A law banning Internet taxes until October 2001 would become permanent under new legislation two U.S. lawmakers intend to introduce.
Rep. Christopher Cox (R-Calif.) and U.S. Sen. Ron Wyden (D-Ore.) said they would file a bill to make the three-year moratorium on discriminatory taxes on the Internet permanent.
The moratorium, which took effect in October 1998, had the immediate effect of stopping a movement among some states to impose sales tax collection obligations on Internet service providers.
The bill also set up the Advisory Commission on Electronic Commerce, which is examining the issue of Internet taxation. That commission will complete its work next month in Houston.
This legislation, however, doesn't prevent states from collecting sales taxes from goods sold over the Internet, no more then it prevents sales tax collection on goods sold via mail or telephone order.
Under current court rulings, states can force a business to collect sales only if it has a physical presence in that state. Buyers, however, in all but a handful of states, are required to pay their states a "use tax" on each purchase.
Traditional brick-and-mortar retailers have been lobbying the commission to recommend a taxing scheme that would require Internet sellers to collect those sales. They say the current sales tax collection scheme discriminates against them.
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Yahoo's full coverage of Internet Taxes and Regulation
Advisory Comission on E-Commerce
An advisory body created by Congress. Makes recommendations on tax policies and the Internet.
Internet Tax Fairness Coalition
An alliance of business, consumer, retail, technology, and communications industry groups that supports the fair and equitable tax treatment of the Internet and online services.
National Tax Association Communications and Electronic Commerce Tax Project
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