Internet transactions.
The commission’s report to Congress is due April 21.
Steve Pfister, the National Retail Federation’s senior vice president for government affairs, blasted the majority’s action, saying: “Retailers and consumers have waited for more than 18 months hoping this commission would be able to resolve the sales and use tax collection issue in an equitable, timely and detailed manner.”
He predicted that the panel’s report to Congress “will contain a business caucus proposal that provides blatant carve-outs for a select few at the expense of retailers and low-income consumers.”
There was no immediate comment from the Mail Street Coalition, an organization representing small to medium-sized retail stores across the country.
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