Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

1

1

2

3 Issues and Policy Options Paper

4

5 Introduction 

6

7 Congress created the Advisory Commission on Electronic Commerce (the "Commission") to 

8 study a wide variety of issues involving taxation of electronic commerce including both domestic 

9 and international. The Commission's statutory mandate calls for "a thorough study of federal, 

10 state and local, and international taxation and tariff treatment of transactions using the Internet 

11 and Internet access and other comparable intrastate, interstate or international sales activities." 

12 Congress provided the Commission 18 months to undertake this broad examination, after which 

13 the statute requires the Commission to "transmit to Congress for its consideration a report 

14 reflecting the results, including such legislative recommendations as are required to address the 

15 findings of the Commission's study...."

16

17 Pursuant to the Commission's Work Plan, this Policy Issues and Options paper attempts to record 

18 and synthesize the major policy issues and alternative resolutions of those issues that the 

19 Commission process has raised thus far. The appearance of any of the proposals, issues, options, 

20 or areas of potential agreement in this paper should not be interpreted as approval by the 

21 Commission. Rather, the descriptions constitute the first step toward reaching a set of consensus 

22 recommendations to be transmitted to Congress in a final report. The Commission reviewed the 

23 proposals submitted in response to the Commission’s listed criteria, and distilled from those 

24 proposals and the public hearings issues and options. This document represents those areas that 

25 the Commission believes merit further discussion.

26

27 Through the Commission hearings and testimony, receipt of public comments including 

28 proposals, and dialogue among Commissioners, some common themes have surfaced. These 

29 themes are likely to guide the Commission’s debate and discussion as it works to resolve the 

30 important policy issues identified throughout this paper. Following is a proposed list of themes 

31 that are candidates for consensus.

32

33 1. It is in the national interest to establish an environment that continues to foster innovation 

34 and technological advancement in the development of the Internet and electronic commerce. 

35 The aggressive and innovative manner in which United States' businesses have embraced the 

36 Internet is a major national asset. Such national interest merits federal, state and local 

37 policymakers' review of laws and regulations affecting the growth of electronic commerce.

38
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

2

39 2. Any federal policies in this area should be respectful of the sovereignty of state and local 

40 jurisdictions and be respectful of interstate commerce. The best way to strike the balance 

41 between national and state interests will be through earnest and open debate of issues and 

42 options by representatives of federal, sub-federal and private sector participants.

43

44 3. With or without a federal mandate, state and local governments should make every effort to 

45 simplify current sales and use tax systems. The complexity of current sales and use tax 

46 systems fosters non-compliance, often imposes uncompensated burdens on businesses and 

47 others in the tax system, and has the potential to stifle increased investment in the Internet. 

48 Multiple audits should be avoided and overlapping tax and regulatory regimes should be 

49 harmonized to facilitate cooperation and trust among public officials, businesses and 

50 taxpayers as well as reduce administrative burdens.

51

52 4. The interests of all parties – federal, state and local governments, businesses of all sorts and 

53 consumers – are best served by a tax system that is efficient and fair. The advent of electronic 

54 commerce raises new issues for traditional state and local tax systems, and such systems 

55 must be adapted to the changing environment if they are to continue to remain viable in the 

56 21st century. 

57

58 5. The interests of all parties – federal, state and local governments, businesses of all sorts and 

59 consumers – are best served by a strong and vibrant Internet economy. The advent of 

60 electronic commerce raises new issues for the way government operates and taxes people, 

and both must be adopted to the changing environment if they are to remain viable in the 21st 61

62 century.

63

64 6. At this time, it does not appear that there is any compelling reason to impose taxes 

65 exclusively targeted at electronic commerce.

66

67

68 7. State, local and federal governments often grant tax preferences to certain forms of business, 

69 marketing and commerce for a variety of public purposes. Internet commerce produces 

70 significant benefits affecting the general public. A central policy question for governments at 

71 all levels is whether those benefits produced by Internet commerce justify similar preferential 

72 tax treatment, or whether there should be tax treatment that neither advantages nor 

73 disadvantages electronic commerce.

74

75 8. Governments should keep tax burdens on American consumers and businesses as low as 

76 possible, and should recognize the role of state and local governments to continue providing 

77 needed services to their citizenry.

78

79 9. The Internet is not only an important and useful tool for electronic commerce; it is becoming 

80 a medium for the transmission of medical development and practice, educational materials 

81 and other essential information. Policymakers at all levels of government should strive to 

82 ensure that the benefits of the Internet are available to all citizens, regardless of geographical 

83 location or economic circumstances. In order to ensure access to all individuals and 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

3

84 businesses, the cost of access and transmission should be kept as low as possible and not be 

85 subject to excessive taxes or government regulation.

86

87 10. As electronic commerce continues to grow and government policies are formulated, 

88 policymakers at all levels of government should be particularly mindful to respect consumer 

89 privacy rights. 

90

91 11. In order to foster the growth of electronic commerce, any recommendations for change 

92 should remove financial and logistical burdens on sellers. 

93

94 12. Any federal, state or local tax policy should not undermine United States global 

95 competitiveness in Internet commerce generally or any particular business sector specifically.

96

97 13. Any national policies adopted regarding international taxes and tariffs on Internet commerce 

98 should bolster United States global competitiveness. 

99

100 These guiding themes are the basis for the discussion of the specific issues that the Commission 

101 has identified to try and resolve in the coming months. 

102

103 For purposes of this document, the term, “Transaction Taxes” includes any sales tax, use tax 

104 excise tax, or other tax or fee imposed on a per-transaction basis.

105

106
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

4

106

I. International Tax & Tariff Issuesi107

108

109 Defining the Issue

110 What recommendations should the Commission make to Congress regarding international tax 

111 and tariff policies?

112

113 Policy Options

114

115 1. Work toward harmonization of certain basic principles.

116

117 • Inconsistent basic tax policies may impede or limit the international growth 

118 potential of electronic commerce.

119 • Nondiscriminatory and neutral taxation of electronic commerce are two 

120 fundamental principles that should be adopted worldwide in order to ensure that 

121 electronic commerce serves as a viable trade vehicle between different countries.

122 • Jurisdictional and administrative rules should be harmonized so that tax 

123 administrators can coordinate collection and remittance of Transactional Taxes 

124 due with respect to cross-border transactions. Harmonization should ensure that 

125 no taxable transaction is subject to double taxation or no taxation.

126

127 2. There should be no international taxes on electronic commerce. 

128

129 • The United States should oppose the imposition of any international taxes on 

130 Internet-based sales and transactions originating in the United States. 

131 • The Administration should vigorously oppose discriminatory taxes by foreign 

132 countries on U.S. sales conducted electronically, including bit and byte taxes.

133

134 3. Recommend a Tariff-Free Internet. 

135

136 • Tariffs on international commerce are by definition discriminatory imposts. 

137 • The administration of tariffs on electronic commerce, particularly the transfer of 

138 digital products and services, would be extremely difficult if not impossible. 

139 • The United States has been a leader in international trade discussions in winning 

140 acceptance of the Internet and electronic commerce as a "tariff-free zone." 

141 • Due to the potentially discriminatory effects of such tariffs and the compliance 

142 issues associated with them, the Commission should encourage the federal 

143 government to continue its pursuit of a ban on tariffs on electronic transmission in 

144 international trade negotiations. 

145

146

147

148 4. Recommend continued federal leadership. 

149
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

5

150 • The federal government by law and institutional role has, and must continue to 

151 play, the leadership role in negotiating for U.S. interests in international trade and 

152 tax organizations and fora. 

153 • It is especially important that the U.S. government consult state and local 

154 governments and others in discussions involving the taxation of electronic 

155 commerce since, currently, the most pressing international discussions involve 

156 consumption taxes, and the primary U.S. consumption tax is the state and local 

157 sales tax.

158 • The Commission should encourage the U.S. government to establish an active, 

159 ongoing vehicle for communication with the various interests regarding the 

160 international tax and trade issues affecting electronic commerce and involving 

161 such interests actively in these discussions. This would enable the federal 

162 government to be apprised of the positions and concerns of the state and local 

163 governments and others as they participate in international discussions as well as 

164 provide a vehicle for the U.S. government to insure that domestic interests are 

165 able to keep abreast of actions being taken internationally. 

166

167

168 Area of Potential Agreement

169 In order for electronic commerce to serve as a viable trade vehicle between different 

170 countries, the international harmonization or adoption of certain basic principles should 

171 be encouraged. For example, non-discriminatory and neutral taxation of electronic 

172 commerce should be an internationally adopted principle.

173

174 Area of Potential Agreement

175 Tariffs are inherently discriminatory and are aimed at protecting one country's goods and 

176 services to the detriment of another country. The United States should refrain from 

177 imposing tariffs on electronic transmissions and should encourage other countries to 

178 follow suit.

179
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

6

II. Tax Treatment of Internet Accessii 179

180

181 Defining the Issue

182 Should Congress leave as is, increase, or decrease the authority of state and local governments to 

183 impose Transaction Taxes on the sale of Internet access? 

184

185 Policy Options

186

187 1. Extend the moratorium on taxing Internet access set forth in the Internet Tax Freedom Act 

188 for five additional years, while modifying the Act to prohibit states already taxing Internet 

189 access from collecting such taxes.

190

191 • Nothing has changed since the original moratorium was passed.

192 • Congress needs more to time to solve the potential double tax problem posed by 

193 taxing Internet access.

194 • Extending the moratorium will enable e-commerce, which is a relatively new and 

195 emerging industry, a chance to develop without the market distortions caused by a 

196 haphazard tax structure.

197 • Extending the moratorium will prevent it from lapsing prior to the conclusion of 

198 national dialogue about if or how e-commerce should be taxed.

199 • Currently, states are flush with revenue and thus there is no need for an alternative 

200 source of revenue. 

201

202 2. Prohibit state and local governments from imposing any Transaction Taxes on the sale of 

203 Internet access. (Repeal any existing Transaction Taxes and impose no new taxes on access.)

204

205 • Keeping the cost of access to the Internet as affordable as possible will promote 

206 interstate commerce and universal access to this medium. 

207 • Taxing Internet access represents a discriminatory, "multiple" taxation because it 

208 is, in essence, already taxed once when Internet service providers pay sales tax to 

209 telecommunications providers for backbone transmission service 

210 • Taxing Internet access may contribute further to the "digital divide," because it 

211 increases the price of access, making access less affordable particularly for lower 

212 income people, which, in turn, would result in their being technologically 

213 disadvantaged. 

214 • Taxing access in addition to taxing items sold over the Internet may slow the 

215 growth of the Internet. 

216

217 3. Permit state and local governments the option of imposing Transaction Taxes on Internet 

218 access. 

219

220 • The goal of preserving state and local government sovereignty prevails over the 

221 need for congressional intervention. 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

7

222 • There is no fundamental reason to provide favored treatment to this kind of 

223 transaction over similar types of transactions. Other services that are important to 

224 the growth of our economy are taxed and, similarly, Internet access should not be 

225 favored. 

226 • Given the lack of a compelling administrative or policy rationale for an 

227 exemption, states should be free to impose the general sales and use tax on such 

228 transactions if they so choose. Some states have chosen to impose their sales and 

229 use taxes on a broad range of service transactions or on a broad range of 

230 information services. 

231 • Excluding Internet access from sales/use tax would complicate compliance and 

232 administration, because Internet access is commonly bundled with other 

233 (presumably taxable) products. 

234

235 Area of Potential Agreement

236 Internet access should not be subject to any Transaction Taxes.

237
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

8

III. Tax Treatment of Telecommunications Service Providersiii 237

238

239 A. Transaction Taxes 

240

241 Defining the Issue

242 Telecommunications service providers are currently subject to a complex federal, state and local 

243 tax system that evolved prior to the development of electronic commerce. The current system, in 

244 some cases, imposes burdensome taxes on telecommunications services when compared to other 

245 businesses. Likewise, it often discriminates among providers within the general category of 

246 telecommunications because not all providers of similar services are subject to the same tax 

247 regime. Should the current telecommunications tax system be simplified as part of a 

248 comprehensive plan that addresses the taxation of access to electronic commerce?

249

250 Policy Options

251

252 1. Dramatically simplify the current telecommunications Transaction Tax system (including 

253 filing and auditing procedures) with the result being that state and local governments would 

254 be required to standardize procedures, definitions, limit the number of Transaction Taxes, 

255 and repeal the 3% federal excise tax imposed on communications services. 

256

257 • Advances in technology ensure that there will be a variety of vehicles available 

258 for accessing the Internet (e.g., telephone lines, satellite, and cable). The 

259 Commission (or Congress) should consider all possible backbone transmission

260 vehicles together and should ensure that consumers are not discriminatorily taxed 

261 on the method of transmission through which they choose to receive Internet 

262 access. 

263 • Administratively burdensome taxes on telecommunications service providers 

264 increases the cost of transmission services to consumers, potentially increasing 

265 the digital divide and reducing the number of consumers who can participate in 

266 the growth of electronic commerce.

267 • Sound tax policy does not justify singling out any industry to bear a 

268 disproportionately large burden for raising revenues for states and localities. 

269 • The reasons for implementing this complex excise tax structure, and the 

270 underlying economic structure on which it was premised (i.e., a rate-regulated 

271 monopoly) no longer exist. 

272

273 2. Reduce taxes on the current telecommunications structure, with the first step being to 

274 eliminate the 3% federal excise tax on communications services. 

275

276 • Comprehensive telecommunications tax reform should be considered as part of a 

277 much more in-depth study (which would include a review of fees imposed on the 

278 industry - an area outside the scope of this commission.) Notwithstanding, the 3% 

279 federal communications excise tax should be eliminated now, because it is an 

280 easily identified burden on the telecommunications industry and consumers. 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

9

281 • American consumers would benefit because the cost of telecommunications 

282 services could be reduced in a competitive market to reflect savings in company 

283 overheads. Reduction in telephone costs reduces the cost for some to log-on to the 

284 Internet. 

285 • The purpose for which this tax was initially imposed no longer exists. Congress 

286 first enacted a 3% federal excise tax on each consumer's local and long-distance 

287 telephone service as part of the Spanish War Act of 1898 to fund America's effort 

288 in the Spanish-American War. 

289

290 3. Create incentives for state and local governments to simplify telecommunications taxes by 

291 distributing revenues from the 3% federal telecommunications excise tax to state and local 

292 governments in exchange for a reduction in the level and complexity of state and local 

293 telecommunication taxes. 

294

295 • State and local governments would be in a much better position to simplify and 

296 reduce their telecommunications taxes if the revenue losses were minimized by 

297 distribution of the 3% federal excise tax.

298 • One option would allow the tax to be phased-out gradually. The federal 

299 government would immediately eliminate 2% of the 3% federal excise tax and 

300 would continue the tax at 1% for three additional years. At the conclusion of 

301 three years, the federal excise tax would be completely abolished.

302 • In return for simplifying their existing taxes, state and local governments would 

303 be ceded a new revenue stream from the federal government amounting to $1.7 

304 billion (based on1999 figures) this year and doubling to $3.4 billion ten years 

305 from now. Those funds would compensate states and localities for any sales taxes 

306 foregone to Internet-based commerce.

307 • States that do not simplify state and local telecommunications taxes would not be 

308 ceded the 1% federal tax and would lose the chance after three years when the 

309 federal tax would automatically be abolished at the federal level.

310

311 4. Encourage state and local governments to work cooperatively with the telecommunications 

312 industry to reduce complexity and cost of complying with telecommunications taxes; adopt 

313 tax policies that consistently treat like-services (i.e. telephone, information, data and content) 

314 without regard to the manner in which the services are delivered (i.e. telephone lines, cable, 

315 or wireless); and, adopt a uniform means of treating "bundled" telephone, cable, Internet and

316 other services (i.e. those that include items that are taxable and those that are not taxable in a 

317 single price.) 

318

319 • Tax reform of converging technologies is something that should be first attempted 

320 by the affected industries and state and local governments. The recent Mobile 

321 Telecommunications Sourcing proposal is an example of how industry and state 

322 and local governments can work together to develop a solution to a complex and 

323 complicated tax problem. 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

10

324

325 5. Recommend no change in the way local, state and federal taxes are applied to

326 telecommunications, cable and the Internet backbone.

327

328 • The various patterns of telecommunications taxes across states and the manner in 

329 which they are integrated into the state and local revenue system probably make it 

330 extremely difficult for a single, mandated approach to reform. 

331 • A "one-size fits all" approach to state and local telecommunications tax reform 

332 would lead to serious revenue dislocations in some states. 

333 • Other industries also bear high tax burdens; there is precedent for placing high tax 

334 burdens on some industries compared to others. 

335 • The federal excise tax produces substantial revenue and eliminating it must be 

336 considered in light of other tax and governmental priorities.

337

338

339 Area of Potential Agreement

340 Eliminate the 3% federal excise tax on communications and support an in-depth 

341 examination of comprehensive telecommunications tax and fee reform, with an eye 

342 towards simplification. Any reform in this area must be examined in light of revenue and 

343 budgetary implications. 

344

345

346 B. Property Taxes

347

348 Defining the Issue

349 Should Congress prohibit state governments from imposing higher property tax burdens on 

350 interstate telecommunications property than on other general business property? 

351

352 Policy Options

353

354 1. Recommend prohibiting state governments from singling out interstate telecommunications 

355 property for higher ad valorem taxation by enacting federal legislation extending 4-R 

356 property tax treatment to telecommunications carriers (and other industries involved in 

357 Internet backbone transmission infrastructures) engaged in interstate commerce. 

358

359 • Interstate telecommunications companies should be afforded the same tax 

360 treatment as their competitors for property tax purposes. Tax discrimination will 

361 be eliminated and investments and expansion of the Internet encouraged. 

362 • Any excessive taxes on the backbone infrastructure may restrict access to the 

363 Internet either through higher costs to users or under-investment in capital 

364 expansion in backbone infrastructure. 

365

366 2. Preserve states authority to determine the nature and level of ad volorem tax on interstate 

367 telecommunications property. 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

11

368

369 • The interests of state and local governments in preserving their sovereignty 

370 outweigh the need for federal intervention. 

371 • In some jurisdictions, this could impose a tax shift on non-telecommunications 

372 properties. In other situations, some state and local governments could 

373 experience revenue losses.

374 • Other industries also bear disproportionately high tax burdens; there is a 

375 precedent for placing higher tax burdens on some industries compared to others.

376

377 Area of Potential Agreement

378
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

12

378 IV. The Application of Transaction Taxes to Sales Conducted 

Through the Internet

iv 379

380

381 A. Tax Treatment of Tangible Personal Property and Taxable Services 

382

383 Defining the Issue

384 Should Congress leave as is, increase, or reduce the authority of state and local governments to 

385 impose Transaction Taxes on sales of tangible personal property and taxable services sold 

386 through the Internet? If Congress does intervene, to what extent should it mandate simplification 

387 of the existing sales and use tax administration system? 

388

389 Policy Options

390

391 1. Extend the moratorium of the Internet Tax Freedom Act for five additional years, while 

392 modifying the prohibition against sales and use taxes to prohibit all sales taxes on Internet 

393 business to consumer sales of tangible or intangible goods and property, intellectual property, 

394 digital goods, services, securities, information and entertainment.

395

396 • Nothing has changed since the original moratorium was passed.

397 • Extending the moratorium will enable e-commerce that is a relatively new and 

398 emerging industry a chance to develop without the market distortions caused 

399 by a haphazard tax structure.

400 • Extending the moratorium will prevent it from lapsing prior to the conclusion 

401 of national dialogue on how e-commerce should be taxed.

402 • Currently, states are flush with revenue and thus there is no need for an 

403 alternative source of revenue. 

404

405 2. Recommend making no change in state and local governments’ authority to impose 

406 Transaction Taxes on sales of tangible personal property facilitated by the Internet. Taxes 

407 would be imposed by state and local governments in the same manner and to the same extent 

408 as they impose Transaction Taxes on sales facilitated through any other means (including 

409 face-to-face retail sales and mail order sales). 

410

411 • The Internet is simply another vehicle for transacting business and no overriding 

412 policy reason justifies allowing transactions conducted via the Internet to enjoy 

413 tax-favored treatment. 

414 • The Internet Tax Freedom Act requires this Commission to issue 

415 recommendations that are tax and technologically neutral. Recommending a tax416 free Internet is arguably not neutral.

417 • With future advances in technology, more businesses may transact business 

418 electronically while conducting business in the traditional "brick and mortar" 

419 manner. Requiring businesses to treat electronic commerce and remote sales 

420 differently than other sales will increase administrative burdens for sellers. 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

13

421 • A "no change" recommendation allows state and local governments the autonomy 

422 to impose sales/use tax in a manner consistent with current nexus standards and 

423 allows all forms of commerce to proceed as they currently do. 

424 • Because Congress has no responsibility for the delivery or non-delivery of state 

425 and local services, Congress should choose to refrain from making decisions that 

426 impact tax revenues used for such services.

427

428 3. Recommend pre-empting state and local governments' authority to tax sales of tangible 

429 personal property or services via the Internet, making such sales exempt from any 

430 Transaction Taxes. 

431

432 • The growth of electronic commerce and the value of the Internet as a whole 

433 would be substantially diminished if transactions were burdened by Transaction 

434 Taxes. 

435 • The current complex sales and use tax system places an substantial burden on 

436 interstate commerce, which should, at least until fundamental simplification 

437 measures are actually implemented, override the state and local government 

438 interests in exercising their sovereign powers to impose taxes on Internet sales.

439 • In certain circumstances, vendors may not be able to comply with the existing tax 

440 system, such as when the situs of a transaction is unknown.

441 • As a vehicle with which to conduct commerce of all forms, the Internet presents 

442 tremendous potential for future economic growth that should not be impeded by 

443 the imposition of state and local governments' complex sales/use tax systems.

444 • Pre-emption of state and local governments' authority to impose sales/use tax may 

445 provide an element of consumer tax relief. 

446 • Pre-emption of state and local governments' authority to impose sales/use tax on 

447 all electronic commerce may foster innovation, technological growth, and 

448 economic prosperity. 

449

450 4. Recommend prohibiting all sales and use taxes on business-to-consumer Internet transactions 

451 by amending the Internet Tax Freedom Act to prohibit all sales taxes on Internet business to 

452 consumer sales of tangible or intangible goods and property, intellectual property, digital 

453 goods, services, securities, information, and entertainment. 

454

455 • The temporary moratorium contained in the Internet Tax Freedom Act should be 

456 extended to a permanent prohibition against the imposition of tax burdens on 

457 business-to-consumer electronic commerce. 

458

459 5. Encourage the development and implementation of a voluntary system for collecting 

460 sales/use taxes on electronic commerce and remote sales that would eventually utilize 

461 advanced technologies to overcome certain complexities and would eliminate the financial 

462 and logistical tax collection burdens and liability of the seller. 

463
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

14

464 • A recommendation incorporating fundamental simplification of sales/use tax 

465 systems with a shifting of tax collection burdens from the seller to an approved 

466 third party agent of the state recognizes both the seller’s need for user-friendly tax 

467 systems and government’s need for revenue to fund basic services; it establishes a 

468 new business paradigm for business and government alike. 

469 • A program whereby a third party, approved by and acting on behalf of the states, 

470 bears the burdens of tax collection, reporting and liability holds a number of 

471 potential advantages, including virtually eliminating all burdens currently 

472 imposed on sellers. While such a recommendation requires states to bear the 

473 economic burdens of implementation and approved third party charges, it 

474 preserves the sales/use tax system in an electronic environment, and allows for the 

475 real time remittance of taxes. 

476 • Using advanced technologies to overcome some of the current complexities 

477 serves to protect state and local governments’ discretion and sovereignty, and it 

478 does not favor one form of commerce over another.

479 • This recommendation could be expanded to include traditional “brick and mortar” 

480 commerce. 

481 • The national interest in an efficient marketplace and a vibrant state and local 

482 sector may argue that the federal government should provide financial assistance 

483 to the development and implementation of such a voluntary system.

484 • This option requires no change to current nexus standards. 

485

486 6. Recommend requiring state and local governments to simplify sales/use tax systems in a 

487 manner meeting certain federally mandated requirements negotiated by interested public- and 

488 private-sector parties in consultation with federal policymakers. 

489

490 • A recommendation for simplification conforming to federally mandated 

491 requirements provides nationwide consistency and certainty for sellers. 

492 • Federally mandated requirements strike a balance between jurisdictional 

493 sovereignty and the national interest of sustaining and promoting the information 

494 highway to electronic communication. 

495

496 7. Recommend imposing a nationally collected, single rate, uniform sales/use tax on electronic 

497 commerce and remote sales in lieu of all sales/use taxes; all revenues to be shared with state 

498 and local governments. 

499

500 • If required to collect sales/use tax in all jurisdictions, electronic commerce and 

501 remote sellers would face multiple rates, laws/rules that are inconsistent from 

502 state to state, and multiple administrative agencies. 

503 • A recommendation to impose a nationally collected sales tax provides simplicity, 

504 a single nationwide rate, uniform definition and registration, and a single party 

505 responsible for collection/administration/distribution of revenue. 

506 • Although this recommendation does not preserve the sovereignty of state and 

507 local governments, it does assure that tax is being paid/collected on all taxable 
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

15

508 sales. It would also provide a vehicle for offsetting any revenue dislocations 

509 currently being occasioned. 

510

511

512 B. Taxation of Digitized Goods 

513

514 Defining the Issue

515 Should Congress leave as is, reduce, or eliminate state and local governments' authority to 

516 impose sales/use tax on electronic commerce transactions involving transfers of digitized goods 

517 (e.g., videos, music, and software?) 

518

519 Policy Options

520

521 1. Recommend states and local governments retain the authority to tax or exempt digitized 

522 goods in a manner consistent with tangible goods and taxable services. 

523

524 • The conversion of tangible personal property into digitized goods does not change 

525 the essence of what is being sold and therefore does not provide an overriding 

526 policy reason for allowing them tax-favored treatment. 

527

528 2. Recommend pre-empting state and local governments' authority to impose sales/use tax on 

529 those electronic commerce transactions involving transfers of digitized goods. 

530

531 • The invasiveness of the necessary enforcement system outweighs the revenue 

532 effects of foregoing taxation. Because of the interests in neutrality, such a 

533 recommendation should be accompanied by a concomitant exemption for sales of 

534 comparable tangible goods. 

535 • The difficulty (or even impossibility) of determining the identity and the location 

536 of the consumer of digitized goods makes the imposition of sales and use taxes to 

537 these transactions virtually impossible without requiring the consumer to provide 

538 the requisite information to analyze the taxation of such a transaction. 

539

540 3. Impose a central or federal sales tax on sales of digitized goods and, by formula, distribute 

541 the revenue to the states. 

542

543 • A central or federal tax treats digitized goods in a manner consistent with their 

544 tangible counterparts, yet resolves the issue of determining where the sale occurs. 

545

546 Area of Potential Agreement

547 There should be no taxes on digitized goods. 

548

549

550 C. Nexus Concerns 

551
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

16

552 Defining the Issue

553 If Congress intervenes with regard to state and local governments’ authority to impose 

554 Transaction Taxes on sales of tangible personal property and taxable services conducted or 

555 performed through the Internet, should the existing nexus standards be applied to such 

556 transactions for purposes of determining a seller's obligation to collect and remit such taxes? 

557

558 Policy Options

559

560 1. Recommend preserving the status quo: out-of-state merchants making sales of tangible 

561 personal property facilitated by the Internet should not be required to collect Transaction 

562 Taxes if they do not meet the “substantial nexus” standard articulated in Quill v. North 

Dakota. 1563

564

565 • The national interest in not burdening interstate commerce and permitting the 

566 natural growth of electronic commerce overrides the state and local government 

567 interests in preserving or increasing their sales and use tax revenue base. 

568 • Out-of-state sellers should not be required to collect transaction taxes for states in 

569 which they do not utilize the governmental services funded by such taxes, and in 

570 which they have no political representation. 

571 • The growth of electronic commerce may be impeded and the value of the Internet 

572 as a whole may be substantially diminished if the current system of sales and use 

573 taxes were imposed on electronic commerce. 

574 • The Supreme Court's interpretation of nexus standards has not changed. The 

575 current state and local sales/use tax system is non-uniform and uncoordinated 

576 among the more than 7,600 different tax jurisdictions. Exporting tax collection 

577 responsibilities beyond state borders would be unfairly burdensome on interstate 

578 merchants who have no “substantial nexus” in a taxing state and would be 

579 incompatible with electronic commerce. 

580 • The states desire to preserve its tax system, designed prior to the Internet era, 

581 provides no rationale for Congress to extend to them National taxing powers.

582

583 2. Recommend redefining existing nexus standards to provide state and local government with 

584 expanded authority to impose tax collection duties on out-of-state sellers, even though the 

585 sellers have no physical presence in the taxing state. 

586

587 • Establishing a nationwide collection obligation would provide a simple, certain 

588 solution to current nexus disputes, would foster a level playing field among 

589 competing retailers selling into the same marketplace and would protect state and 

590 local governments' sales tax revenue base from eroding. 

591 • The lower cost to consumers of tax-free sales over the Internet may make it the 

592 preferred means of purchase, and possibly hurt sales of retailers who choose not 

593 to sell over the Internet.

594

 

1

 Quill v. North Dakota, 504 U.S. 298 (1998)
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

17

595 3. Recommend clarifying existing nexus standards by identifying, with greater precision than 

596 under current law, the business activities in which taxpayers involved in interstate commerce 

597 may engage without being subject to state and local tax collection obligations. 

598

599 • The implementation of fundamental simplification of the sales and use tax system 

600 combined with nexus clarification would result in increased voluntary compliance 

601 with tax collections and reduced administrative burdens for sellers. 

602 • Such a standard would create uniform rules defining what activities allow a state 

603 or its political subdivision to tax or impose collection responsibilities on out-of604 state businesses. 

605 • It should also provide a list of specified activities that an out-of-state business can 

606 conduct within a state that will not subject it to taxation by the state in which the 

607 activities are conducted. 

608 • It should apply to all state taxes and not be limited to sales taxes or Internet 

609 transactions. 

610 • One option would be to specify the activities that should not create tax nexus. 

611 These would include, but are not limited to: solicitation of orders or contracts, 

612 shipment of goods, presence of intangible properties, the use of the Internet, ISPs, 

613 or servers, the affiliation with another entity, the use of an unaffiliated 

614 representative or independent contractor. 

615

616 Area of Potential Agreement

617

618
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

18

V. Impact on Business Activity Taxesv

618

619

620 Defining the Issue

621 Should bright-line standards be adopted to identify certain situations in which a taxpayer would 

622 be deemed not to have sufficient nexus for Business Activity Taxes (e.g., income, gross receipts, 

623 franchise taxes)? 

624

625 Policy Options

626

627 1. Recommend adopting bright-line standards for Business Activity Taxes nexus including 

628 extending the protections of P.L. 86-272 to all state and local government taxation.

629

630 • The business community’s concerns over being subjected to unfair income or 

631 business activity taxes has been heightened by recent court rulings in several 

632 states that impute “substantial nexus” in various legal contexts due to their virtual 

633 or electronic presence.

634 • States traditionally have imposed their corporate income and related business 

635 activity taxes only upon businesses that physically exist in their jurisdictions. The 

636 Internet, however, makes companies ubiquitous, and more state tax collectors 

637 have begun to impute “substantial nexus” to companies due to their virtual or 

638 electronic presence, or due to their ownership of equipment needed solely to 

639 transfer information in a cyber economy.

640 • Such standards would help minimize the likelihood that state and local 

641 governments would inadvertently discriminate against electronic commerce 

642 businesses. 

643 • The existing federal statute that provides such a bright-line test was written more 

644 than 40 years ago and needs to be updated to account for modern changes in the

645 economy, particularly the advent of the Internet and electronic commerce. 

646 • Such standards would provide express protection to companies that sell 

647 intangibles, services and information in addition to the current protection for only 

648 the sale of tangible goods.

649 • A company that owns only intangible property in a state would not have 

650 "substantial nexus " in a state and would not be subject to income or business 

651 activity taxes in that state.

652 • For the past 30 years, states have shown a complete inability to deal with this 

653 problem, which is why federal preemption is required.

654

655

656 2. Recommend no change in current business activity taxes.

657

658 • Existing standards based on interpretations of the U.S. Constitution’s commerce 

659 and due process clauses have worked reasonably well.
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

19

660 • Different standards that effectively exempt aspects of the new economy from the 

661 payment of business taxes may increase pressure on the taxation of in-state 

662 taxpayers. Multistate business may be favored over single-state businesses.

663 • This could reduce revenues that are currently being collected. States that rely on 

664 business activity taxes and not on sales and use taxes could be affected 

665 disproportionately.

666 • Any change in the current standards could encroach upon the state and local 

667 governments' powers to interpret the nexus standards within their jurisdiction. 

668 States could address any problems themselves rather than requiring federal 

669 intervention.

670

671 3. Recommend requiring electronic commerce businesses to pay Business Activity Taxes on a 

672 basis reasonably equal to all other businesses earning income in a state by encouraging states 

673 to develop uniform apportionment methods for all enterprises, including those conducting 

674 electronic commerce, and by adopting nexus standards for all businesses based on clear and 

675 certain levels of economic activity. 

676

677 • Neutral tax policies that treat all types of businesses in a comparable manner are 

678 the tax policy most likely to maximize economic growth over the long term. 

679 • Business activity taxes are a "true" benefits received tax and should be 

680 proportionate to economic activity. 

681 • Nexus standards based on clearly specified levels of economic activity are true 

682 "bright line" standards that cannot be manipulated by either taxpayers or tax 

683 authorities and ensure equitable treatment of all businesses competing in a state's 

684 marketplace. 

685 • P.L. 86-272 (15 USC § 381 et. Seq.) is more than 40-years old and was intended 

686 to be temporary in nature and therefore its continued viability should be 

687 examined.

688

689

690 Area of potential Agreement

691
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

20

691

692 VI. Redress Mechanism for Imposition of Unconstitutional State 

and Local Taxesvi 693

694

695 Defining the Issue

696 Should Congress establish a mechanism to ensure that taxpayers can obtain effective and timely 

697 redress for the states’ imposition of unconstitutional taxes? 

698

699 Policy Options

700

701 1. Congress should act to ensure that in the e-commerce environment taxpayers are entitled to 

702 receive refunds, and reasonable attorney fees, in cases where state taxes, or tax exemptions, 

703 may be unconstitutional. 

704 • States sometimes impose unconstitutional transaction and business activity taxes 

705 that discriminate against out-of-state firms. States sometimes continue to impose 

706 these taxes, or fail to provide meaningful redress, even when such taxes have been 

707 ruled illegal by the Supreme Court.

708 • The existing redress procedures are burdensome, complex and unfair, and 

709 obtaining refunds is virtually impossible. 

710 • The Tax Injunction Act made sense in a cash register economy, but should be 

711 updated, because the existing system of taxpayer redress is particularly 

712 problematic in the e-commerce environment. The Internet provides even the 

713 smallest firms with national market access, but currently only large businesses 

714 have the wherewithal to challenge unconstitutional tax assessments. Small firms 

715 have no practical recourse but payment for unconstitutional tax assessments that 

716 discriminate against out-of-state businesses. 

717 • Congress should act to ensure that meaningful redress exists when 

718 unconstitutional taxes are imposed. Otherwise, states have no incentive to alter 

719 their behavior, and the problem will only grow larger as e-commerce continues to 

720 grow. 

721

722 2. Congress and the Supreme Court have spoken in this area; the standards and requirements are 

723 clear. No further intervention is necessary. 

724

725 • The U.S. Supreme Court has clearly spoken on the issue of refunds and remedies. 

726 In McKesson Corp. v. Division of Alcoholic Beverage Control [496 U.S. 18 

727 (1990)], the Court held that if states do not provide a "predeprivation remedy" 

728 (i.e., an opportunity to enjoin collection of tax or withhold payment), then they 

729 must provide "meaningful backward looking relief." Such relief may be in the 

730 form of refunds or other acceptable means of undoing the damage caused by the 

731 unconstitutional statute. To suggest that states may simply "refuse to pay refunds" 

732 is extremely misleading in light of the jurisprudence in the area. 

733 • The proposal raises serious Tenth and Eleventh Amendment issues.

734
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

21

735 • The proposal upsets the delicate balance that the states and the federal 

736 government have reached in the important area of state taxation. Developing 

737 special remedy rules for a special set of taxpayers has the potential to create 

738 inconsistent understandings of state law.

739 • Just because the party that did not prevail takes issue with the court's decision 

740 does not mean that the decision is wrong or that Congressional intervention is 

741 necessary. 

742 • A "one-size-fits-all" remedy is not appropriate for this highly complex area of law 

743 where many competing interests are involved. 

744 • This issue is beyond the scope of the Commission's charge. 

745

746 Area of potential Agreement

747

748
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

22

VII. Digital Dividevii 748

749

750 Defining the Issue

751 What steps should Congress take to reduce, with the goal of eliminating, the Digital Divide and 

752 empowering needy families in rural America and inner cities to participate in the Internet 

753 economy?

754

755 Policy Options

756

757 1. Amend federal welfare guidelines to permit states to spend Temporary Assistance to Needy 

758 Families (TANF) Surpluses to Buy Computers and Internet Access for Needy Families.

759

760 • Due to the success of welfare-to-work reforms and the booming economy, welfare 

761 rolls have been reduced dramatically across the United States. Consequently, 

762 many states have accumulated surpluses of federal TANF funds. 

763 • Under federal statutes and regulations, states arguably could use TANF funds to 

764 empower needy parents and their children with computers and Internet access. 

765 • TANF surplus funds are a rational and available source of funds to accomplish 

766 this objective without increasing taxes and without creating all-new entitlement 

767 programs. 

768 • Poor families should have the same tax-free opportunity to purchase clothing and 

769 food, to invest in securities, and to obtain critical information about employment 

770 and educational opportunities as anyone else. 

771

772 Area of potential Agreement

773
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

23

773 ENDNOTES

774 * Proposals cited are not endorsements by the Commission. These materials 

775 provide resources from which the Commission has distilled some of the

776 issues and options contained in this document.

777

 

I. International Tax & Tariff Issues

•

i Alistair Kelman, “The easyClear White Paper” (Proposal # 98)

II. Tax Treatment of Internet Access

•

ii Governor Jim Gilmore, chairman and commissioner, “No Internet Tax” (Proposal 

#107)

• e-Freedom Coalition, “The e-Freedom Coalition’s Proposal” (Proposal # 138)

• U.S. Representative, John Kasich, Small Business Survival Committee, “Internet Tax 

Elimination Act” (Proposal # 144)

• James M. Goldberg, North American Retail Dealers Association, “A Proposal from 

the North American Retail Dealers Association,” (Proposal #145)

III. Tax Treatment of Telecommunications Service Providers

•

iii Jeffrey A. Eisenach, “The High Cost of Taxing Telecom” (Proposal #51)

• Commissioner Dean Andal, “A Prohibition of Discriminatory Ad Valorem Taxation of 

Interstate Telecommunications” (Proposal #104)

• Governor Jim Gilmore, chairman and commissioner, “No Internet Tax” (Proposal #107)

• Air Touch, ALLTEK, Bell Atlantic, BellSouth, CommNet Cellular, Global Crossing, 

GTE, SBC, Sprint, US West, Western Wireless, “Proposal for State and Local Taxation 

of the Telecommunications Industry” (Proposal #124)

• e-Freedom Coalition, “e-Freedom Coalition’s Proposal to the Advisory Commission on 

Electronic Commerce” (Proposal #138)

• Commissioner Dean Andal, “A Uniform Jurisdictional Standard: Applying the 

Substantial Physical Presence Standard to Electronic Commerce” (Proposal 146)

IV. The Application of Transaction Taxes to Sales Conducted 

Through the Internet

•

iv Robert D. Atkinson, Progressive Policy Institute, “Internet Taxation” (Proposal #66)

• Wayne Eggert, “Electronic Commerce; Modernization and Sales Tax Simplification 

Proposal” (Proposal #102)

• Paul Francisco, TaxNet systems, Inc., “Sales and Use Tax Collection on Interstate 

Purchases” (Proposal #106)

• Governor Jim Gilmore, chairman and commissioner, “No Internet Tax” (Proposal #107)
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

24

 

• Andrew Wagner, “Proposal of an Origin Based Tax Solution for the Possible Taxation of 

Digitized Products Sold Over the Internet” (Proposal #108)

• Austin W. Dunn, “Multijurisdictional Electronic Commerce Taxation Proposal” 

(Proposal #109)

• Joseph F. Taricani, Interstate Solutions, LLC “The Simplification of Collections and 

Remittance on Remote Consumer Sales” (Proposal #110)

• David Polatseck, Data Processing Center, “Sales Tax Simplification Proposal (Proposal 

#112)

• Charles E. McClure, “Radical Simplification of State Sales and Use Taxes: The 

Prerequisite for and Expanded Duty to Collect Use Tax on Remote Sales” (Proposal 

#113)

• William Olders, Data Kinetics, Ltd. ,“A Foundation for Automating the Taxation of ECommerce” (Proposal #114

• David Hardesty, “Sales Use Tax: Creation of the Multistate State Tax Service” 

(Proposal# 115)

• ATRACS Corp. “ATRACS Corporation” (Proposal #116)

• Ronald E. Knox, Esalestax.com, “Proposal to Address Issues of State and Local Taxation 

of Internet Transactions for the Advisory Commission on Electronic Commerce” 

(Proposal #117)

• John M. Peha, “Proposal on Taxation of Electronic Commerce” (Proposal #119)

• Daniel L. Sullivan, Taxware International, Inc. “Adapting Tax Technology to the Internet 

– the eCommerce Transaction Tax Server” (Proposal # 120)

• Kaye Caldwell, CommerceNet, “A State Cooperative Approach to Collection of Use 

Taxes in Interstate Commerce” (Proposal #122)

• Hal R. Varian, “A Proposal to Eliminate Sales and Use Taxes” (Proposal # 125)

• Senator Ernest F. Hollings, “Sales Tax Safety Net and Teacher Funding Act, S. 1533” 

(Proposal # 126)

• Danielle Bujnak, Independence Forum, “Proposal for Advisory Commission on 

Electronic Commerce” (Proposal # 127)

• William F. Willbrand, MPP&W Consultants, “Sales/Use Tax Settlement System” 

(Proposal # 128)

• Thomas A. McGuire, “The Zip Code Tax” (Proposal #132)

• Clifford A. Farmer & Gregory M. McCauley, The Sales Tax Clearinghouse, “Proposal 

from the Sales Tax Clearinghouse” (Proposal # 133)

• Governor, Michael O. Leavitt, commissioner, National Governors Association, National 

Conference of State Legislatures, Council of State Governments, National Association of 

Counties, The United States Conference for Mayors, International City/County 

Management Association, “Streamlined Sales Tax System for the 21st Century” (Proposal 

#134)

• David A. Lifson, American Institute of Certified Public Accountants, “The Proposal from 

the American Institute of Certified Public Accountants, “American Institute of Certified 

Public Accountants” (Proposal #135)
Final Draft Submitted to the Commission 

from the Report Drafting Subcommittee

12-3-99

3401 North Fairfax Drive • Arlington, VA 22201-4498 • 703-993-8049 • Fax: 703-993-8250 

Web site: www.ecommercecommission.org

25

 

• Diann L. Smith, Committee on State Taxation, “Proposal from the Committee on State 

Taxation” (Proposal #136)

• Richard N. Kappler, Global Crossing, Ltd., “A Proposal for Fostering the Fast and 

Efficient Development and Operation of Internet Web Hosting Facilities” (Proposal 

#137)

• The e-Freedom Coalition, “The e-Freedom’s Coalition’s Proposal” (Proposal # 138)

• eCommerce Coalition, “Simplification of the state and Local Sales and Use Tax System” 

(Proposal #139)

• William McArthur & Peter Merrill, “A Modest Principle: No Net NetTax” (Proposal # 

141)

• Representative John Kasich, Small Business Survival Committee, “Internet Tax 

Elimination Act” (Proposal # 144)

• James M. Goldberg, North American Retail Dealers Association, “A Proposal from the 

North American Retail Dealers Association,” (Proposal #145)

• Commissioner Dean Andal, “A Uniform Jurisdictional Standard,” (Proposal #146)

v Quill v. North Dakota, 504 U.S. 298 (1998)

V. Impact on Business Activity Taxes

•

vi Commissioner Dean Andal, “A Uniform Jurisdiction Standard” (Proposal #146)

• Hal R. Varian, “A Proposal to Eliminate Sales and Use Taxes” (Proposal # 125)

• Air Touch, ALLTEK, Bell Atlantic, BellSouth, CommNet Cellular, Global Crossing, 

GTE, SBC, Sprint, US West, Western Wireless, “Proposal for State and Local Taxation 

of the Telecommunications Industry” (Proposal #124)

• Diann L. Smith, Committee on State Taxation, “Proposal from the Committee on State 

Taxation” (Proposal #136)

• Richard N. Kappler, Global Crossing, Ltd., “A Proposal for Fostering the Fast and 

Efficient Development and Operation of Internet Web Hosting Facilities” (Proposal 

#137)

VI. Redress Mechanism for Impostion of Unconstituional State

and Local Taxes vi

VII. Digital Divide

•

vii Governor Jim Gilmore, chairman and commissioner, “No Internet Tax” (Proposal 

#107)