President Clinton surprised the beltway crowd last week during a CNN online interview by opposing certain taxes being imposed on Internet consumers.
The matter of taxing Internet transactions is kicking into high gear this month after enjoying two years of legislated moratoriums. Along with Clinton’s unexpected statement, U.S. Rep. and House Policy Chairman Christopher Cox, R-Newport Beach, introduced a bill he co-authored that would make the United States’ temporary moratorium on I-taxes a permanent one, and U.S. Sen. Barbara Boxer, D-California, has argued against levying taxes on e-commerce transactions.
With dollar signs in their eyes, many state and local governments say that mushrooming e-commerce sales are depriving public coffers of tax revenues by driving down purchases usually rung up at the local mall. E-commerce advocates argue that imposing taxes on the nascent industry would threaten its viability, and besides that, is discriminatory.
“We’ve learned over the last two years (since a temporary moratorium on e-commerce tax was passed into law) that this policy has yielded higher state tax collection, quarter over quarter, year over year,” Cox said. “Bricks-and-mortars have had their best sales season ever. The Internet industry represents a major boon to a state’s economy. No one is being deprived. A hands-off policy is best for all involved.”
To e-commerce companies, the tax issue is a no-brainer. Jan Loning, chairman of Chatsworth-based e-tailer MobilePlanet Inc., says that imposing taxes on online purchases would negatively impact the industry by slowing down its growth.
“The bottom line of e-commerce companies is not as low as was expected a couple years ago, and any change to the economics would be harmful,” Loning said. “The lack of taxation compensates in part for the shipping costs necessary to our industry. Introducing taxation will place a significant price burden on our customer.”
Moreover, e-commerce executives believe that the push to impose taxes on e-commerce companies but not mail-order companies which face minimal sales tax obligations would be discriminatory.
“When it comes down to it, we are an extension of the mail-order business and should not receive differential treatment,” said Susan Daniher, a vice president at Hollywood-based DVD Express and member of the Alexandria, Va.-based trade and lobbying group Association for Interactive Media. “Also, why change the name of the game now simply because we’re successful? This is going to be a senseless cause of confusion for our customers.”
The Internet Non-Discrimination Act bill, co-authored by Cox and U.S. Sen. Ron Wyden, D-Oregon, is scheduled to hit the House floor on April 15. The 1998 bill that granted a temporary moratorium on Internet taxes had a tough passage, and while Cox said that general sentiment has warmed toward banning taxation, serious opposition remains.
A collection of senators and governors most of whom come from states without burgeoning tech industries are strongly fighting against the specter of lost potential tax revenue.
Studio Feud
Hollywood has a longstanding tradition of fiercely protecting its intellectual properties, and one studio has taken its IP wars in a new direction.
Universal Studios Inc. is suing the Viacom-owned amusement park company Paramount Parks and the Las Vegas Hilton over an interactive adventure ride called “Star Trek: The Experience.” Universal isn’t protesting the rights to the popular “Star Trek” franchise, which Paramount squarely owns, or the interactive ride’s creative content. Instead it’s crying foul on a patent infringement for the two-year-old, $70 million simulator ride’s base technology. Universal claims that it has a 1993 patent on the domed projection screen and the audience’s moving vehicle used by the popular ride which, by the way, can accommodate 800 visitors an hour and costs $16 per person.
The complaint was recently filed in Los Angeles federal court, and none of the involved parties are talking about the case.
News & Notes
America Online Inc. has ended its lobbying efforts in California and other states for legislation that would require cable television firms to open up their infrastructure to high-speed Internet service provider competitors. The abrupt change in attitude is less than surprising given AOL’s pending acquisition of cable giant Time Warner Inc.
Woodland Hills-based eNutrition has partnered with Wild Oats Inc., a leading natural food market chain, to create a joint online store to sell Wild Oats’ vitamins, nutritional supplements and related products under the domain www.wildoats.com. Under the unusual structure, eNutrition will record sales as revenue and Wild Oats which previously made a $1.5 million equity investment in eNutrition will earn equity in the company in proportion to sales.
Contributing columnist Sara Fisher can be reached via e-mail at [email protected].
Site of the week
Targeting hardcore international news junkies and office dwellers deprived of conventional radios, KCRW.com has created a new online newscast believed to be the first of its kind in the United States. The eclectic radio station, KCRW-FM 89.9, is running a round-the-clock, internationally focused news stream drawing primarily on programming from the BBC World Service, National Public Radio and Public Radio International. As an added hook, the site will also feature extra hours of NPR’s afternoon newsmagazine “All Things Considered” and its “Morning Edition” not broadcast by the station.
