ONLINE SALES
Internet taxes are unfair, argue ecommerce companies - with 7,500 state and local tax jurisdictions nationwide, just determining the applicable online sales tax would be far too burdensome.
Better find a new argument, says Daniel Sullivan, CEO of Taxware International (www.taxware.com), a Salem, Massachusetts-based company that leads a pack of startups vying to become the Net's chief tax calculator. Founded by Sullivan as a data-processing consulting firm in 1964, Taxware has quietly morphed into the Microsoft of Internet tax software. "It was partly luck, with a little bit of foresight," says Sullivan.
The moratorium on new ecommerce taxes expires in October 2001, although the House has voted to extend it until 2006. But don't bet on a tax-free Net yet. (Especially once the election-year kowtowing to Silicon Valley dies down.) Still to be decided is how state sales taxes should apply to ecommerce. Some 39 governors have called for imposing e-sales tax, saying the present setup cheats states out of revenue.
Thousands of online merchants (already required to charge sales tax in jurisdictions where they have a real-world "nexus") now use Taxware software to calculate ecommerce taxes. Merchants log on and send basic information - including the type of purchase, price, and shipping location - and Taxware matches zip codes against a database of local tax figures, working out the numbers and reporting the transaction to the appropriate authorities. Taxware maintains a team of attorneys to keep up with local codes.
Sullivan says he can understand why companies and consumers wouldn't want to pay taxes on ecommerce transactions, but the oft-heard claim that Internet taxation isn't technically feasible doesn't hold up. "We can calculate any tax, anywhere in the United States," he says. "There's just no question about it."
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