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Tech Industry

More new Net taxes

Our new Internet commerce industry is already acting like any established market, rushing to Washington to grab special-interest tax breaks.

Sadly, our new Internet commerce industry is already acting like any established market, rushing to Washington to grab special-interest tax breaks. The "No New Net Taxes" slogan lumps us with others seeking corporate welfare in Washington.

It's the wrong message, if we believe our own rhetoric about how this medium is going to change the world. Are we freeloaders or not?

Don't feed me this drivel about being an infant industry that needs nurturing. The nature of corporate pork is that once a special-interest advantage is in place, it's very difficult to remove. Tax loopholes beget business PACs that raise campaign funds then showered on key members of Congressional committees that decide on loopholes.

Try this slogan: "We pay our share." The Internet industry's very existence owes greatly to government largess. Don't forget that federal, mostly military, research funds created the infrastructure that has evolved into today's Internet.

Notice too, that the Federal Communications Commission is preparing to collect a $2 billion-plus annual tax from telecommunications users to finance Internet connections for schools, libraries, and health clinics. Getting schools and libraries online is extremely important, but let's not pretend we don't notice the business benefit to Internet firms.

In software, they call it "market development funds." In real life, it means phone users are subsidizing connections for future Internet consumers.

The "No New Net Taxes" slogan, endorsed recently by President Clinton, now refers fairly specifically to legislation in Congress that would bar states and local jurisdictions from adding any special taxes on Internet transactions for a limited period, five years as of this writing.

Sounds reasonable, but it hides what we're really asking for. Internet tax foes want for themselves the same special-interest tax break that the print catalog companies have. Generally, mail order houses don't collect taxes on sales in most jurisdictions unless they have a physical presence there.

It's certainly fair enough for Internet merchants to ask for a level playing field, as CEO Jeff Bezos puts it, with the catalogers.

But from the perspective of a retailer with a store on Main Street or in the mall, where's the equity? Mom-and-Pop's shoe store has to collect sales taxes, and so does K-Mart.

But not (except in Washington state), not Eddie Bauer (ditto on Washington), not Lands' End (except in Wisconsin). In fact, Bezos picked Seattle for his home base in part because the state has a relatively small population. That way he maximized the number of customers who would slip through the catalog/Internet tax loophole.