The impact of the Internet on the U.S. economy has benefited millions of Americans from all walks of life. Growth of electronic commerce, specifically, has resulted in the creation of tens of thousands of new high-skilled, high-paying jobs, and has provided people with more access to goods and services at increasingly competitive prices.

The ongoing growth of the U.S. economy has also created significant budget surpluses for states and municipalities. The warning by cities, counties and states that services will decline without taxation of electronic commerce contradicts this unprecedented prosperity. When reconciling the surpluses with the stated need to tax electronic commerce, most state and local taxing authorities cite a need for protection against a future slumping economy.

Ironically, these groups would place a regulator on the engine of the new economy and the ability of businesses of all shapes and sizes to take advantage of the Internet Ð in order to ensure that their collective multi-billion dollar surpluses survive without adjusting revenue models to support the new economy.

In addition, cities, counties and states have provided quality services without taxes on interstate commerce, such as mail-order, for decades. The Supreme Court has long held that vendors have a sales tax obligation only when the buyer and seller are in the same state, or the seller has a "nexus," or physical presence in the buyer's state. But the stakes have risen, and representatives of AmericaÕs 30,000 tax jurisdictions want to change the rules and get in on the action.

The best way to ensure long-term economic prosperity, quality services and the continued creation of new jobs is to ensure the future growth of electronic commerce. We must continue to fuel the engine driving the new economy -- and reduce, not increase, barriers to entry for companies small and large not yet taking advantage of electronic commerce.

Proponents of unfettered taxation of electronic commerce suggest that "if a company knows your underwear size, they know how much to tax your purchase."

This argument is fatally flawed. The consumer submits his or her sizes, preferences, etc., to retailers who place this information in a database to make shopping easier. The consumers, however, are not required to determine their own sales tax liability.

The argument also does not address the complexity involved with the prospect of multiple jurisdictions requiring collection and payment of taxes on transactions, nor the digital delivery of goods and services. Main Street retailers collect taxes from their customers at a single rate, prepare and file a single tax return and file tax returns at one place. Taxation of online transactions, however, would require that the vendor identify all relevant taxing jurisdictions, calculate how much to charge, file forms and remit payments to hundreds or even thousands of different taxing authorities. In the case of digital goods and services capable of being delivered via the Internet, the seller may not know where his customer receives delivery, making appropriate collection and remittance of sales taxes impossible.

Finally, changes in local sales tax rates occur frequently, requiring constant and costly software updates to ensure that the vendor collects the correct amount. Overall, acquisition and maintenance of the technology required to collect and remit taxes from online transactions would be expensive and bar small retailers from the benefits of electronic commerce.

The retail marketplace is undergoing unprecedented change, resulting in Main Street business adapting its practices to compete with large corporate "chain" stores. In times where corporations shoulder immense financial losses to enter a marketplace, with full knowledge that longevity, price warfare and name recognition will eventually generate market share, many Main Street businesses need tools such as electronic commerce to survive.

The Internet allows a business with just one retail storefront to showcase its inventory and sell goods to large numbers of consumers -- literally, worldwide -- helping them compete with retail chains without burdensome overhead investments. Electronic commerce enables a business of any size to expand its market reach exponentially, at a cost often less than opening one new store.

Discriminatory taxation at the city, county and state level, however, would eliminate competition in the electronic commerce marketplace by creating a severe barrier to entry Ð making participation for Main Street business impossible. The infrastructure required to collect and remit multiple, confusing taxes would allow only large, well-financed companies to survive the losses of the financial and compliance burden posed by city, county and state taxing jurisdictions.

When the Advisory Commission on Electronic Commerce reports its findings to the Congress, it will have completed only the first step towards a legislative solution to the problems surrounding taxation of electronic commerce.

The Commission's report will include conclusions on whether electronic commerce should be taxed, and if taxed, how the process will ensure that electronic commerce is not taxed on a special, multiple or discriminatory basis. Congress will then have full authority to accept, change or disregard the Commission's findings when it writes legislation either to ban taxation of electronic commerce and the Internet permanently or establish a system of fair taxation. The moratorium on taxation of the Internet expires October 21, 2001.