Will the Government Take a Byte?

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The Internet economy may be global, but politics Ė and the taxman -- is still local. Mayors, city councilmen and chamber of commerce types, not the IRS, are the muscle behind the Advisory Commission on Electronic Commerce, a congressional panel that convenes this week to address Internet retailersí greatest fear: e-commerce taxation. With online sales growing by some 300 percent a year and ready to top $200 billion by 2000 (with hardly a dime in sales tax collected on any of it), local officials are terrified that the local mall is lumbering toward extinction -- and taking their tax base with it. In a letter to the commission, lobbyists for the locals demanded "equitable treatment for all Main Street sellers and preservation of the single most important resource for education in our nation."

When sales taxes are paying for schools and cops, thatís a hard argument to refute. But Net bigwigs, along with many federal officials, have their own concerns: namely, that online taxing, besides driving consumers back to the malls, will drive U.S. e-tailers overseas and bring Americaís dollars with them. The Main Street gang has already landed the first punch: forcing Trent Lott to boot a former Netscape CEO off the panel and replace him with one of theirs. The 19-member panelís roster, a mix of Big Business (AT&T CEO Michael Armstrong), no-tax hawks (Grover Norquist, the guy who got George W. to re-read his fatherís lips) and federal and local officials, is now tipped in Main Streetís favor. The commissionís recommendations on whether or not to scrap the current tax moratorium are due in April (itself an ominous sign). That the panelís chairman is a tax-cutter, GOP governor Jim Gilmore of Virginia, bodes well for fans of the current e-topia. But no panel like this convenes without something getting changed. And thatís a warning for anyone still holding Amazon.com: the taxman cometh.