THE DEPUTY SECRETARY OF THE TREASURY                                                          WASHINGTON                                                          July 15,1998

The Honorable William V. Roth, Jr.
Chairman Senate Finance Committee
United States Senate
Washington, DC 205 10

Dear W. Chairman,

As the Finance Committee prepares to examine the issue of Internet taxation, I would like to take this opportunity to express the Administration's strong support for the Internet Tax Freedom Act and the important goals it achieves.

As President Clinton has stated, the explosion of commerce over the Internet has the potential to increase our prosperity, to create more jobs and to improve the fives of our people. We would not want duplicative, discriminatory or inappropriate taxation by 30,000 different state and local tax jurisdictions to stunt the development of what he has called "the most promising new economic opportunity in decades." For this reason, the Administration strongly supports a temporary and appropriate moratorium on new or discriminatory taxation of the Internet and electronic commerce. Any taxation of the Internet and electronic commerce must be clear, consistent, neutral, and nondiscriminatory.

At the same time, however; we must not allow the Internet to become a tax haven that drains the sales tax and other revenues that our states and cities need to educate our children and keep our streets safe. In conjunction with this moratorium, the legislation establishes a body or commission that will explore the longer-term tax issues raised by electronic commerce, in order to develop a policy framework that is fair to states and localities while allowing the Internet to earn its fair place in the ever-changing business world.

For these reasons, the Administration strongly urges the Senate to pass this legislation so that it can be signed into law this year. While we may have further suggestions, we believe these can be addressed in conference. We look forward to working closely with you and other members on this important issue.

(An identical letter was sent to the Honorable Daniel P. Moynihan, the Ranking Member of the Senate Finance Committee)