TEI Supports Release of NTA E-Commerce Report.

Tax Executives Institute recently voted to release the report of a joint business-government project on electronic commerce. The report of the National Tax Association's Communications and Electronic Commerce Tax Project was approved on September 7, 1999, and was promptly submitted to the federal Advisory Commission on Electronic Commerce. A creature of the Internet Tax Freedom Act, the Advisory Commission is charged with developing possible legislative solutions to issues relating to the taxation of the Internet and electronic commerce.

TEI has actively participated in the NTA e-commerce project for more than two years. When the project commenced in September 1997, the 16 business groups, 16 governmental groups, and 7 "other" individuals or organizations agreed to form a steering committee to work toward the development of "a broadly available public report that identifies and explores the issues involved in applying state and local taxes and fees to electronic commerce and that makes recommendations to state and local officials regarding the application of such taxes." TEI's representatives on the project's steering committee were Amy J. Eisenstadt of the General Electric Company, chair of the Institute's State and Local Tax Committee, and Timothy J. McCormally, TEI's General Counsel and Director of Tax Affairs.

Through a series of meetings and conference calls and a plethora of email exchanges, the project's members addressed a number of issues, including those relating to its own scope (e-commerce, remote commerce, or all commerce), situs and sourcing, tax base, tax rate, filing, and other administrative issues. The final report, which can be downloaded from the NTA's website (http://ntanet.org/) -- or from TEI On-Line -- consists of 11 parts:

* Executive Summary

* Introduction

* Prefatory Caveat

* Sales and Use Tax Rates

* Duty to Collect Sales and Use Taxes and Other Taxing Jurisdiction Issues

* Sales and Use Tax Base Issues

* Sourcing Transactions for Sales and Use Tax Purposes

* Simplification of State and Local Sales and Use Tax Administration

* Telecommunications Tax Issues

* Implementation Issues

* Appendix A: Project Steering Committee Members

The release of the NTA report was approved by all but one of the steering committee members, and that group did not oppose its release; it simply abstained. Nearly unanimous approval, however, does not signal consensus on the myriad issues addressed by the report. Indeed, the report itself contains the following caveat:

   Despite the Project participants' significant investment in time and effort
   over the course of nearly two years in attempting to develop a consensus
   and a set of recommendations regarding the appropriate approach to state
   and local sales and use taxation of electronic commerce and communications,
   the Project was unable to reach agreement on many of the key issues it
   considered. As a consequence, the Steering Committee agreed that the
   Project's report would be an educational document to provide context for
   the work of the Project to date and, for each major issue on which the
   Project worked, a description of items of agreement and a neutral and
   balanced description of items not resolved.

According to Amy Eisenstadt, TEI's involvement in the project was worthwhile.

   From the outset, TEI was a realist about what the project could accomplish.
   It would have been nice to find a panacea, but it would be a mistake to
   think the project "failed" because we did not reach agreement on all the
   various and sundry items coming before the group. That we worked together
   to identify the issues and find some common ground is noteworthy. Indeed,
   the agreements we did reach -- for example, concerning the need for
   simplification and the desirability of having only one rate of tax per
   state -- are quite significant in themselves.

   If nothing else, the final report demonstrates that there is no easy
   solution to the e-commerce conundrum. That is especially important as the
   attention Shifts from the tax professionals and administrators to the
   politicians on the Advisory Commission and in Congress.

   TEI is very pleased to have participated in the project.

Ms. Eisenstadt noted that, in addition to herself and Timothy McCormally, several other TEI members participated in the work of the project, even if not on TEI's behalf. Among those members are Christopher W. Baldwin of Gannett Co., Katrina Doerfler of Cisco Systems, Daniel Kostenbauder of Hewlett-Packard Company, Walter Nagel of MCI WorldCom, Bruce J. Reid of Microsoft Corporation, and James W. Schroeder of Thomson Corporation.3