Internet Use Tax Forgotten, But Not Gone
Edited By Gabrielle Mosquera
Congress' November 2001 decision to extend for two more years a moratorium on Internet access and e-commerce taxes presents a boon for e-commerce.
But Ben Isaacson, executive director of The Direct Marketing Association's (The DMA) Association for Interactive Marketing, notes that once the moratorium expires in November 2003, the next one may be harder to pass. "A few years ago, we had the full weight of Congress behind the growth of the Internet and the catalog industry," he says. "Today that weight has dissipated."
Another obstacle to moratorium approval is the increasing momentum of the Simplified Sales Tax Project. This effort, spearheaded by state governments, aims to establish a uniform sales tax across the country and would require merchants to collect it, regardless of their presence within a given state. The DMA says collecting such taxes would not only be detrimental to an already slowing economy, but also insurmountable for businesses.
Catalog Success recently asked Isaacson about the use tax and what it may hold for U.S. catalogers.
Catalog Success: You don't think online catalogers are prepared for the Internet use tax. Why?
Isaacson: It dropped off people's radar screens after the last moratorium [was passed]. Another shift is that many catalogers expanded their retail efforts, and they do want to see a tax simplification. But as far as the traditional use tax argument has gone, most pure catalog and Internet merchants are not engaged in dialogue.
CS: Why do you think that's so?
Isaacson: Certain economic and other issues have taken further stance. And we still do have another year, but some states and legislators are looking at the Simplified Sales Tax Project as an answer. That's a program being implemented by the states to create a common set of criteria that would apply to all 50 states so they could start the process of merchants collecting taxes across all states.
CS: Do you think the use tax poses any threats to online catalogers?
Isaacson: The simplification that the Simplified Sales Tax Project is looking at would not be of great assistance to catalogers. In the initial stage, catalogers would collect the tax if it becomes mandatory; the burden would still be incredibly high for catalogers and Internet merchants. [Direct marketers] are looking for a one-rate-per-state, extremely simplified system.
CS: When do you think the use tax will become a reality?
Isaacson: Next year is the extension for the moratorium vote, and we barely squeaked in an extension this time. If we don't have a concerted effort, we're looking at the moratorium expiring. What happens after that is anybody's guess.
For more, contact The DMA at (212) 790-1529.
