Internet Tax? Maybe, Maybe Not

The dilemma: whether or not to tax Internet transactions. The players: politicians, experts, and lobbyists. The timing: early presidential campaign. The result: nada. Declan McCullagh reports from San Francisco.

SAN FRANCISCO -- Take a peck of politicians, add a cayenne-hot topic like Internet taxes, season with presidential politicking, and agitate.

The result? A meeting that falls flatter than a building on landfill during a California earthquake.

Instead of voting on any of the topics surrounding Internet and telecommunications taxation, controversy-shy members of a Congressional advisory panel decided to dodge the issue.

The 19-member commission on Wednesday postponed all decisions until its next and final meeting in Dallas, Texas in March 2000.

"No consensus was reached. We're still where we were before we began," said Sonia Arrison, an analyst at the Pacific Research Institute whom the commission appointed as an expert.

The three-month period before the next and final gathering is sure to bring not only behind-the-scenes lobbying, but also additional scrutiny of Internet taxes during the US presidential race.

During this month's GOP presidential debates, Senator John McCain (R-Arizona) and Steve Forbes called for a permanent ban on online taxes, while Texas Governor George W. Bush was silent on the issue.

Forbes is scheduled to speak Thursday about technology and privacy at the Free Congress Foundation in Washington, and he likely will address Net taxes as well.

The commission did do one noteworthy thing. It agreed to consider a draft document presented by George Vradenburg III, general counsel of America Online. The paper offers a few options, including extending a temporary no-tax moratorium, allowing sales taxes, or banning them in perpetuity.

One panel member, Grover Norquist of Americans for Tax Reform tried to repeal some century-old federal taxes on telecommunications services.

But the commission voted 10-5 to table Norquist's motion and delay debate until March.

That may be a sign that pro-tax forces have the upper hand -- but to eke out a victory, they have to muster a two-thirds vote.

"I've got enough votes to stop two-thirds," Norquist said.

Without a super-majority, the commission could submit multiple minority recommendations to Congress.