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Anti-tax groups offer e-commerce plan

A coalition of anti-tax and consumer groups joins House Budget Committee chairman John Kasich to present a plan to a federal commission that would limit taxes on e-commerce.

A coalition of anti-tax and consumer groups joined House Budget Committee chairman John Kasich today to present a plan to a federal commission that would limit taxes on e-commerce.

In its proposal, the e-Freedom Coalition recommends that the federal government make permanent its current three-year ban on new "discriminatory" e-commerce or Internet access taxes.

The proposal comes in response to a call for Internet taxation plans by the Advisory Commission on Electronic Commerce. Established with the Internet Tax Freedom Act last year, the commission is set to examine the Net tax issue and make a recommendation to Congress by next April.

The new proposal also comes two days after Kasich (R-Ohio) introduced a bill that would ban any local or state sales taxes on e-commerce and also would extend the current ban on Internet access taxes. Presidential candidate Sen. John McCain (R-Arizona) introduced a similar bill in the Senate in September.

The new bills and proposals are part of a growing debate on Internet taxes. State and local officials have argued that the tax prohibitions discriminate against small offline businesses and could mean less money in state coffers for teachers, police, and other state services.

E-commerce spending is expected to reach $1.3 trillion by 2003, and much of that is coming at the expense of offline retailers, analysts say. That in turn could lead to less revenues for state and local governments.

But Kasich spokesman Bruce Cuthbertson said that these governments are raising taxes at record rates. And many local merchants are getting online through eBay, Amazon's zShops, and Yahoo's stores. State governments should stay out of the way of the e-commerce revolution, Cuthbertson said.

"The last thing we need is for them to interfere with growth rates of e-commerce," he said.

Meanwhile, the e-Freedom Coalition recommends that the government clarify when companies are required to pay taxes on e-commerce. Typically, state governments can assess taxes on companies that have a physical presence within them, but the laws on such taxes are unclear.

The coalition argues that under present laws a company could be taxed on an online sale by two different states. For example, the state of California could argue that Seattle-based Amazon owes it sales tax for transactions made by California residents. This problem hasn't cropped up yet, but the coalition says that laws should be drawn up to prevent such occurrences.

In addition, the coalition recommends that Congress prohibit the government from collecting data on individual consumer purchases.