Frequently Asked Questions – FAQ

Frequently Asked Questions

How was the Commission created?

In 1998, Congress passed (and the president later signed) the Internet Tax Freedom Act (ITFA) that imposes a three-year moratorium on new Internet taxation. As part of the Act, Congress established the Advisory Commission on Electronic Commerce to address the issues related to Internet taxation. The Congressionally designated members of the Commission include:

  • Three representatives from the Federal Government: the Secretary of Commerce, the Secretary of the Treasury, and the United States Trade Representative (or their respective delegates);
  • Eight representatives from State and local governments (one such representative shall be from a State or local government that does not impose a sales tax and one representative shall be from a State that does not impose an income tax); and
  • Eight representatives of the electronic commerce industry (including small business), telecommunications carriers, local retail businesses, and consumer groups.

What was the authority of the Commission?

The Advisory Commission conducted a thorough study of Federal, State and local, and international taxation and tariff treatment of transactions using the Internet and Internet access, and other comparable intrastate, interstate, or international sales activities. The Commission was tasked with producing what is arguably the most important policy initiative of the information age. The Commission’s recommendations on the critical issues of e-Commerce and tax policy were submitted to Congress on April 12, 2000.

What was the term of the Commission?

The Commission completed its work with its Report to Congress, which was delivered on April 12, 2000, ahead of schedule.

Who provided funding for the Commission?

This Commission is unique in that Congress did not appropriate any funding, but gave the Commission “gift authority.” As a result, the Commission approved a funding strategy at its first meeting. The strategy called for initial funding from the Commonwealth of Virginia and the six corporate members of the Commission along with a request to Congress for additional funding for Commission activities. On November 29, 1999, President Clinton signed an appropriations bill that included $1.4 million in Fiscal Year 2000 operating funds for the Commission. The initial funding provided by The Commonwealth of Virginia and the six corporate members of the Commission will be fully reimbursed as the Commission closes its books.

Why should there be an Internet tax moratorium?

The ITFA placed a three-year moratorium on various taxes on Internet access and e-Commerce so the Commission would have time to review the issues and make its recommendations. It is important to provide for a framework for discussion of these critical issues. All sides of the argument were represented in the debate, and the ramifications of all positions were considered as the Commission prepared its Report to Congress.

What was the Commission’s meeting schedule?

The Commission met in person:   June 21-22, 1999, Williamsburg, Virginia;   September 14-15, 1999, New York City;   December 14-15, 1999, San Francisco;   and March 20-21, 2000, Dallas.   The Commission also met twice by conference call.

In addition to tax issues, what other issues did the Commission address?

Central to the examination of these issues is the fact that the Internet knows no geographical boundaries and by its very nature violates those geographical boundaries that hinder other forms of commerce. The Commission also commented on the implications of personal privacy on the taxation of Internet purchases.