Panel Seeks 5-Year Sales Tax Ban While States Streamline System

America Online Inc., Time Warner Inc., MCI WorldCom Inc. and other companies are seeking a five-year suspension of taxes on sales of books, records and certain other items--over the Internet and in retail stores--while states move to simplify sales taxes.

“This proposal is intended to enable all consumers, whether or not they make purchases on the Internet, to enjoy the benefits of a new, restructured sales- and use-tax system,” the companies, members of a congressionally appointed panel, said in a statement issued late Tuesday.

The proposal comes as the Advisory Commission on Electronic Commerce is seeking agreement by April on a recommendation to Congress on electronic commerce and Internet sales-tax policy.

Congress put a three-year ban on taxes for access to the Internet and sales over the Internet in 1998, when it created the advisory panel to recommend a permanent solution. The panel is split, with Chairman James S. Gilmore, the governor of Virginia, leading an effort to ban sales tax on Internet purchases to give the industry more room to grow.

Internet sales are supposed to be treated the same as mail-order sales. Companies are required to collect sales tax from customers in states where they have a store or warehouse. If there’s no facility in a customer’s state, the customer is liable for paying the tax to the state, though few consumers do.

AOL and other members of the so-called ACEC Business Caucus, which includes Charles Schwab Corp., AT&T; Corp. and Gateway Inc., say there should be neutral taxation on books, records and other items that have digital equivalents and can be downloaded on a computer.

The proposal was opposed by the E-Fairness Coalition, a group of major shopping centers and other retailers.

“We believe that extending the moratorium beyond two years is unreasonable,” said Lisa Cowell, the coalition’s director.