Death and Net taxes Analysis/Commentary You can bet the new presidential candidate won't say: "Read my lips, no Net taxes." Nothing is certain but death and taxes, and the Net tax "moratorium" -- a fancy word meaning legally authorized delay -- will most likely someday be lifted. The Net tax moratorium was imposed in October 1998 and runs until October of this year. In the meantime, a congressionally empowered advisory committee on Net taxes has been weighing the pros and cons of taxing business transactions, including sales, on the Internet. Pro: e-commerce grows at the expense of physical establishments, therefore cutting into the standard sales tax revenue anticipated by local and state jurisdictions. Con: the Net generates all kinds of money that eventually winds up in taxes. Why can't one hand wash the other? But things usually don't work out that way. The solution might be to let the states and localities apply their sales taxes, but simplify rates so that Mom and Pop Web businesses can navigate the tangle of 7,000 or so current sales tax jurisdictions in America. And as far as tariffs and foreign taxes are concerned, the fix might be a value-added tax, like that imposed in Europe, collected at the point where a transaction gets processed. Taxes are a sore point for Net shoppers. Already, they're required to pay shipping and handling on merchandise. UPS boasted an enormous profit this year, an expense that many e-commerce companies simply absorbed to win new customers. Some critics of sales taxes on Net purchases suspect that if tax is applied the number of shoppers will drop by a quarter. Will taxing the Net amount to killing the golden goose? Net taxes involve three kinds of tax: excise tax on telecommunications companies (3 percent), service provider taxes (passed on to customers), and sales taxes. While the first two still apply, the last has been suspended for businesses that can show that they don't have a tie-in to the jurisdiction of a sale. A Web business located in Atlanta, Georgia, dispenses with collecting a state tax on sales effected in Sunnyvale, California. The company only taxes Georgians, since they belong to the jurisdiction where the company has a physical presence. Retail chains like Blockbuster that have a wide physical presence must apply sales tax to all or most of the sales they make. The tax moratorium doesn't help hybrid businesses like large "bricks-and-mortars." Again, one proposed compromise involves nullifying taxes on telecommunications companies and those on ISPs, and simplifying the state and local tax rates so that they are less of a chore for the businesses that do the tax collecting and accounting. On the other hand, perhaps nothing is really certain, including death and taxes. Ponce de Leon sought the fountain of youth; Web businesses might discover that, to their surprise -- amid the current political enthusiasm for Internet freedom -- the tax shelter they longed and despaired for, has been granted. February 2, 2000