E-Commerce: A Tax Collector's Dream

The Internet has grown rapidly. Users are expected to cause a huge growth in electronic commerce. Internet users represent an enormous and largely untapped market for entrepreneurs and providing services and products of all kinds. Recent data suggests that the number of people using the Internet for commercial purposes is growing even faster than the number of new people getting online. IntelliQuest.com indicates in 1998, 63% of U.S. Internet users made a purchase online, and 81% of U.S. Internet users planned to shop online during 1999.

The Internet Tax Freedom Act, was enacted in March 1997. It states in part, "information should not be taxed. As we enter the digital age, the age of information, establishing this principle in law will have profound and long-lasting consequences. Given the pace of the Internet's growth--the U.S. Commerce Department recently told us that the number of Internet users and the number of web pages are doubling every 100 days--protecting the Internet, and the information and commerce exchanged over the Net, from special and discriminatory taxation on a national basis will prove a further stimulus to the continued technological and commercial development of this dynamic new medium.

The Internet Tax Freedom Act is needed not just to give the Net room and time to grow, but also because the Net is inherently susceptible to multiple and discriminatory taxation in a way that commerce conducted in more traditional ways is not. The very technologies that make the Net so useful and efficient--notably its decentralized, packet-switched architecture--also mean that several States and perhaps dozens of localities could attempt to tax a single Internet transaction. The Internet Tax Freedom Act will protect commerce conducted over the Internet from being singled out and taxed in new and creative ways, and will give Americans the reassurance they need that they will not be hit with unexpected taxes and tax collecting costs from remote governments."

In addition to imposing a moratorium on U.S. taxation of the Internet, the Internet Tax Freedom Act also calls on the Clinton Administration to take more aggressive action internationally to keep the Internet free of foreign tariffs and trade barriers. At the July 1, 1997 press conference held to unveil the "Framework for Global Electronic Commerce," President Clinton endorsed the goal of making the Internet a "global free-trade zone." He also promised that his administration

would work aggressively to keep foreign tariffs and taxes off the Internet, and issued specific instructions to his top trade negotiators:

"I'm directing the Treasury Secretary, Bob Rubin, to negotiate

agreements where necessary to prevent new discriminatory taxes on

electronic commerce. I'm directing our Ambassador of Trade,

Charlene Barshefsky, to work within the WTO, the World Trade

Organization, to turn the Internet into a free-trade zone within the next

12 months."

The debate on the "Internet Tax" is ongoing. It is clear E-Commerce has enhanced the economy nationwide. Placing a tax would slow down this booming business substantially.