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Industry Standard

Net-tax panel squabbles over budget

June 23, 1999
Web posted at: 1:44 p.m. EDT (1744 GMT)

by Elizabeth Wasserman internet tax

WILLIAMSBURG, Va. (IDG) -- A 19-member commission formed by Congress to study the divisive issue of Internet taxes will continue this week. The group's first-ever meeting began Monday, marked by some of the same fractiousness that delayed the panel's meeting for six months last fall.

The first order of business for the Advisory Commission on Electronic Commerce was to deal with administrative issues, such as deciding how the commission will be funded, approving a budget and hiring staff. But most of those issues were tabled until the panel's meeting today as members tried to hash out their differences.

The commission, created by the Internet Tax Freedom Act, which was signed into law last October, is supposed to study federal, state, local and international taxation and tariff treatment of Internet transactions, access and other types of activities. The Act imposed a three-year moratorium on new Internet taxation but it mandated that the panel report back with findings within 18 months. That 18-month period will expire on April 21, 2000.
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For the first six months, the commission was embroiled in controversy, as representatives of the nation's cities and counties filed suit, arguing that they were underrepresented. Congress determined that representatives of municipal governments and industry leaders would each take 8 seats on the panel, with the remaining three posts going to federal government officials. Former Netscape chief James Barksdale resigned from the commission this spring to make way for an additional agent of county government.

Pointing to the tension between industry, which wants to keep the Internet tax-free, and governments, which rely on taxation to fund programs, several panelists led by Utah Gov. Michael Leavitt argued that the group should discuss the administrative details more exhaustively. Virginia Gov. James Gilmore, who was elected chairman, had already hired an executive director and established a budget of nearly $1.9 million, noting that the panel has much work to do in less than a year. But while his state kicked in $150,000 in financing, some of the other panel members balked at the suggestion that they try to raise the remaining funds from their companies or institutions.

The group did vote to establish a five-member committee to determine where the remaining $1.7 million in financing could be found. "Several groups will have difficulty raising this kind of money," Leavitt noted. Some of the panel's corporate reps indicated that they would be willing to help make up the deficit, but that raised questions among the panel about the public's perception of whether the proceedings were fair.

"We don't want it to look like people are buying access [to the proceedings]," said David Pottruck, president of Charles Schwab, saying that the funds amounted to "rounding errors" at some of the bigger companies represented at the table. AT&T Chairman C. Michael Armstrong grinned.

"If you had 50 percent from AT&T and 50 percent from MCI ... that probably would not look good to the other industries," noted panel member John Sidgmore, vice chairman of MCI WorldCom.

Andrew Pincus, the representative from the secretary of commerce, suggested that all contributions and gifts be disclosed on the panel's Web site and that individual contributions be capped.

The full commission is expected to determine the source of its funding Tuesday. The money will be used to pay for an executive director and staff and to cover the costs of four meetings, which the panel expects to hold within the year. Subsequent meetings were proposed for New York City on Sept. 14 to 15, Silicon Valley on Dec. 14 to 15 and Texas on March 20 to 21.

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June 17, 1999
U.S. counties lodge class-action suit over Internet taxation
March 13, 1999
States, localities say Internet tax panel is stacked against them
March 2, 1999>BR>

Uncertainty surrounds first meeting of Net tax commission
Net tax commission gets down to business
Internet tax fight settled, local gov reps drop suit
Mayors threaten lawsuit over e-commerce tax panel
Gingrich knocks Net taxes, censorship
(The Industry Standard)
Net-tax panel stalled
(The Industry Standard)
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Advisory Commission on Electronic Commerce
Internet Tax Fairness Coalition
Internet Tax Freedom Act
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