[At-Large] US Marketplace Fairness Act of 2013 #Internet Sales Tax

Mon Mar 25 06:18:51 UTC 2013

>
> What does this have to do with anything that ICANN or NARALO does?
>
> Regards,
> John Levine, johnl at iecc.com, Primary Perpetrator of "The Internet for
> Dummies",
>

*The US Congress Tax Freedom Act – Let Me Go, I want to Breathe*

Well it not new that the US has always maintained that the Internet should
be a tax free zone as per the *US Congress's Tax Freedom Act 1998* (*authored
by Representative Christopher Cox and Senator Ron Wyden and signed into law
on October 21 1998 by then President Clinton*) which following expiry
continued to be reauthorised and it most recent re-authorisation (legal
speak for extension) was in October 2007 where this has been extended till
2014. It is unclear whether there will be another extension post 2014.  There
is a moratorium on new taxes on e-commerce, and the taxing of internet
access via the Tax Freedom Act.  Whilst the US Congress's Tax Freedom Act
1998 bars federal, state and local governments from taxing Internet access
and from imposing discriminatory Internet only  taxes such as bit taxes,
bandwidth taxes and email taxes, it also bars multiple taxes on e commerce.
It does not exempt sales made on the Internet from taxation, as these may
be taxed at the same state and local sales tax rate as non Internet sales.

*The US Marketplace Fairness Act – You are strong, you can stand on your
feet now*

With the introduction of the *US Marketplace Fairness Act in 2013* in both
the Senate and the House of Representatives will make for some interesting
discussions and lobbying on the Hill. Whilst the Bill in its current form
acknowledges the exemptions that are currently in place – the manner in
which discussions play out by the manner in which both Senators and
Representatives are having reflect a change in atmospheric pressure – which
in my mind is significant.

In 1998 when US Senate voted 96-2 to approve the Tax Freedom Act and the
mere fact that the new Bill has 28 Co Sponsors and in the House of Reps,
there are 47 co sponsors speak volume.

*To Tax or Not to Tax*

As early as 2000, the problems of tax free e commerce were
discussed[1]<#_ftn1>.
If e-commerce proceeds untaxed, it would mean that state treasuries would
face an eroding tax base. States within the United States of America rely
on sales tax for approximately 25-40% of their revenue[2] <#_ftn2>. As such
there is a trade-off or opportunity cost as other taxes may have to
increase to make up for the deficit caused by tax-free e-commerce.

*Opportunity Cost and Impact on Other Industries*

The deficit caused by tax free e-commerce means that other taxes may be
subjected to increase and also potential funding may be siphoned away from
other priority areas. Traditional firms or businesses who do no trade
electronically are at a disadvantage as they are forced to collect sales
tax at the register. This is why it is sometime cheaper to purchase a pair
of boots online than if you were to walk into a traditional store.

*Widening the Digital Divide*

One of the issues that was discussed in the E commerce round table meeting
was the widening of the digital divide where people without credit cards or
Internet access may be forced to shoulder the burden of sales tax[3]<#_ftn3>
.

*E Commerce has truly blossomed*

The term ``electronic commerce'' means any transaction conducted over the
Internet or through Internet access, comprising the sale, lease, license,
offer, or delivery of property, goods, services, or information, whether or
not for consideration, and includes the provision of Internet access.

Global business-to-consumer e-commerce sales will pass the 1 trillion euro
($1.25 trillion) mark by 2013, and the total number of Internet users will
increase to approximately 3.5 billion from around 2.2 billion at the end of
2011, according to a new report by the Interactive Media in Retail Group
(IMRG), a U.K. online retail trade organization[4] <#_ftn4>. The study
estimates that business-to-consumer e-commerce sales in 2011 increased to
690 billion euros ($961 billion), an increase of close to 20% from a year
earlier[5] <#_ftn5>.

According to that study, the US remains the world’s largest single market
as far as e commerce goes. The same study highlighted that with China’s
phenomenal growth rates that it is speculated to surpass the United States
in this regard shortly.

The US Department of Commerce[6] <#_ftn6> reported that Total Retail Sales
from the fourth quarter of 2012 was estimated at *$1,105.8 billion* which
is an increase of 4% from the third quarter of the same year.

*ICANN and its Revenue Streams*

The explosive growth of the Internet and domain name registration has led
to marked growth of the ICANN budget from revenues of about $6 million and
staff of 14 in 2000, to revenues of $90million and a staff of 149 which was
forecasted for 2012[7] <#_ftn7>.  ICANN is funded primarily through fees
paid to ICANN by Registrars and Registry Operators[8] <#_ftn8>. Registrars
are companies with which consumers register domain names and these include
but are not limited to the likes of GoDaddy, Network Solutions and Google.

Registry Operators are companies and organisations that operate and
administer the master database of all domain names registered in each top
level domain. For example, .com is operated by Verisign Inc and Neustar
Inc. operates .biz .

In 2011, ICANN received 94% of its total revenues from registry and
registrar fees. That is Registry Fees contributed 49% and Registrar fees
contributed 45% from registrar fees[9] <#_ftn9>.

Without a doubt, the collection of fees from the new gTLD program could
contribute to an unprecedented level of revenue for ICANN. It has been
estimated that ICANN will generate revenue of $337million from the new gTLD
application fees, which is twice the amount of traditional revenues from
all other sources over the next couple of years. ICANN
estimates[10]<#_ftn10>that there will be a surplus of $27.8 million
after operating expenses
(OPEX) is met.

*List of Interesting Links*

·         Internet Retail Taxation in the United States -
http://www.cj.com/internet-tax [To see State and Legislative Activity]

·         US Internet Taxation -
http://minnesotaattorney.com/internet-taxation/  [Note: material is old and
needs revision but it is helpful to see the types of taxes]

·         Advisory Commission on Electronic Commerce -
http://govinfo.library.unt.edu/ecommerce/ITFA.htm

* *

------------------------------

[1] <#_ftnref1> 1st E-commerce Roundtable Meeting was held in Washington
DC, 12-2 PM on April 13, 2000

[2] <#_ftnref2> ibid

[3] <#_ftnref3> ibid

[4] <#_ftnref4> See:
http://www.internetretailer.com/2012/06/14/global-e-commerce-sales-will-top-125-trillion-2013

[5] <#_ftnref5> ibid

[6] <#_ftnref6>
http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf

[7] <#_ftnref7> ICANN, FY13 Operating Plan and Budget, June 24, 2012,
available at http://www.icann.org/en/about/financials.

[8] <#_ftnref8> The list of ICANN-accredited registrars is available at
http://www.icann.org/en/registries/agreements.htm.

[9] <#_ftnref9> ICANN Financials Dashboard, updated June 15, 2011,
available at https://charts.icann.org/public/index-finance-fy11.html.

[10] <#_ftnref10> ICANN, FY13 Operating Plan and Budget, June 24, 2012, p.
61, available at
http://www.icann.org/en/news/announcements/announcement-13jul12-en.htm.

-- 
Salanieta Tamanikaiwaimaro aka Sala
P.O. Box 17862
Suva
Fiji

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