URBAN ECONOMIC POLICY

INTERNET TAX MORATORIUM

WHEREAS, since the Spring of 1997 numerous proposals have been introduced in Congress to impose a moratorium on state and local taxes on Internet and other forms of electronic commerce; and

WHEREAS, because the tax laws and regulations of most state and local governments were established long before the advent of the Internet, their application to this new medium could have unintended consequences; and

WHEREAS, state and local governments recognize the vital importance of the Internet and advance communications systems for all levels of governments, and realize the need for a coordinated simplified tax structure that will not impede the growth of the Internet and electronic commerce; and

WHEREAS, state and local governments have demonstrated their support for the development and growth of the Internet by not enacting Internet-specific taxes, and several states have passed laws in recent years exempting the Internet from various state and local taxes; and

WHEREAS, representatives of national organizations that represent state and local governments (including the Conference), industry and academia are participating in the National Tax Association’s Communications and Electronic Project which is examining issues involving the application of state and local taxes to electronic commerce and developing recommendations to help states develop a more uniform, simplified tax system for electronic commerce; and

WHEREAS, after consulting with state and local leaders Representative Christopher Cox introduced a proposal on March 18, 1998 which was endorsed by the Conference and other national organizations representing state and local governments; and

WHEREAS, the House Commerce Committee approved a modified version of Representative’s Cox March 18 proposal on May 14 which incorporated many of the provisions from the earlier bill, calling for a 3-year moratorium on new Internet taxes, a grandfather clause to protect existing state (but not local) taxes on Internet access and online services, and establishing an Advisory Commission on Electronic Commerce to recommend ways to simplify how sales and use taxes are applied to electronic commerce; and

WHEREAS, the Conference continues to have serious concerns about a number of provisions in the modified version approved by the House Commerce Committee, including the lack of protection for existing local taxes, particularly the preemption of home rule authority granted cities and counties in some states; a federal mandate requiring states to pass new laws to reaffirm existing state taxes on Internet access and online services in order to maintain such taxes; and technical language contained in certain definitions,

NOW, THEREFORE, BE IT RESOLVED that The U.S. Conference of Mayors urges Congress to support Internet Tax legislation similar to the March 18 version offered by Representative Cox, which:

• establishes a 3-year moratorium on new Internet taxes;
• protects existing state and local sales taxes; and
• establishes a commission to recommend model legislation to simplify how state and local sales taxes apply to electronic commerce, and to enable state and local governments that simplify their tax system to collect taxes on remote sale; and

BE IT FURTHER RESOLVED, that The U.S. Conference of Mayors opposes provisions in any Internet Tax bill that would preempt local home rule authority granted cities and counties in some states to address their revenue needs.