Subject: State telecom round-up
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked]
Date: Mon, 22 Nov 1999 01:18:00 -0800 (PST)

Let 'Em See Something In Writing 

?????Hurricane Floyd was creeping its way up the coast to New York City when 
the Advisory Commission on Electronic Commerce held its last meeting 
mid-September. Sensing impending travel catastrophes coupled with a mass 
exodus down the shoreline to Washington after the session's adjournment, the 
group appeased a eleventh-hour call from Utah Gov. Michael Leavitt, R, to 
request proposals from the public on how to best deal with the prospect of 
taxing e-commerce. And this week, after around 30 proposals were submitted to 
the commission, a different kind of storm began to brew. 
?????Consumer advocacy groups, local government organizations and 
commission-watchers unleashed a flurry of press releases and media events to 
announce their proposals, which were due to the commission on Nov. 15. Many 
of the submissions, which were called to meet a set of 18 criteria ranging 
from "meeting constitutional muster" to "radically simplifying the sales tax 
system," responded to Leavitt's plan. Also due on that date were comments to 
be considered for the report-drafting subcommittee's issues and options 
paper, which will serve as a compilation of ideas on the topic of electronic 
commerce and taxation for the entire commission to consider while it drafts 
its final recommendation. 
?????"What I think we're seeing is a tremendously positive development," said 
Jim Lucier, a Prudential analyst who worked with Americans for Tax Reform's 
Grover Norquist as he lobbied while the legislation creating the commission 
was being drafted. "Instead of constantly squabbling, you have important 
groups within the commission working hard to get majority positions." 
?????Because infighting has plagued the commission from its beginning, a 
majority may be the most difficult endeavor many of these groups have worked 
for. The 19-member commission needs a two-thirds majority vote to approve any 
recommendation, and the group already has shifted into pro- and anti-tax 
factions, with only a few still undecided. The proposals are making their 
rounds among the commission-members, and the next meeting is Dec. 14. While 
there are a host of groups that have submitted their propositions it appears 
that three are getting the majority of the commission's attention (and one, 
specifically, because it was drafted by the group's chairman, Virginia Gov. 
Jim Gilmore). Following is a synopses and analysis of the three plans that 
have the best chance of succeeding: 
	Title: Streamlined Sales Tax System for the 21st Century (Zero-Burden Plan) 
Sponsor: National Governors' Association, National Conference of State 
Legislatures, National Association of Counties, U.S. Conference of Mayors, 
Council of State Governments, International City County Management 
Association. While the remaining member of the "Big Seven" local 
organizations, the National League of Cities, has backed the proposal's 
intent, it is waiting until its annual meeting in December to vote on 
supporting it officially.
Description: The idea centers around establishing a "trusted third party," or 
tax clearinghouse, to collect and remit sales taxes based on the purchaser's 
tax jurisdiction. When an online order is placed, the seller would notify the 
clearinghouse and credit card company to determine the jurisdiction of the 
buyer. The third party would notify the seller of the appropriate tax amount, 
the credit card company would collect the funds and then remit the tax to the 
clearinghouse. The clearinghouse would then distribute the funds to the 
states and localities and would be paid by a percentage of what it collects. 
The third parties would be licensed by the state and the necessary software 
required of each vendor would be paid for by the state.
History: The plan was drafted after a series of marathon meetings by the 
local organizations that argue they are jeopardized because of lost sales tax 
revenues from e-commerce. Organizers of the proposal, which is being touted 
by Gov. Leavitt, say that regardless of the commission's final decision they 
will begin pushing the system to state legislatures for adoption. Under the 
Internet Tax Freedom Act, no new taxes may be applied to e-commerce, but 
existing taxes, such as sales and use taxes, are not covered. The sponsors 
say they do not need the commission's go-ahead in order to implement the 
system, which would be optional by state and would not require all 50 states' 
involvement to function. Comments: The plan is widely criticized by anti-tax 
advocates and those who believe that taxing e-commerce will stifle its 
growth. Others say that the pro-tax movement is only supported by the 
national government organizations and not their members, with Leavitt being 
the notable exception, and criticize it for not receiving many other 
individuals' support. But the organizations argue that unless states and 
localities have the right to determine revenue-raising activities, control of 
local services like education and law enforcement ultimately will be given to 
the federal government. "Thomas Jefferson would roll over in his grave" if 
that happens, Leavitt said. 
	Title: E-Freedom Coalition Proposal
Sponsors: The E-Freedom Coalition's membership involves over 20 
organizations, including Americans for Tax Reform, Citizens Against 
Government Waste, Competitive Enterprise Institute, Consumer Alert, Heritage 
Foundation, Progress and Freedom Foundation and State Policy Network. 
Description: The group supports a ban on collection of sales taxes on 
electronic commerce and the repeal of the 3 percent federal excise tax on 
telecommunications. It also would ban discriminatory Internet taxation and 
taxes on Internet access. The group endorses slashing local 
telecommunications taxes and wants to see interstate telecom property taxes 
reduced and controlled with federal protections. History: The E-Freedom 
Coalition unveiled its proposal at a joint press conference with legislation 
by House Budget Committee Chairman John Kasich, R-OH, that would ban Internet 
sales taxes. Kasich's Internet Tax Elimination Act, H.R. 3252, would make 
permanent the three-year moratorium on discriminatory Internet taxes passed 
in the Internet Tax Freedom Act. Fellow Ohio Republican John Boehner joined 
Kasich in sponsoring the measure. Comments: Americans for Tax Reform's 
Norquist has led the anti-tax movement on the commission. Stan Sokul, an 
independent consultant for the Association for Interactive Media was also on 
hand to support the proposal. Advocates are promoting the plan by saying it 
would protect consumers' privacy by not collecting personal information from 
users to determine tax jurisdictions. 
	Title: No Internet Tax
Sponsor: Virginia Gov. Jim Gilmore, R, chairman of the Advisory Commission on 
Electronic Commerce Description: Gilmore's proposal is almost identical in 
ideology to the E-Freedom Coalition plan. He maintains Congress should ban 
all sales and use taxes on e-commerce and protect businesses from state 
income and business activity taxes simply because of their virtual presence 
in a state. Gilmore also has proposed the elimination of the 3 percent 
federal excise tax on telecommunications and has called for the federal 
government to give states $1.7 billion each year for the lost revenue from 
the repeal of sales taxes on e-commerce transactions. He also has proposed 
that states be allowed to use federal welfare money to purchase computers and 
Internet access for needy families.
History: Gilmore's outline was submitted to the policies and options paper 
that the commission is preparing, not under the call for proposals suggested 
by Leavitt. But because he is the chair of the commission and had maintained 
that he would remain neutral, Gilmore's actions have received criticism from 
many on the state and local side of the debate. But he has defended his 
actions. "After hearing dozens of experts on an entire range of e-commerce 
issues, I felt it was time to put forward my vision. It can be summarized in 
three words: No Internet Tax," Gilmore said in a recent speech. Observers 
have speculated that Gilmore's plan could be meshed with the E-Freedom 
Coalition's to come up with a proposal agreeable to both parties. And 
suggestions such as the welfare provision even have appeased pro-tax groups, 
which have said solutions such as those may be the most agreeable for a 
consensus statement. Comments: The National Association of Counties and other 
local groups remain opposed to the plan's provisions calling for the federal 
government to allot funds to localities. "The fact remains that Gilmore's 
proposal means county officials will be even more dependent on state and 
federal governments to fund their local services," said NACo's Executive 
Director Larry Naake. "This isn't my idea of returning more control and 
authority to the local citizen." *by Stephanie Lash