Regulation Policy

Taxing Internet Commerce

The Clinton administration has decided not to tax transactions made over the Internet -- for the time being. Clinton adviser Ira Magaziner says the Net should be tax free for at least five years. But the Federal Communications Commission wants to charge Internet phone providers access fees for routing long-distance calls through local telephone lines, a move opposed by many critics.

  • Traffic on the Internet has doubled every 100 days and online commerce is projected to top $300 billion by 2002, according to the Commerce Department.

  • The World Wide Web has been responsible for a one-percentage-point drop in inflation and is growing twice as fast as the overall economy.

  • A report from the Department of Commerce recommends that electronic commerce not be "burdened with extensive regulation, taxation or censorship."

  • But the National Governors Association and the National Conference of Mayors have backed imposing sales taxes on electronic commerce and mail-order purchases.

Those who oppose Internet taxation predict that any move to collect such taxes would swamp the courts with lawsuits over jurisdiction.

Source: Editorial, "White House Slipping on Internet Taxes," Investor's Business Daily, April 17, 1998.

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