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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