The eyes of the electronic commerce community will be on the Advisory Commission on Electronic Commerce (ACEC), which is holding its first meeting this evening in Washington D.C. It is the first step in determining how Congress will treat the issue of taxing Internet transactions in the near future. The commission will be open to a variety of plans for how to handle Internet taxation.
Local Associations are fearful that the commission could recommend that states and localities should not be able to tax electronic commerce. They plan to attend the meeting, but with "plans to observe only," said Ralph Tabor, assistant legislative director for the National Association of Counties (NACo).
"Quite a bit of their meeting is procedural," he said. "We're not really anticipating that much is going to be happening there except a discussion of the issues and how the commission is going to operate."
How the commission with operate itself is an issue that almost led to a lawsuit when the ACEC was first established, due to several local associations who claimed the group was unfairly biased toward
pro-business entities who would like to reduce or eliminate state and local authority to collect taxes on Internet transactions.
NACo, the NGA, the National Conference of State Legislatures, the Council of State Governments, the US Conference of Mayors, the National League of Cities and the International City/County Management
Association have restated that they believe "state and local governments have the ability and the desire to achieve sales and use tax simplification without a federal preemption."
If the ACEC makes a recommendation to Congress that there should be no new Internet taxes, many state and local jurisdictions could be crushed. If Internet commerce is as successful as many research firms predict, it could possibly cause the downfall of the physical-world retail market, leading to less revenue for states and localities.
Pro-business interests claim that different jurisdictions could apply so many taxes to a single Internet transaction that it could completely end the development of online commerce.
Earlier this year, the NGA adopted a policy to try to reach a unified system of state and local taxation on Internet transactions, a step toward limiting multiple tax jurisdictions. Meanwhile, Internet Tax Freedom Act, which puts a three-year moratorium on new online taxes while the ACEC studies the issue already has States and localities squirming.
Because the Internet is not solely based in the US, the so-called Big Seven of local and state associations sent a letter last month to commission members, asking them to come up with international agreements that "could protect American firms from discriminatory tax regimes" in non-US trading partners.
"The governor is aware of the different views on Internet taxation," said Mark Miner, spokesman for Virginia Gov. James Gilmore, R. "That's the point of this whole conference...to work together to develop a plan that will work." The meeting will likely result in Gilmore officially being named the chairman of the commission.
"There are different plans out there," Miner added. "Some of the (ACEC) members don't want to tax the Internet. Some do. The goal is to get everybody's advice and to work together as a group to look at these
issues."