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E-commerce panel leaves tax issue unresolved

The congressional panel studying Internet taxes wraps up its business with no surprises.

The congressional panel studying Internet taxes wrapped up its business today with no surprises.

Meeting via a conference call, the Advisory Commission on Electronic Commerce voted to send a report on to Congress. But the panel didn't resolve its differences over the sticky issue of Internet sales taxes.

Congress established the panel through the Internet Tax Freedom Act of 1998 and charged it with looking into the issues of taxes on Internet sales, taxes on Web access and international tariffs on Internet use. The commission is required to submit a report to Congress by April 21.

The commission needed a two-thirds vote to make a formal recommendation to Congress. In its report, the commission will formally recommend that Congress extend the current moratorium on international tariffs, study how new sales taxes on e-commerce would affect consumers' privacy, and work with local governments and private corporations to close the so-called digital divide.

But the commission failed to get the two-thirds approval on many of the matters before it. Instead, the commission will include what is essentially a majority report. In the panel's meeting in Dallas earlier this month, a majority of commissioners voted to urge Congress to extend the current moratorium on new Internet taxes, ban the 3 percent federal excise tax on telecommunications that dates back to the Spanish-American War, push states to simplify their sales taxes, and clarify when businesses would be required to collect sales taxes.

The proposals that gained majority approval were backed by an anti-tax coalition on the panel led by Virginia Gov. James Gilmore and by a coalition of business leaders that included AT&T chairman Michael Armstrong. Utah Gov. Mike Leavitt led a group of federal, state and local members of the commission who opposed the majority proposal.

Throughout the meeting in Dallas, the different sides tried to negotiate a compromise that would receive the votes of two-thirds of the members. Although those discussions continued between various members up until today's vote, members were unable to reach an agreement.

Today's vote on the report mirrored similar votes in Dallas; the business and anti-tax commissioners voted to approve the report and send it on to Congress, while Leavitt's group voted against approving the report. Although a majority voted for the report, it did not receive a two-thirds vote.

In addition to the vote on the report, the commission voted down a request to include a minority report in its findings and decided not to consider any other matters during the meeting other than the report itself.

Despite the division on the panel, Gilmore, who chaired the commission, said the panel's work was a success and would be well-received in Congress.

"There's a lot of interest in the Congress in our report," Gilmore said. "I believe it will be persuasive document."