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5 Va. J.L. & Tech. 1 (2000)

handle is hein.journals/vjolt5 and id is 1 raw text is: 5 Va. J.L. & Tech. 1 (2000) <http://www.vjolt.net> 1522-1687 / 9 2000 Virginia Journal of Law and Technology Association VIRGINIA JOURNAL of LAW and TECHNOLOGY UNIVERSITY OF VIRGINIA SYMPOSIUM 2000 5 VA. J.L. & TECH. 1 Internet Taxation: A Software Solution Robert D. Atkinsonf*J Randolph H. Courtf j Overview 1. The growth of Internet commerce has presented policy makers with a host of complex new issues over the last few years, from encryption to broadband access. One of the most vexing problems, however, is not a new issue, but an age-old one: taxation. On the one hand, free-market libertarians argue that online retail transactions should stay beyond the reach of the Tax Man (and if new technologies should sound the death knell for nearly all government, so much the better). On the other hand, state and local officials, in particular, view the Internet as a tide that will erode local and regional tax bases with devastating consequences as more and more sales move from the brick-and-mortar retailers on Main Street to the ether of Cyberspace. 2. Federal lawmakers have rightly taken a deliberate, go-slow approach to the problem. The Internet Tax Freedom Act of 1998 wisely imposed a three-year moratorium on new discriminatory taxes on the Internetll and created the Advisory Commission on Electronic Commerce to study the Internet taxation issue.L2 The nineteen-member commission, which has three representatives from the federal government, eight from state and local government, and eight from the electronic commerce industry, will report its findings to Congress in the spring of 2000. 3. In the interim, several Internet tax bills have been introduced in Congress. In January of this year, Senator Bob Smith (R-NH) introduced S. 328,J3J a bill that would make the moratorium permanent. In July, Senator Ernest Hollings (D-SC) introduced S. 1433, which would impose a five percent national sales tax on all remote sales, including Internet, mail-order catalogues, and by phone.j41 The Smith bill has been referred to the Commerce Committee, while the Hollings bill was referred to the Finance Committee, but no other actions have been taken on either. We believe that neither bill adequately addresses the issue and that a third way is needed with regard to Internet taxation. 4. The Internet Tax Freedom Act prohibits the creation of new state, local, or federal taxes on Internet access or electronic commerce until October 2001 .f5 Therefore, as the Advisory Commission works to fulfill its mandate, now is the time to move beyond simplistic rhetoric and dire warnings, and to

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