Over the past several years, the US Congress has treated the Internet as the fair-haired boy of American industry.
In 1998, lawmakers enacted a ``moratorium'' that protects Internet businesses from federal and state taxes on everything from user access to downloading data, ostensibly to nurture an infant industry. They're about to renew it for five more years.
``What's been happening is that both parties have been competing for the high-tech sector -- for contributions and for votes,'' said Andrew Laperriere, political economist at International Strategy & Investment, explaining the congressional largesse.
The politicians also want to bask in the Internet's popularity, Laperriere said. ``They want to show they `get it' with the New Economy,'' he said. ``The only issue that gets more support on Capitol Hill is that of saving the family farm.''
Now, debate is heating up over a controversy that was sidestepped in the 1998 legislation, yet goes to the heart of how far lawmakers should venture in shielding the Internet from the taxes that burden other US industries.
The question is whether states should be able to collect sales taxes on transactions made over the Internet, as they do in the case of brick-and-mortar stores. States -- and some non- Internet businesses -- argue they should. On-line firms say no.
Important issue
The issue is important. So far, e-commerce, as on-line sales are known, has been getting something of a free ride. On-line vendors are able to offer customers deals unencumbered by sales taxes and -- in some cases -- shipping and handling charges.
Although on-line sales still constitute a relatively small portion of the economy -- they totaled US$8.7 billion last year, according to the Commerce Department, about 1 percent of all retail sales in the US -- they're expected to grow rapidly.
While the 1998 law didn't specifically prohibit states from collecting sales taxes on Internet transactions, the US Supreme Court outlawed it in a ruling in 1992, and lawmakers have been pushing to reverse that as part of any new legislation.
Yet, compromise is proving elusive. This week, the Senate Commerce Committee canceled a bill-drafting session scheduled for yesterday morning because panel members couldn't agree on how to handle the state sales-tax issue.
The 1998 law expires in October and must be renewed if the other protections that Congress has erected against Internet taxation are to continue. On the surface, the sales-tax issue seems simple. If retail stores must collect state taxes on over-the-counter sales, then it's only fair that Internet transactions follow the same rules. And why should states lose sales tax revenue, advocates argue? Yet, it's not quite that cut and dried, analysts say. While on-line sellers don't usually collect sales taxes, they sometimes charge for shipping and handling, which for purchases below US$150 add on more than sales taxes ordinarily would take. Indeed, the retailers themselves are split, concedes Frank Julian, operating vice president of Federated Department Stores Inc, which owns Macy's, Bloomingdale's and other big shopping-mall anchors and is active in interstate sales as well.
Right now, 7,600 state and local governments impose sales taxes, each with different rates and exemptions, Julian points out. Collecting them all would be a nightmare, he says -- even with today's advanced computer software.
Sales tax issue
Catalog vendors aren't required to collect state sales taxes on orders from states where they have no on-the-ground outlets, but in cases where they've built local stores to supplement their mail-order business, they must collect sales tax for that state.
``The real issue is whether states are willing to simplify their sales-tax rules,'' Julian said, with each state adopting a single set of rates and rules that would cover both its own sales tax and those imposed by its localities.
Indeed, it was this kind of complexity that the US Supreme Court cited in prohibiting states from imposing sales taxes on so-called remote transactions, such as on-line sales. It said forcing firms to follow so many sets of rules would be unfair.
The difficulty is, it isn't easy for some states to make such changes, says Stan Sokul, a tax specialist with Davidson and Company, a Washington firm that has been following the controversy closely.
Wyoming has moved toward working out a single standard, but New York -- whose biggest city has its own ideas about sales taxes -- undoubtedly would find it harder. Persuading the bulk of the states to go along is proving an even more difficult job.
As sometimes happens in Washington, the Commerce Committee's stalemate centers on an even narrower issue: Whether to require the states to consolidate their tax systems before or after Congress grants them authority to collect taxes on e-commerce.
Panel split
Panel members are split over competing proposals -- and apparently are unwilling to yield. A similar issue exists over how far a state's reach on business activity taxes should go. Would locating a server within its borders constitute a local outlet? What will happen over the next few weeks still isn't clear.
Laperriere predicts that eventually lawmakers will simply shelve the sales tax issue again and renew the 1998 legislation. The House already has voted overwhelmingly to extend the moratorium.
If the 1998 bill isn't renewed, it will open up the Internet to a variety of previously prohibited taxes, Sokul predicts -- including levies on access charges and taxes on downloading information. In that case, most analysts say, states would make token moves to simplify their tax systems and throw the case back into the courts. ``In the long-run, the Internet will be taxed,'' Laperriere said. Just not before the next election.
‘UNITED FRONT’: The married couple allegedly produced talk show videos for platforms such as Facebook and YouTube to influence Taiwan’s politics A husband and wife affiliated with the China Unification Promotion Party (CUPP) were indicted yesterday for allegedly receiving NT$74 million (US$2.32 million) from China to make radio and digital media propaganda to promote the Chinese government’s political agenda and influence the outcome of Taiwan’s elections. Chang Meng-chung (張孟崇) and his wife, Hung Wen-ting (洪文婷), allegedly received a total of NT$74 million from China between 2021 and last year to promote candidates favored by Beijing, contravening the Anti-Infiltration Act (反滲透法) and election laws, the Chiayi District Prosecutors’ Office said. The couple acted as Beijing’s propaganda mouthpiece by disparaging Hong Kong democracy activists
EARLY ARRIVALS: The first sets of HIMARS purchased from the US arrived ahead of their scheduled delivery, with troops already training on the platforms, a source said The Ministry of National Defense (MND) yesterday said it spotted 35 Chinese military aircraft, including fighters and bombers, flying to the south of Taiwan proper on the way to exercises in the Pacific, a second consecutive day it has reported such activities. The Chinese Ministry of National Defense did not respond to a request for comment on the missions, reported just days before tomorrow’s US presidential election. The US is bound by law to provide Taiwan with the means to defend itself. Its arms sales to Taipei include a US$2 billion missile system announced last month. The MND said that from 9am yesterday,
A Control Yuan member yesterday said he would initiate an investigation into why the number of foreign nationals injured or killed in traffic incidents has nearly doubled in the past few years, and whether government agencies’ mechanisms were ineffective in ensuring road safety. Control Yuan member Yeh Ta-hua (葉大華) said in a news release that Taiwan has been described as a “living hell for pedestrians” and traffic safety has become an important national security issue. According to a National Audit Office report released last year, more than 780,000 foreign nationals were legally residing in Taiwan in 2019, which grew to more than
‘SOMETHING SPECIAL’: Donald Trump vowed to reward his supporters, while President William Lai said he was confident the Taiwan-US partnership would continue Donald Trump was elected the 47th president of the US early yesterday morning, an extraordinary comeback for a former president who was convicted of felony charges and survived two assassination attempts. With a win in Wisconsin, Trump cleared the 270 electoral votes needed to clinch the presidency. As of press time last night, The Associated Press had Trump on 277 electoral college votes to 224 for US Vice President Kamala Harris, the Democratic Party’s nominee, with Alaska, Arizona, Maine, Michigan and Nevada yet to finalize results. He had 71,289,216 votes nationwide, or 51 percent, while Harris had 66,360,324 (47.5 percent). “We’ve been through so