Internet Taxes Pit States Against IndustryBy Neil MunroStaff Writer

July 10, 1997

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Washington Technology Online State and Local

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Internet Taxes Pit States Against Industry

By Neil Munro
Staff Writer

"Any tax scheme compensating states for losses caused by out-of-state online commerce would cost more to collect than it would be worth."

- Bill Melton
CyberCash Inc.

The raging battle over Internet taxes is likely to end up in court regardless of whether U.S. lawmakers approve a controversial bill that would curb taxes on Internet companies, say congressional, industry and state officials.

If members of Congress pass the Internet Tax Freedom bill, sponsored by Rep. Chris Cox, R-Calif., and Sen. Ron Wyden, D-Ore., industry and states will meet in federal courts to dispute how many Internet-related taxes would be curbed or barred altogether, said Neal Osten, committee director for commerce and communications at the Washington-based National Conference of State Legislators.

States will eventually face the Supreme Court in a rerun of the 1992 Quill Corp. vs. North Dakota Supreme Court decision, said executives and government officials. That decision declared that the Constitution's interstate commerce clause freed out-of-state mail-order merchants from any legal requirement to collect a state's sales taxes when selling items to a resident of that state. Only when there is "nexus" -meaning the merchant has a store or an office in a particular state - can a state force the company to collect sales taxes, according to the decision.

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