(May 11) – “Without holding a single hearing, the House overwhelmingly approved a five-year extension of the e-commerce tax moratorium, but Senate Republicans want to slow it down and scale it back,” writes Jim Vandehei in today’s Wall Street Journal.

With politicians eager to please the booming Internet industry during an election year, the House rushed through legislation to extend the current moratorium until 2006. But some GOP senators are complaining that the measure doesn’t tackle vexing problems, such as how to level the playing field between online sellers and brick-and-mortar retailers, or how states and localities can collect applicable taxes on Internet sales. They would favor a shorter moratorium extension, but only after such problems are addressed, even if that means waiting until next year for a bill. “We don’t need to do this this year,” says GOP Sen. Slade Gorton of Washington, pointing out that the current moratorium doesn’t expire until October 2001.

“The House bill, which passed on a 352-75 vote, would prevent states from imposing any new taxes on Internet transactions, or charging new online-access fees, for five years. But many senators in both parties think a five-year moratorium extension is too long. President Clinton agrees, and has threatened to veto the measure.

“‘I think two or three years’ is more feasible, says GOP Sen. Paul Coverdell of Georgia. ‘There are so many broad ramifications.’

“More troublesome to some is the House bill’s failure to protect traditional retailers, especially mom-and-pop stores, from the competitive disadvantage they face against virtually tax-free Internet shopping.

“Under the current moratorium, consumers can save 6% to 8% by buying books, CDs and other goods on the Internet, according to the National Retail Federation, which opposed the House bill. Tandy Corp.’s Radio Shack and other companies have established dot-com subsidiaries to compete with Internet-based retailers.

“States are permitted to collect taxes on Internet sales by companies located within their borders. They can also demand “use taxes” from residents who buy goods from out-of-state e-tailers. But states routinely fail to enforce the “use tax,” and are losing billions of dollars in potential sales-tax revenue as shoppers buy more and more products online. The National Retail Federation estimates that consumers will spend $300 billion on Internet purchases by 2002.”