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To: Pauly who wrote (956)	3/19/1998 11:13:00 PM
From: Tom Hua	Respond to of 4903

Compromise Emerges on Bill That Would Halt Net Taxation An INTERACTIVE JOURNAL News Roundup State and local government officials said they'll back a revamped House bill that would freeze taxes on Internet commerce. Groups like the National Governors' Association and the U.S. Conference of Mayors dropped their opposition Thursday after winning several changes to the legislation. Local officials feared the Internet Tax Freedom Act, as originally crafted, would devastate state and local revenues. "We want to ensure that as we accelerate into the world of electronic commerce, we do so in a manner that protects our Main Street merchants and prevents erosion of state and local tax bases," said National League of Cities President Brian O'Neill. The measure would place a moratorium on Internet taxes while a panel reviewed prospects for a new, simplified system for collecting state sales and use taxes. The House bill was authored by Rep. Chris Cox (R., Calif.). The new version would shorten the moratorium to three years, from the six years envisioned in the original bill. The moratorium wouldn't apply to Internet taxes in place by March 1; the original version didn't include that provision. "What remains intact is our purpose, which is to make sure that before the taxman gets there we stop him," Mr. Cox said at a press briefing announcing the agreement. "The Internet is not a place where the tax vultures will descend and start creating new ways to collect money that don't presently exist." The revamped measure would set up a congressional commission that would recommend new tax legislation two years after the bill becomes law. The panel would include state and local officials, the Commerce and Treasury secretaries and business leaders. Congressional leaders would appoint the chairperson. Backers say the panel's work would extend to catalog sales and other vexing tax issues. The commission would be asked to mull a uniform system of tax-related definitions and simplified tax procedures, including a single state rate on all remote commerce. The panel would also study ways to simplify interstate administration of sales and use taxes, including uniform tax registration, tax returns and filing procedures. "I believe we can put forward a system that will dramatically improve the way commerce is done in this country," said Utah Gov. Michael Leavitt, the president of the National Governors' Association. The moratorium envisioned in the new version of the bill would apply to taxes on Internet access, taxes on on-line services, "bit taxes" and "bandwidth taxes," as well as multiple or discriminatory taxes on electronic commerce. Mr. Cox said he expects the bill to reach the House floor before Congress recesses next month. But obstacles remain. Oregon Democratic Sen. Ron Wyden, who sponsored a companion bill, opposes the newly negotiated changes, an aide to the Senator said. The original legislation was prompted by fear that state and local officials were increasingly viewing the Internet as a potential cash cow. Lawmakers worried that growth of the global computer network would be stymied by a web of new taxes. "It's obvious to us that electronic commerce is the future, that these are the formative years," said Mr. Leavitt. "Governors of this nation want the Internet to grow in an uninhibited way and to be an economic force that it has the potential to become." The measure, controversial from the beginning, grew even more heated last month as cracks appeared in the governors' ranks and President Clinton was dragged into the fray. Several governors from states with large Internet businesses, including Virginia and California, objected that the idea would damage the information-technology market. The Clinton administration raised eyebrows last year by refusing to support the bill at the same time as it was touting an electronic-commerce report by a task force led by Ira Magaziner that advocated not imposing new taxation of the Net. Last month, Mr. Clinton came out in favor of the proposal, but called on the two sides to work to narrow their differences. On Thursday, Mr. Clinton hailed the new agreement as "an important and constructive step toward a long-term solution." "We cannot allow 30,000 state and local tax jurisdictions to stifle the Internet, but neither can we allow the erosion of the revenue that state and local governments need to fight crime and invest in education," Mr. Clinton said. The governors had opposed a six-year moratorium because they feared the Internet industry would move so quickly that Internet commerce would be routine by the time it expires, making the imposition of taxes after that point an impossibility.