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CEOs want e-tailers off hook for tax collecting

Executives from computer hardware companies are urging lawmakers to keep tax-collecting duties away from e-tailers, suggesting that tax authorities or credit card companies bear that responsibility.

Executives from computer hardware companies today urged lawmakers to keep e-tailers free of tax-collecting responsibilities.

In a paper submitted to a government advisory body, the Computer Systems Policy Project suggested that tax authorities or agents such as credit card companies should collect taxes on consumers' online purchases.

The group also urged simpler sales tax rules and global coordination of tax policies to avoid inhibiting e-commerce. New Internet technologies could help simplify tax collection online, it said.

Hardware companies generally don't collect sales taxes from consumers, because most of their computer sales are to businesses. But they fear that making e-tailers collect taxes could crimp the growth of online purchases and thus slow their own sales to Internet merchants.

The report was addressed to the Internet Tax Commission, an advisory group of business and government officials that was formed when a three-year Internet tax moratorium was signed into law by President Clinton last year.

In the United States, the question of taxing Net transactions has been hotly contested among representatives of state and local governments, many of them dependent on sales tax revenue. They argue that a lack of online taxation stands to hurt local merchants who do have to charge sales tax. Conversely, Internet and high-tech companies say Internet taxes could stunt the growth of e-commerce.

The Computer Systems Policy Project wields some political weight, though it has not been highly visible in Washington. Members are chief executives of a dozen major hardware companies including Hewlett-Packard, Silicon Graphics, Cisco Systems, Dell Computer, IBM, Intel, Sun Microsystems, NCR, Data General, Unisys, Apple Computer, and Compaq Computer.

On Monday, the group issued a paper arguing that technologies such as digital watermarks and cryptography could reduce the need for government intervention on eight e-commerce issues including privacy, "harmful" content, and intellectual property.

"If tax authorities assume responsibilities for determination and collection of tax, then a lot of the simplification issues are not the vendors' problem anymore," said Phil Servidea, a government affairs vice president at NCR who drafted the position paper. "If vendors are going be tax collectors, it absolutely has to be simplified."

But one industry lobbyist played down the significance of the effort, noting that taxation is a "horribly complex" area. "There's got to be a comprehensive package of tax reforms that sort of go along together before anything starts to work," said Mark Nebergall of the Software and Information Industry Association.

One issue complicating matters is that similar to mail-order companies, many Internet retailers don't levy sales taxes on purchases made by consumers who live in states where the e-tailer doesn't have a physical presence.

And the already-contentious issue of Net taxation is getting even more so. This week, an effort by the National Tax Association to come up with a fair tax system for e-commerce is close to falling apart. After a report Monday in USA Today said an e-commerce panel was close to proposing a dramatic change in how U.S. sales taxes are levied, the Internet Tax Fairness Coalition blasted government representatives for going public too soon.

"Unfortunately, the government representatives seem far too willing to give up on consensus building, even before the process truly gets started," said Carol Cayo, director of government affairs for the Information Technology Association of America.

In addition, research company Computer Economics said today that most online retailers are not prepared to deal with sales tax issues, nor are they ready to comply with a potential onslaught of requirements from taxing entities. The group predicts a protracted conflict that eventually will end up in court.

Servidea suggested the development of an online database so Web retailers and consumers could assess sales tax for transactions, similar to the way Internet addresses are translated. He also suggested that clearinghouses could keep local governments apprised of how much sales tax had been collected for them for online purchases.