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BW: E-commerce




>        (KPMG-PEAT-MARWICK-STUDY) American companies forecast huge growth in
>        electronic commerce, but study uncovers concern about the impact of
>        ambiguous state tax laws 
>        
>           Business Editors
>        
>        NOTE:  The following news release replaces 
>               BW1109, which was upheld by KPMG Peat Marwick.    
>               This revised version is for immediate release.
>        
>            NEW YORK--(BUSINESS WIRE)--June 27, 1996--An overwhelming nine
>        out of ten financial executives at American companies currently
>        engaged in buying and selling goods or services over the Internet
>        caution that government must clarify the associated state and local
>        tax implications if this new method of doing business is to reach
>        its full potential, according to a study conducted on behalf of KPMG
>        Peat Marwick LLP.  
>        
>            "This study shows that electronic commerce is taking off,"  said
>        Kent Johnson, National Partner-in-Charge of KPMG's Sales and
>        Transactions Tax practice.  "But it also reveals the frustrations of
>        corporate America as it tries to cope with the murky environment
>        created by applying old tax laws to new ways of doing business."  
>        
>            Johnson continues: "Taxation of electronic commerce varies from
>        state to state so determining what's taxable and who is responsible
>        for paying those taxes becomes very complex."  
>        
>            Survey respondents appear to agree.  Almost seven out of ten
>        respondents (67%) say that state and local tax laws governing
>        electronic commerce are ambiguous, while more than half of those
>        polled (51%) say that this ambiguity is already inhibiting their
>        involvement in electronic commerce.  Furthermore, 50% say they are
>        "not very"  or "not at all"  familiar with the sales and transaction
>        tax implications -- twice as many as those who say that they are
>        "very"  or "extremely"  familiar with the tax issues.  In fact, 20%
>        of the financial executives surveyed do not know if their companies
>        are even subject to sales and transactions taxes for the sale of
>        products and services over the Internet.  
>        
>            Johnson says that these statistics are particularly distressing
>        because several states and municipalities have already begun taxing
>        certain Internet services.  
>        
>            "The huge growth potential of the Internet has undoubtedly
>        caught the attention of state tax administrators who are eagerly
>        looking for ways to apply existing tax laws and capture some of the
>        revenue this business generates,"  said Michael H.  Lippman,
>        National Partner-in-Charge of KPMG's State and Local Tax Technical
>        Services.  "On the other hand, companies are saying that tax law, in
>        its present form, cannot be applied to the new world of electronic
>        commerce.  They are calling for, at the least, a rewrite of the
>        statutes and many contend that the states should give electronic
>        commerce time to develop before imposing taxes."  
>        
>            Companies' concerns about taxes, however, go beyond those
>        related to the bottom line.  More than half of those surveyed (53 %)
>        think taxing electronic commerce has the potential to become a
>        significant threat to privacy.  Other specific areas of concern
>        include: "the crafting of equitable laws from state to state and
>        across industries" and "fear that state taxing authorities will take
>        a very aggressive approach in determining whether a company is
>        taxable in its state."  
>        
>            Said Johnson of KPMG's Sales and Transaction Tax Practice: "Even
>        though companies are saying they're concerned about the impact of
>        state and local taxes on electronic commerce, very few have been
>        proactive in working with taxing authorities to help ensure
>        equitable rules."  Nearly seven out of 10 companies (68%) say that
>        they are "not very"  or "not at all"  involved with efforts to
>        affect state and local tax policy, compared to only one in 10
>        companies that are "very"  or "extremely involved."  However,
>        exactly half of respondents (50%) claim they do intend to become
>        involved in industry group discussions and debates in the future.  
>        
>            Looking at taxation of electronic commerce from an international
>        perspective, Jeff Stein, National Partner-in-Charge of KPMG's
>        International Services, notes that the impact of ambiguous tax laws
>        on electronic commerce is even more heightened as companies expand
>        their sales and operations overseas.  
>        
>            "Electronic commerce has the potential to fuel the engine for
>        future growth of U.S.  exports,"  notes Stein.  "In fact, 83 percent
>        of study participants believe that electronic commerce will be a
>        major vehicle for U.S.  exports."  
>        
>            About one-third of companies believe that state and local taxes
>        imposed on electronic commerce diminish their international
>        competitiveness.  Indeed, some companies even said that that they
>        would consider moving their Internet activities offshore to escape
>        state and local taxes in the future.  But, KPMG cautions, such a
>        move might not provide the anticipated tax haven because
>        jurisdictions around the world are revenue-starved and will be just
>        as aggressive as individual states in imposing taxes on companies
>        engaged in electronic commerce.  
>        
>            "There are a great deal of unknowns when it comes to electronic
>        versus traditional commerce.  We've been advising our clients to
>        develop a multi-level, flexible approach that positions them for
>        sudden changes in policies.  At the same time we'll continue to work
>        with regulators to help clarify how current tax laws can be fairly
>        applied to business in the 21st century,"  said Lippman.  
>        
>        Editor's note: The KPMG Study was executed by Clark, Martire &
>        Bartolomeo, Inc.  during June 1996.  Results of the study will be
>        available through KPMG's State and Local Tax Practice World Wide Web
>        Site at HTTP:\WWW.US.KPMG.COM\SALT\ or by calling Patricia Neil,
>        KPMG's director of State and Local Tax Marketing & Communications at
>        212/872-6570.  
>        
>        For the purpose of this survey, electronic commerce is defined as
>        buying or selling products or services over the Internet.  The
>        survey was conducted among 291 companies with gross revenues in
>        excess of $50 million.  They span four industry groups: publishing;
>        software/business services/ advertising; communications; and
>        manufacturing/distributing/retail.  
>        
>        KPMG Peat Marwick LLP is the U.S. member firm of KPMG, The Global
>        Leader among professional services firms.  Worldwide, KPMG has more
>        than 6,000 partners as well as 76,000 professionals servicing
>        clients throughout 1,100 offices in 837 cities in 134 countries.  In
>        the U.S., KPMG partners and professionals deliver a wide range of
>        value-added consulting, assurance and tax services in five markets:
>        financial services; manufacturing, retailing and distribution;
>        health care and life sciences; information, communications and
>        entertainment; and public services.  
>        
>        --30--bk/ny*
>        
>        CONTACT:  Pat Neil  
>                  KPMG Peat Marwick LLP         
>                  212/872-5506             
>                  E-mail: [email protected]
>                         or
>                  Jackie Kaldon/Constantine Theodoropulos
>                  Shandwick USA
>                  212-420-8100, ext. 213, 217
>                  800-223-2121
>                  E-mail: [email protected]
>        
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