The Failure of the Advisory Commission on Electronic Commerce (ACEC)


The Internet Tax Freedom Act appointed a Commission with 19 members to study and 
report back on the taxation of sales made over the Internet. The Commission 
failed to reach consensus, yet Virginia Governor James Gilmore, the Commission 
Chairman, is peddling a biased "Majority Report" that purports to represent the 
views of the Commission. The Gilmore Report violates the law that established 
the Commission, fails to level the playing field for the collection of sales 
taxes, and instead, promotes tax breaks for the businesses represented on the 
Commission.


"Majority Report" Violates the Law

***Ø The Internet Tax Freedom Act clearly states, "No finding or recommendation 
shall be included in the report unless agreed to by at least two-thirds of the 
members of the Commission."

***Ø Despite this black-and-white requirement, Chairman Gilmore is sending to 
Congress a report that was agreed to by only 10 of the 19 commissioners, clearly 
short of the 13 votes necessary to send a recommendation to Congress.


Bias in the Make-up of the ACEC

***Ø Traditional brick and mortar retailers were not represented on the 
Commission. The six business representatives on the ACEC are from the high 
tech., telecommunications, and electronic commerce industries that benefit from 
subsidies for Internet sales.

***Ø Governor Gilmore released his proposal to prohibit all sales and use taxes 
on Internet sales before the Commission had even heard from public witnesses. 
The Chairman was biased from the start.

***Ø 46 Governors and the National Governors' Association support equal sales 
tax collection responsibilities for all retailers. Nonetheless, Gov. Gilmore 
used his ACEC leadership role to promote a permanent tax haven for Internet 
sales.

***Ø Not surprisingly, the stacked ACEC "Majority Report" advocates an unlevel 
playing field for the collection of sales taxes where brick and mortar retailers 
are required to collect but online retailers are exempted.


Tax Breaks for Business Commissioners

***Ø The press has criticized the six business members of the Commission for 
pursuing generous tax breaks instead of proposing a clear plan to level the 
playing field for sales tax collection.

***Ø Instead of acting in the Nation's interest, the business commissioners 
acted in their corporate self-interest and received the following tax hand-outs 
which help specific industries:
     **¨ "Nexus carve-outs" that allow businesses to form legally "separate" on-
line subsidiaries that do not have to collect sales taxes.
     **¨ A new loophole to exempt from taxation all "digitized goods" that can 
be sold in digital or tangible format (CD's, books, software, pornography, 
etc.).
     **¨ Repeal of the 3 percent federal excise tax on telephone calls.
     **¨ Exempt local affiliates of online companies from paying state income 
tax, as well as sales tax.


The e-Fairness Coalition includes brick-and-mortar and online retailers, retail 
corporations and associations, publicly- and privately-owned shopping centers, 
outlet centers and independently owned shops. The coalition advocates fairness 
for businesses and consumers. It supports a level playing field that ensures 
consumers are treated fairly regardless of where they choose to shop.