Congress to tackle Net taxes, privacy

By Patrick Thibodeau, InfoWorld |  Business

CONGRESS returns to session next week facing two big high-tech issues: Internet taxes and online privacy.

On the tax issue, in particular, the clock is ticking. The Internet tax moratorium act, which blocks new and discriminatory taxes on Internet transactions, expires in October.

But since the moratorium was passed in 1998 with strong bipartisan support, there has been a great awakening among bricks-and-mortar businesses about the fairness of a system that forces traditional retailers to collect sales taxes in many states while pure-play Internet retailers generally don't collect it. A battle over the moratorium is possible this time around.

David Bullington, a vice president at Wal-Mart Stores in Bentonville, Ark., said the moratorium extension "puts off the tax fairness question." He, along with other major businesses, wants Congress to take up the "tax fairness issue" as part of the moratorium.

But the top issue will be privacy, and dozens of bills are expected.

Congress could easily divide along party lines and not accomplish anything. But the strong bipartisan support for privacy protections makes it "more likely to pass in this Congress than less likely simply because of that interest on both sides of the aisle," said Steve Emmert, director of government affairs at London-based Reed Elsevier, which owns Lexis-Nexis information services.

The Bush administration remains a wild card on the privacy issue. In the campaign, Bush said privacy protections are needed but he also complained about excessive federal regulation.

"You can talk about being against regulation and against big government. The question is, are you also going to be against consumer privacy, are you going to be against privacy rights for American citizens?" said Marc Rotenberg, director of the Electronic Privacy Information Center (EPIC) in Washington. "I don't see any particular reason why the Bush administration would take those positions."

Work in Congress will begin in earnest after Bush is inaugurated.

The House Commerce Committee will see a raft of privacy bills early on in the session. One expected bill will seek to give end users the ability to "opt-out" from having cookies placed on their computer systems, said congressional sources.

The Senate Commerce Committee will likely see a reintroduction of Arizona Republican Sen. John McCain's privacy bill that would require Web sites to disclose how customer data is used.

The high-tech sector is divided over whether or not privacy legislation will help or hurt e-commerce.

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