NCPA Tax Policy - Protecting The Internet From Taxation

Tax Policy

Protecting The Internet From Taxation

Legislation is pending on Capitol Hill that would impose a temporary moratorium on certain discriminatory state and local taxes imposed on Internet commerce. Observers say that despite the political popularity of the issue, the Republican leadership is waffling in its support -- at the behest of the National Governors Association.
Supporters of the bill charge that unelected tax administrators at the state level have already been using the existence or involvement of the Internet as an excuse to tax businesses that were previously out of bounds.

For example, the Vermont Department of Taxes argues that an out-of-state company running an "electronic mall" must collect taxes on all sales made to Vermont residents -- even if the server is not located in the state.
Opponents of Internet taxation say jurisdiction is a critical issue -- wondering who a New Jersey customer would pay, for example, if a resident of Wisconsin files incorporation papers in Delaware, makes production and shipping arrangements with a factory in Arizona and sets up a web site on a server in Tennessee.
The U.S. Constitution grants Congress the authority to regulate interstate commerce to eliminate the problem of states erecting trade barriers against one another.
Legal experts point out that Congress has already preempted state and local taxation involving interstate motor carriers, pension income, air and securities commerce, satellite television and utilities.

**Source: Grover Norquist (Americans for Tax Reform), "Enough Internet Taxation," Washington Times, April 24, 1998.

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