A Taxing Internet Debate

If its initial squabble over fund raising is any guide, a commission created to recommend future Internet tax policy has a tough road ahead.

The inaugural meeting Monday of the 19-member Advisory Commission on Electronic Commerce focused on how to solicit private money to operate and still avoid any perceptions of a pro-business bias. Congress provided no money when it created the panel last year.

"We don't want it to look like people are buying access, buying influence," said commission member David Pottruck, president of Charles Schwab Corp. "It could become a quagmire."

But the panel could not resolve the issue Monday after several members balked at a proposal by its chairman, Republican Gov. Jim Gilmore of Virginia, for each member to contribute up to $150,000 each — as Virginia has already done. It is expected to try to reach a compromise Tuesday on how to finance a projected $1.7 million budget.

The fear was that contributions from well-heeled companies represented on the panel, such as AT&T, MCI Worldcom and Gateway Inc., would outstrip those from state and local governments, leading to a perception of bias.

"If the money comes disproportionately from one side of the debate, it may be perceived by some to taint the commission's ultimate conclusions," said panel member Andrew Pincus, general counsel for the Commerce Department.

Congress created the commission to sort out tax issues on Internet commerce, after lawmakers imposed a three-year moratorium on new E-commerce taxes. The panel's report is due in April 2000.

The commission was delayed for months because organizations representing state and local governments filed a federal lawsuit claiming the initial appointments were illegally tilted toward business. The lawsuit was dropped after Senate Majority Leader Trent Lott, R-Miss., replaced Netscape chief James Barksdale with a local government official from Oregon.

That conflict and the one over financing demonstrate the sensitive nature of the commission's work: How to ensure state and local tax collections don't suffer from electronic commerce while avoiding a new, heavy tax burden on the companies doing a fast-growing business on the Internet.

"Our goal would be to see that whatever solution comes out of this strikes the proper balance in a real and credible way," said Robert Novick, general counsel for U.S. Trade Representative Charlene Barshefsky and a commission member.

The commission Tuesday also planned to hear several presentations on tax issues surrounding the Internet, both domestic and international. It will have at least three other meetings one each in California's Silicon Valley, New York City and Austin, Texas.