August 3, 2001, 12:00 AM

A House subcommittee approves extending the Internet tax moratorium

The House Judiciary Committee’s Subcommittee on Commercial and Administrative Law has voted to extend the moratorium on Internet taxes. The legislation applies mainly to taxes on Internet access and did not address sales taxes, as some would like.

Kurt Peters

Executive Editor

The House Judiciary Committee’s Subcommittee on Commercial and Administrative Law voted this week to extend the moratorium on Internet taxes. The legislation applies primarily to taxes on Internet access and did not address the sales tax issue.

The extension to the legislation-known as the Internet Tax Freedom Act-must still be approved by the House Judiciary Committee, then the House and the Senate before going to the president for signature. This legislation was sponsored by Republican Rep. Christopher Cox of California.

The National Retail Federation and the Direct Marketing Association immediately cranked up their pr machines in response to the vote.

“If ITFA is reauthorized without addressing the sales tax issue, this issue may never be addressed and Internet and mail-order sellers will continue to have a government-sanctioned price advantage over Main Street retailers for years to come,” NRF Vice President for Government and Industry Affairs Scott Cahill said. “That is unfair not just for local retailers but the state and local governments that count on them for tax revenue and the countless community groups that depend on them for support of everything from Little League to charities. In an industry with profit margins as narrow as they are in retail, the lack of sales tax is a significant price advantage.”

"The moratorium`s extension will allow small business to develop and stretch their wings on the Internet," said H. Robert Wientzen, president & CEO of The DMA. "The extension will ensure that e-commerce can continue to compete and will go a long way to bridging the digital divide. The DMA is pleased that the subcommittee understands the critical need for the moratorium and the growth in business that it can foster."

Said George Wiedemann, president and CEO of Responsys Inc., and immediate past chairman of the Direct Marketing Association: “Yesterday’s vote is an important first step toward getting legislation to the president before October. Ecommerce is still in the early stages of development, and it’s vital that we allow this emerging source of economic activity time to mature without the burden of transactional taxation.”

While a Supreme Court ruling has exempted online retailers from collecting sales taxes, the sales tax issue has come up repeatedly during Congressional debates over Internet taxation. A competing bill in the House would extend the legislation to 2005, but it specifically addresses the sales tax issue by encouraging states and local governments to work out a streamlined sales tax approach.

Congress is now in recess and the soonest the issue could come before the Judiciary Committee would be after Labor Day.

 

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