Business Corner

Possibility of Internet taxes rankles small businesses

by Small Business Tax News

A moratorium on Internet taxes could end in November if Congress does not move to extend the ban. While an extension is in the works, some small business advocates are worried.

In 1998, Congress passed a moratorium on Internet access taxes as well as multiple and discriminatory e-commerce taxes. The tax prohibition has been extended twice but is scheduled to expire in November. Congress recently held hearings on the topic.

In addition, while a number of U.S. Supreme Court rulings bar states from requiring retailers to collect out-of-state taxes, Sen. Michael Enzi, R-WY, recently introduced legislation that would make those rulings moot and allow states to collect taxes on Internet transactions.

States are the main proponents of ending the moratorium, claiming that they are losing billions of dollars in revenue. The Small Business and Entrepreneurship Council, meanwhile, is opposed to taxing Internet commerce.

The council, a nonpartisan, nonprofit small business advocacy group that works to protect small business, claimed that allowing taxes to be collected on Internet commerce will harm small businesses. A recent report by the council found that small businesses would see a reduction in Internet customers and their goods and services would face multiple, punitive levels of taxation.

“The greedy hand of government never stops reaching,” Raymond Keating, chief economist for the council, said.

Three bills have been introduced to make the tax moratorium permanent. Keating suggested that a permanent ban on Internet taxes would benefit small businesses and consumers.

“Advancements in computer and telecommunications technologies in recent times have opened up tremendous markets and opportunities for entrepreneurs and small businesses,” he said. “A permanent ban on Internet access and discriminatory e-commerce taxes would further solidify benefits for consumers and small businesses.”

Enzi’s bill that would allow states to collect sales tax off of Internet transactions is lacking support and had no co-sponsors.

“If Congress wants to hamper the Internet, and related economic opportunities and growth, then clearly this Internet tax moratorium should be ended,” Keating said. “But if they wish to see the full potential of the Internet realized, then the current tax moratorium should be made permanent.”

Reprinted with permission of Small Business Tax News, Copyright 2007, 1-301-951-1240. This information is distributed with the understanding that the editor and publisher are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Reprinted from Central Vac Professional, September 2007