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[NEWS] More internet-tax proposals
> INTERNET BEWARE: GOVERNMENTS ARE SMELLING A RICH NEW SOURCE OF TAXES
> Copyright © 1996 Nando.net
> Copyright © 1996 The Boston Globe
> (Sep 25, 1996 8:06 p.m. EDT) If taxes are the price we pay for
> civilization, the Internet is about to become a lot more civilized.
> State and local governments are coming to see on-line computer
> networks as a rich, new revenue source, and they want to cash in.
> An official of the Massachusetts Department of Revenue said this month
> on-line service providers that do business in the state should be
> paying a 5 percent sales tax. Those who haven't been paying could face
> audits, penalties and demands for back taxes.
> The state of Tennessee has demanded on-line services doing business
> there turn over their tax records and a count of how many customers
> they have in the state. Cities in Texas and Colorado are considering
> special on-line taxes. And a recent effort to slap a 6 percent tax on
> Internet users in Tacoma, Wash., aroused so much public outrage that
> city officials were forced to back off.
> Many Internet experts agree that Internet taxes are inevitable. After
> all, connecting computers to the Internet is now a $2 billion
> business, and people use these networks to buy and sell millions of
> dollars in goods and services.
> But some also fear the chaos that could result as 50 state governments
> and thousands of cities and counties each make their own rules about
> taxing computer networks and the transactions that occur on them.
> The issue may be given new prominence, thanks to a surprising decision
> by a major Internet service provider. In late August, Netcom On-Line
> Communication Services Inc. began notifying its Massachusetts
> customers the company would start adding the state's 5 percent sales
> tax to its bills. Netcom typically charges $19.95 a month for a
> personal Internet account, so the tax would amount to $1. Similar
> notices were sent to Netcom customers in several other states,
> including Illinois and Pennsylvania.
> Did the taxing authorities in these states demand their money? Guess
> again. Netcom has decided to begin paying the taxes voluntarily.
> Thomas Weatherford, Netcom's chief financial officer, said its
> accounting firm, Ernst & Young, warned them early this year that
> Netcom might be liable for the taxes.
> So Netcom contacted state tax officials for clarification. Netcom's
> 500,000 customers are scattered throughout the United States, but the
> company is focusing on tax laws in Massachusetts and 14 other states
> where most of its customers dwell. Weatherford said he still had
> received no official word from Massachusetts, but Netcom attorneys had
> concluded the company is subject to the state's telecommunication
> sales tax. To play it safe, it will begin collecting the tax this
Remind me not to sign up with Netcom.
> It's probably a smart move. At the Massachusetts Department of
> Revenue, acting general counsel William Hazel told the Globe that
> Netcom and every other on-line service provider should be paying the
> sales tax.
> "To the extent that folks are being charged for the ability to
> telecommunicate through the Internet... that's taxable," he said.
> This situation could change. The state has set up a legislative
> commission to review its telecommunications tax policy, with a final
> report due next year. But for now, Hazel said, Massachusetts wants its
> money, including back taxes from up to seven years ago. Hazel said
> some Internet access providers are paying the tax already.
> But plenty of others are not. For example, Kristopher Hill, president
> of NetWorx Internet Services Inc. in Newburyport, said he believed his
> firm didn't have to pay sales tax in any of the dozen states in which
> it operates. He wasn't thrilled to hear that he may be wrong. "If we
> have to start dealing with Chicago tax law, that'll be a major pain in
> my butt," he said. Chicago imposes a tax on telecommunications
> services over and above the Illinois state tax.
> Hill is even more annoyed by the prospect of being ordered to pay
> years of back sales taxes in Massachusetts. He said state officials
> never told Internet service providers they were liable for the money,
> and to try to collect it now would be unfair. "We would sooner leave
> the commonwealth than be subjected to seemingly arbitrary and
> ill-defined taxes," Hill said.
> Netcom's Weatherford opposes taxes on Internet services but says if
> his company pays voluntarily, tax officials should demand payment from
> Netcom's competitors. That could mean trouble for America's 3,700
> Internet service providers, many of which are shoestring operations
> that will have to set up tax collection procedures.
Translation: Netcom is attempting to use regulations to shut
down its competitors.
> The fuss over Internet service taxes is just the beginning. Another
> sticky controversy awaits: How do you tax sales of goods and services
> over the Internet?
> And then there's the question of which government is entitled to
> collect the tax. Say you log on to Ohio-based CompuServe, where you
> buy a fruit basket from a firm in California and have it sent to your
> mother in Chicago. Which state gets to collect tax on the transaction?
> The experts say right now, the answer is unclear.
If they think that's "unclear", wait until they start dealing with
> But tax-hungry governments are hard at work trying to figure it all
> out. According to KPMG Peat Marwick, sales of goods and services over
> the Internet will reach $125 billion by the year 2000. One way or
> another, governments intend to get their share.
Note the typical biased phrasing.
> Copyright © 1996 Nando.net