Senate Votes To Extend Net Tax Ban

Richard Koman,

With only a few days to go before a ban on Internet taxes expires, the Senate approved a measure to extend the prohibition for seven years. The House approved a similar bill last week, but the differences must now be ironed out in a final bill submitted to President Bush before the current law runs out on November 1.

There are several differences. The Senate bill extends the ban for three years longer than the House bill. But more importantly, the House bill narrows the ban, apparently allowing taxes on e-mail services unless they are provided as part of Internet service.

While the current law prohibits taxes on services "that enable users to access content, information, electronic mail, or other services offered over the Internet," the House bill would only ban taxes on services if they're incidental to Internet service.

House Bill Limits Tax Ban

A memo by the Congressional Research Service found that under the House bill, "if an Internet user utilized one provider to connect to the Internet and another paid provider of, for instance, e-mail services, the connection provider would be covered by the moratorium but not the paid e-mail provider. Under the current moratorium, each would be covered."

"I know no member of the U.S. Senate who wishes to see that happen," Sen. Ron Wyden (D-OR), said in a speech on the Senate floor Thursday afternoon. Wyden had pushed for a permanent ban on Internet taxes.

The report was prepared for Wyden, the author of the original ban, who pushed through the more expansive language for the Senate bill. He said the additional language resolves his "immediate concerns" but that he remains "concerned about the vast range of current and future services that are still exposed to the potential for taxation under this legislation."

Push for Permanent Ban

Both the House and Senate bills accommodate local governments by not banning taxes on VoIP systems and video services.

"The Internet has provided a powerful economic boost to our nation, and has become an important everyday tool for millions of Americans," said Sen. Ted Stevens (R-AK). "By keeping Internet access tax-free and affordable, Congress can encourage Internet use for distance learning, telemedicine, commerce, and other important services."

Some senators -- notably Republicans -- were continuing to push for a permanent ban Friday. Sen. John Sununu (R-NH) offered an amendment to an Amtrak bill to make the moratorium permanent.

Sen. Mitch McConnell (R-KY) praised the Senate compromise but added: "While I was pleased to help move this legislation, the job's not done yet -- we must continue our fight to permanently ban taxes on Internet access."

Wyden said he will continue to work to protect "all Internet services" from the web of taxation that has resulted in "many telecommunications services paying tax rates as high as alcohol and tobacco."

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