Report On E-Commerce And Technology Advisory Group ("E-TAG")

At Comptroller Carole Keeton Rylander’s request, E-TAG was formed to analyze and make recommendations concerning tax policy for E-Commerce issues facing Texas. The group, designed to provide a cross-section of industry, technology and local government views, is comprised of industry representatives (ranging from bricks and mortar retailers to e-tailers to telecommunications companies and others), other policy and industry representative groups (such as TTARA), and tax professionals from both inside and outside the Comptroller’s office, as well as local government representatives.

During multiple meetings held over the last several months, E-TAG gathered information not only from its members, but also from others, including from a presentation by the U.T Graduate School of Business Center for Research on Electronic Commerce, and a presentation about the National Governor’s Association proposal for a Streamlined Sales Tax System.

Three separate working groups were created to analyze in more detail Internet issues:

1. The Internet Infrastructure Working Group focused on issues related to the tangible personal property and services that help create an IP-based network infrastructure, including telecommunications and cable equipment, networking hardware and software, computer equipment, etc.
2. The Internet Applications and Intermediaries Working Group focused on issues related to the tangible personal property and services that work with the IP-network infrastructure to facilitate interaction of buyers and sellers over the Internet and make on-line business activities technologically feasible (e.g., data processing services that, under current Texas interpretations, include creating, storing and maintaining web pages).
3. The Electronic Commerce Working Group focused on issues concerning sales of services and tangible personal property to consumers and businesses over the Internet, including services such as Internet access, telecommunications and other services, and including not only sales of tangible personal property over the Internet, but also sales of digital goods.

Not surprisingly, faced with difficult issues and competing concerns (e.g., industries’ drive to develop further the Texas economy and to create the ever-elusive "level playing field," as well as local governments’ concerns about maintaining a stable tax base), the working groups struggled to find common ground so they could present carefully considered recommendations to the Comptroller. Whereas the Advisory Commission on Electronic Commerce was unable, in most areas, to reconcile business and government goals, E-TAG was able to reach consensus on many important policy issues, as the Committee’s report illustrates.