- The Washington Times - Thursday, May 17, 2001

The moratorium on Internet taxation ends in October, and there are forces out there who would like to see the World Wide Web opened up for taxes. Fortunately there are a few voices denouncing taxes on the Internet. Sen. George Allen is one of them. Under legislation introduced by Mr. Allen there would be a permanent ban on these taxes.
There are actually three issues at hand. First is the access tax, the idea that everyone who logs onto the Internet would pay a tax for the privilege. The second issue is tax discrimination on Internet purchases. This would tax items that would normally not be taxed if you ordered them from a mail order catalog or from a store in a state that does not tax clothes. One such is Pennsylvania. The third issue is the so-called nexus of the purchase. This refers to the 1992 Quill decision in the U.S. Supreme Court that stated, which Internet taxes could be collected even if the merchant has no presence in the state, such as a store or a corporate headquarters. The court allowed a ban to stay in place until the states could figure out how to collect the taxes without interrupting interstate commerce. In 1998, however, Congress placed a moratorium on the taxes.
Of the competing bills on the issue, the Allen bill is the only one that would permanently ban Internet taxes in all three disputed areas currently under the moratorium. Mr. Allen is leading the charge against bills sponsored by Democrats Byron Dorgan and Ron Wyden. Both of these bills would have a short-term prohibition on the access and discrimination taxes, but would allow the states to come up with a plan to tax the businesses that dont even have a presence in the state. As Mr. Allen says, both of these bills take the wrong approach because, "If you, as a merchant, get no service from a state, such as fire or police protection, why should you pay taxes? The way I look at it is it is one of the few times that the pro-tax people care about Federalism and States rights. This is Interstate commerce and free trade among the states as guaranteed by the Constitution. The Internet is a free trade zone, but the government wants to compel the merchants to collect taxes. They want to hobble the growth of the Internet by making it easier to collect sales taxes."
The Allen bill is being supported by the Internet Freedom Coalition, a group which includes AOL and Microsoft, who also backed the 1998 moratorium. State governors are another matter, with only Bill Owens of Colorado, James Gilmore of Virginia, George Pataki of New York and Gray Davis of California aboard. That means that only a few smart politicians stand between the government and your money on the Internet. Lets hope Mr. Allen is able to buck the tide and get his bill though the gantlet.


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