Taxpayer Groups Warn of Internet Fees

By Bruce Sullivan | July 7, 2008 | 8:25 PM EDT

( - A coalition of more than twenty conservative taxpayer and public policy organizations warned of the dangers Wednesday of several new schemes to levy taxes on goods and services purchased over the Internet, one day after the chairman of an advisory commission on Internet taxation proposed a bill to prohibit taxing Web purchases.

The new proposals include but are not limited to state and local sales taxes on Internet commerce.

"There is an irresistible urge on the part of politicians to get their hands on the piggy bank," said Rep. John Kasich (R-OH), who addressed the "e-Freedom Coalition," which is urging Congress to pass Kasich's Internet Tax Elimination Act, H.R. 3252.

The bill would make permanent a current moratorium on Internet taxes, which expires in October of 2001.

Member groups of the e-Freedom Coalition include the Heritage Foundation and the Small Business Survival Committee.

"Congress should ensure that this important new medium is not subjected to discriminatory and potentially unconstitutional state and local taxes," Adam Thierer of the Heritage Foundation told

In a related development, James Gilmore, Republican Governor of Virginia and chairman of the Advisory Commission on Electronic Commerce, submitted a proposal to the commission Tuesday that recommends the elimination of Internet taxes.

"The Internet represents a marvelous tool of empowerment for people all over the world," said Gilmore. "It is the most transforming technological development since the industrial revolution, and its growth must not be thwarted by taxation."

Gilmore's plan would eliminate all taxes on Internet purchases of goods, services, and information, eliminate $3.3 billion in federal excise taxes on local and long distance phone services; return federal tax revenues to the states to compensate for foregone sales taxes on Internet services; allow federal welfare dollars to be spent on purchasing computers for poor families; and oppose internal Internet tariffs.