Traditional systems for imposing and collecting state-levied sales and use taxes can't be applied to Internet retailers without placing an unfair tax burden on the nascent e-commerce industry, a new study contends.

The study, performed by Ernst & Young LLP at the behest of a consortium of large financial, Internet and retail firms, further contends current sales and use tax systems are becoming increasingly obsolete and must be substantially reworked to serve the emerging digital economy.

Probably not coincidentally, the study findings come just days before the Advisory Commission on Electronic Commerce (ACEC) is set to meet in New York to continue its discussion of how and whether Internet purchases should be taxed.

One of the study's most striking assertions is that, in order to adequately collect and document sales and use taxes, a national Internet retailer could end up spending as much as 87 cents for every tax dollar it collects.

By contrast, single-state retailers typically pay no more than 7 cents on the tax dollar for tax collection and compliance costs. And the largest single- state retailers can spend less than 1 cent on the dollar, the study found.

The study "adds a lot of support for the argument that the sales and use tax is obsolete," said Internet Tax Fairness Coalition spokesperson Mark Nebergall at today's press conference.

The reason tax collection would be such an expensive proposition for e-retailers is that, rather than comply with one tax codes of one locality, an Internet merchant could have to keep track of sales taxes in 46 states and more than 7,000 localities in order to collect the taxes.

Also complicating matters is the sale of intangible products over the Internet. Many states have a hard time assigning a tax status to downloaded programs and other digital products.

Currently, a pair of US Supreme Court decisions allow e-retailers to refrain from collecting taxes in all states except those in which the firms are physically located.

The top issue to be discussed at the Sept. 14-15 ACEC meeting is whether state and local governments should be prevented from taxing books, CDs, software, computers, and the untold numbers of other items sold via the Internet.

The congressionally appointed commission is supposed to strike a balance between the interests of Internet e-retailers and the interests of local and state governments. The ACEC's recommendations are due to be given to Congress no later than April 21, 2000.

The Ernst and Young study is available online at http://www.ey.com/ecommerce/complexity.asp

Online Shoppers
Ready To Spend $9.5 Bil This Xmas
By Laura Randall

Toys, electronics and sports equipment are at the top of the Christmas wish lists of online shoppers, while e-tailers are likely to receive the gift of a $9.5 billion total sales tally, according to a new survey of more than 5,000 Web users.

Not surprisingly, shoppers are much more likely to buy holiday gifts online this year than they did in 1998, according to the Harris Interactive poll. Last Christmas, about 8 percent of the online population bought gifts on the Web, while this year 32.9 percent said they expect to purchase at least one product on the Web during the coming holiday season. About 78 percent of those surveyed said they expect to use the Internet either to buy or gather information on their holiday gifts.

Last year, online shoppers spent an average of $297 each during the holiday season. Based on that estimate, Harris researchers estimate that the holidays will generate about $9.5 billion in online sales.

The survey results are in sync with other findings on the explosive growth of e-commerce and Internet use. But the Harris poll, which was taken in mid-August, also offers a glimpse into the rapidly changing awareness of brand names as more companies aggressively pursue an e-commerce presence.

Online users were asked in April and again in August which Websites they would visit when searching for specific category items. In April, users shopping for toys chose Toys "R" Us, Wal-Mart and Disney as their top sites; in August, online retailer EToys knocked Wal-Mart off the list as the number-two site for online toy buying. In the computer hardware category, Office Max, Gateway and Hewlett-Packard were the top three picks in April, but by August they had all been displaced by ZDNet, Egghead.com and BuyComp. Columbia and Amazon.com remained shoppers' top choices for music buying in April and August, but CDNow won out over BMG as their top choice in August.

Books were the only category that remained the same for top shopping sites, according to the Harris poll. Those surveyed chose Amazon, Barnesandnoble.com and Borders as their favorite Websites for the written word in both April and August.

Wine and spirits are likely to experience the most explosive growth (400 percent) this holiday season, according to the poll, followed by gardening equipment (320 percent), household items (253 percent) and sports equipment (238 percent).

The poll was taken by Harris Interactive's E-commerce Pulse arm and is based on the questionnaire responses of 5,802 adult online users and parallel phone surveys. It is representative of the overall US online population, according to Harris.

Net Auctions
Satisfy Women More Than Men
By Robert MacMillan

More men shop online auctions than women, but women report being more satisfied with their online auction experiences, according to a 24-hour snapshot-style survey by Internet research firm Esearch.com.

The survey, conducted over one day, was sent to 5,000 auction users, and 1,123 people responded - 562 men and 560 women. According to the survey results, 85 percent of the women said they were satisfied with the auction process, compared to 75 percent of the men.

Auction site eBay Inc. reacted coolly to the survey results. PR assistant Jennifer Chu said that the news was not interesting enough to pull executives out of their meetings.

An Amazon.com Inc. official commented that the material itself is encouraging because it shows a high satisfaction rate overall for online auctions, but that the company does not share similar internal information with the public.

The survey also showed that the 20-25 age group showed the least amount of interest in online auctions (20 was the minimum age for survey respondents), while users more than 55 years old reported the highest interest level. The age demographic with the most number of people that have never engaged in an online auction was 45 to 54 - only 50 percent of those respondents had used the online auction process.

Esearch.com founder Janet Westergaard said that this is the first survey she has conducted that specifically looked at gender differences coupled with satisfaction rates for online auctions, though Esearch.com has been conducting surveys of consumer satisfaction with the overall electronic commerce experience since 1995.

Completed in August, the survey also showed that 57 percent of the respondents had participated in at least one online auction, either as a buyer or shopper.

The survey also yielded several other results:

- online auctions as a line of work only appeal to a small group of users - 1 percent of respondents said they used the auctions for business purposes only, while 77 percent used the system purely for personal reasons;

- 24 percent of online auction participants were involved at least once in deals that never went through, 35 percent of whom said it was because the "buyer/seller changed their mind (for no specific reason);

- 22 percent of the deals that didn't end in success were because of product damage or misrepresentation;

- 85 percent of the respondents said they never have used an escrow service in the auction process, showing what Westergaard termed "a high level of trust among buyers and sellers." Three percent of the respondents said they always use an escrow service; the other 12 percent said they used an escrow service depending on the particular item being bought or sold.

The survey is available at http://www.esearch.com .

Post Office
Plans To "Dominate" E-Commerce Shipping
By Bob Woods

Not many people know that the US Postal Service (USPS) already controls 32 percent of the shipping market's e-commerce segment. That's about to change, though, as the Post Office launches a huge advertising campaign and an associated Website touting to both e-retailers and consumers its Priority Mail service.

The goal of the new program is simple: "Dominate the e-package business," said Postmaster General William J. Henderson.

"We have the trust of the American public, and the security and sanctity of the mail is well-known," said Postal Service Vice President of Expedited/Package Services John F. Kelly. "We are poised to deliver anything that e-commerce wants to send, up to and including the weight and size limits placed upon us."

Now, the Postal Service wants to ingrain what it says is the cost- effectiveness of using its Priority Mail and Delivery Confirmation services through a television and print advertising campaign featuring both it and the e-retailers Amazon.com and EddieBauer.com.

The slogan of the new campaign, "What's your e-Priority," is a subtle variation of the one in the Post Office's current Priority Mail ads.

Internet advertising, primarily via banner ads, will also be a part of the campaign, which starts next week. Network and cable television will carry two 15-second spots, while print ads will appear in business and trade publications like The Wall Street Journal, Business Week, Forbes, Business 2.0, The Industry Standard and Red Herring, among others.

Priority Mail generally is delivered in two to three days, at a cost of $3.20 for packages up to 2 pounds, although a specific delivery time is not guaranteed. Delivery Confirmation is also available for an additional $0.35.

Competing services offer 2-day guaranteed shipping starting at $11.75 per package, USPS officials said.

A special Priority Mail Website has also been established to educate both e-retailers and consumers about the service. The site features postage and supply ordering capabilities, along with details about the various Priority Mail services.

Also, the site features special application programming interfaces (APIs) that let e-retailers provide tracking and confirmation services, rate calculations, and delivery confirmations.

A special merchandise return API is available to e-retailers via the new Website. When installed at a retailer's Website, a customer who wants to return an item only has to click on a special button to print out a special postage-paid label that will let him or her ship the merchandise back to the retailer. The retailer picks up the shipping, which is charged at fourth-class rates.

The API is a "key part" of the Postal Service's overall e-commerce shipping strategy, said USPS Manager of Marketing and Strategy for Expedited/Package Services Kim Parks.

On the consumer side of the site, a special "I want to tell my online retailer about Priority Mail" hyperlink lets a Web surfer send an e-mail to an e-commerce concern, asking to add the Priority Mail service.

As the public's and e-retailers' perception of the Post Office increases, the Postal Service expects that its percentage of the overall e-commerce shipping market will rise. Post Office officials did not give any projections, though, as to how big a chunk of the market they expect to bite off in the coming years.

Both the ad campaign and the Website were rolled out during a news conference at US Postal Service headquarters in Washington, DC.

USPS' Priority Mail Website - already up and running - is located at http://www.USPSPriorityMail.com , while the main site is at http://www.usps.gov .

Web-Based
Global IT Exchange Opens On Sep.
By Steve Gold

A new global information technology (IT) hardware buying and selling Web portal, called e-Exchange, went live Sept 2nd..

Aimed at business buyers and sellers of IT hardware, the Web portal, located at http://www.e-exchange.com , has offices in most major centers around the world, and aims to bring business buyers of IT hardware together with PC vendors, distributors, and resellers.

Kate Metcalf, a spokesperson for the service, told Newsbytes that the Web portal is several steps beyond traditional online buying and selling emporiums such as e-Bay.

"This is a business service and has the significant backing of several players in the IT industry, such as Broadvision," she said, adding that, although the e-Exchange company was only formed last October, a significant amount of planning and money has gone into the venture.

The venture has recruited a number of senior IT figures, including: chairman Rakesh Gandhi, a veteran of the IT industry of 25 years; Tan Kok Hin, who heads up the Asia Pacific operation, and an industry veteran of some 20 years; and Tim Burrow, chief executive of Europe and Africa, who has 20 years experience in the IT industry. Also on the board is Paul Mahoney, who recently retired as managing director of Olivetti after 32 years with the firm.

E-Exchange will make a "modest" commission on each sale, with potential buyers and sellers of products posting their requirements or offerings on the Web portal, detailing the hardware, its pricing, its geographic availability (or requirements), and other details.

Buyers or sellers will then be able to search the database of buyers and sellers' requirements and offerings, with the actual identity of the buyer and seller shielded from public view. Only when the buyer or seller is willing to progress to a possible deal do they reveal themselves to the "bidders."

Metcalf said that the anonymity of users of the e-Exchange service is a key feature that will attract potential buyers and sellers. The service, she said, will not compete with existing IT hardware sales channels, such as corporate sales divisions and computer dealers plus resellers, but will assist these sales outlets in reaching into new markets.

The Web portal is based around Broadvision's e-commerce portal, and allows quite complex searches to be carried out. The firm expects to have several tens of thousands of registered users on the service within a matter of weeks, and says it has the capacity and bandwidth to meet these needs.

Rakesh Gandhi, e-Exchange's chairman, says that the Web portal will assist many existing computer resellers and traders.

He said that the exchange aims to be the answer to companies that evolve technologically but who don't necessarily have the funds for a major online presence.

According to Gandhi, not everyone is geared up for e-commerce or has the time and money to create their own corporate Web site to attract customers.

Similarly, on the buyer's side of the equation, Gandhi said that the worldwide exchange will help IT professionals expand their market, and find new customers and supply sources quickly.

Sellers, he says, will be able to find new buyers in one place and buyers will have an enormous product selection at their fingertips. Procurement, inventory balancing, and business expansion will all be made easier with e-Exchange.