From: "E. Allen Smith" <EALLENSMITH@ocelot.Rutgers.EDU>
Date: Tue, 1 Oct 1996 08:39:38 +0800
To: cypherpunks@toad.com
Subject: [NEWS] More internet-tax proposals
Message-ID: <01IA3GIEKEYW8Y57AQ@mbcl.rutgers.edu>
MIME-Version: 1.0
Content-Type: text/plain


>     _________________________________________________________________
>   Centura
>     _________________________________________________________________
>     INTERNET BEWARE: GOVERNMENTS ARE SMELLING A RICH NEW SOURCE OF TAXES
>   __________________________________________________________________________
>      Copyright &copy 1996 Nando.net
>      Copyright &copy 1996 The Boston Globe
      
>   (Sep 25, 1996 8:06 p.m. EDT) If taxes are the price we pay for
>   civilization, the Internet is about to become a lot more civilized.
>   State and local governments are coming to see on-line computer
>   networks as a rich, new revenue source, and they want to cash in.
   
>   An official of the Massachusetts Department of Revenue said this month
>   on-line service providers that do business in the state should be
>   paying a 5 percent sales tax. Those who haven't been paying could face
>   audits, penalties and demands for back taxes.
   
>   The state of Tennessee has demanded on-line services doing business
>   there turn over their tax records and a count of how many customers
>   they have in the state. Cities in Texas and Colorado are considering
>   special on-line taxes. And a recent effort to slap a 6 percent tax on
>   Internet users in Tacoma, Wash., aroused so much public outrage that
>   city officials were forced to back off.
   
>   Many Internet experts agree that Internet taxes are inevitable. After
>   all, connecting computers to the Internet is now a $2 billion
>   business, and people use these networks to buy and sell millions of
>   dollars in goods and services.
   
[...]

>   But some also fear the chaos that could result as 50 state governments
>   and thousands of cities and counties each make their own rules about
>   taxing computer networks and the transactions that occur on them.
   
>   The issue may be given new prominence, thanks to a surprising decision
>   by a major Internet service provider. In late August, Netcom On-Line
>   Communication Services Inc. began notifying its Massachusetts
>   customers the company would start adding the state's 5 percent sales
>   tax to its bills. Netcom typically charges $19.95 a month for a
>   personal Internet account, so the tax would amount to $1. Similar
>   notices were sent to Netcom customers in several other states,
>   including Illinois and Pennsylvania.
   
>   Did the taxing authorities in these states demand their money? Guess
>   again. Netcom has decided to begin paying the taxes voluntarily.
>   Thomas Weatherford, Netcom's chief financial officer, said its
>   accounting firm, Ernst & Young, warned them early this year that
>   Netcom might be liable for the taxes.
   
[...]
   
>   So Netcom contacted state tax officials for clarification. Netcom's
>   500,000 customers are scattered throughout the United States, but the
>   company is focusing on tax laws in Massachusetts and 14 other states
>   where most of its customers dwell. Weatherford said he still had
>   received no official word from Massachusetts, but Netcom attorneys had
>   concluded the company is subject to the state's telecommunication
>   sales tax. To play it safe, it will begin collecting the tax this
>   month.

	Remind me not to sign up with Netcom.
   
>   It's probably a smart move. At the Massachusetts Department of
>   Revenue, acting general counsel William Hazel told the Globe that
>   Netcom and every other on-line service provider should be paying the
>   sales tax.
   
>   "To the extent that folks are being charged for the ability to
>   telecommunicate through the Internet... that's taxable," he said.
   
>   This situation could change. The state has set up a legislative
>   commission to review its telecommunications tax policy, with a final
>   report due next year. But for now, Hazel said, Massachusetts wants its
>   money, including back taxes from up to seven years ago. Hazel said
>   some Internet access providers are paying the tax already.
   
>   But plenty of others are not. For example, Kristopher Hill, president
>   of NetWorx Internet Services Inc. in Newburyport, said he believed his
>   firm didn't have to pay sales tax in any of the dozen states in which
>   it operates. He wasn't thrilled to hear that he may be wrong. "If we
>   have to start dealing with Chicago tax law, that'll be a major pain in
>   my butt," he said. Chicago imposes a tax on telecommunications
>   services over and above the Illinois state tax.
   
>   Hill is even more annoyed by the prospect of being ordered to pay
>   years of back sales taxes in Massachusetts. He said state officials
>   never told Internet service providers they were liable for the money,
>   and to try to collect it now would be unfair. "We would sooner leave
>   the commonwealth than be subjected to seemingly arbitrary and
>   ill-defined taxes," Hill said.
   
[...]

>   Netcom's Weatherford opposes taxes on Internet services but says if
>   his company pays voluntarily, tax officials should demand payment from
>   Netcom's competitors. That could mean trouble for America's 3,700
>   Internet service providers, many of which are shoestring operations
>   that will have to set up tax collection procedures.

	Translation: Netcom is attempting to use regulations to shut
down its competitors.
   
>   The fuss over Internet service taxes is just the beginning. Another
>   sticky controversy awaits: How do you tax sales of goods and services
>   over the Internet?
   
[...]

>   And then there's the question of which government is entitled to
>   collect the tax. Say you log on to Ohio-based CompuServe, where you
>   buy a fruit basket from a firm in California and have it sent to your
>   mother in Chicago. Which state gets to collect tax on the transaction?
>   The experts say right now, the answer is unclear.

	If they think that's "unclear", wait until they start dealing with
multinational transactions....
   
>   But tax-hungry governments are hard at work trying to figure it all
>   out. According to KPMG Peat Marwick, sales of goods and services over
>   the Internet will reach $125 billion by the year 2000. One way or
>   another, governments intend to get their share.

	Note the typical biased phrasing.
   
[...]

>    Copyright &copy 1996 Nando.net