This story was written by Keith Dawson for the Industry Standard's Media Grok email newsletter. It is archived here for informational purposes only because The Standard's site is no more. This material is Copyright 1999-2001 by Standard Media.

The Net on Net Taxes

May 01 2001 08:16 AM PDT

The Internet looks likely to remain a federal-tax-free zone, but the state-tax question is more complex.

The congressional moratorium on (some forms of) Internet taxation is expiring this fall, so it's easy to find stories about federal and state moves to tax online transactions - or to ban such taxes forever.

Everyone agreed that the current moratorium - which applies only to Internet access taxes and taxes that single out the Internet - will probably be extended by a number of years. Confusion arose when reporters talked to different parties and factions and came to different conclusions about the likelihood of state sales taxes on Net transactions.

Newsfactor's John L. Micek enumerated the various Net tax proposals filed in the House and Senate. Some of the bills would extend the existing limited moratorium, and some would make it permanent. Some would make it easier for states to collect sales taxes on Internet transactions, and some would forbid it.

Interactive Week's Doug Brown focused on negotiations between two senators who are sponsoring pro-tax and anti-tax bills. Brown quoted a spokeswoman from the National Retail Federation (pro-tax, natch) and concluded that sales taxes are likely to come to the Net. Wired ran an Associated Press story that arrived at the opposite conclusion, ending with this quote from Rep. Billy Tauzin (R-La.): "I think people would like to keep this thing on the burners so states are encouraged to work this out. I really don't see us doing much more than extending the current law."

The Los Angeles Times pursued the California angle. State law requires companies with a brick-and-mortar presence in California to collect sales tax on Web sales to Californians. It seems that some companies, such as Barnes & Noble, evade this requirement by running their Web sales through out-of-state subsidiaries. The Times' George Skelton profiled the dogged efforts of state Rep. Carole Migden to close the loophole over the opposition of Gov. Gray Davis, who vetoed Migden's identical legislation last year. Skelton's piece bordered on the editorial, closing this way: "Davis wants to be seen as a futuristic, New Age pol. ... But he can manage that without tromping on his Democratic roots as protector of the little guy."

Lawmakers Mull Yet Another Net Tax Plan

E-Sales Taxes Are Coming

Congress Wrestles With Net Taxes (AP)
Wired News

How Sales Tax Is Falling Through a Loophole
Los Angeles Times