Senate Weighs Ban on Net Taxes

WASHINGTON--A proposed law that would prevent the taxation of Internet access is headed to the Senate. Lawmakers will vote on the Internet Tax Non-Discrimination Act, which was approved on Thursday by the Senate Commerce Committee.

The Commerce Committee approval sends the measure to the full Senate for a vote.

The bill, introduced by Sen. George Allen (R-Virginia), would make permanent a five-year-old moratorium on Internet-specific taxes. Congress first approved a three-year moratorium in 1998 and renewed it again in 2001, but it now is set to expire on November 1.

The moratorium prohibits taxes on Internet access, discriminatory taxes on purchases made over the Internet, and the double-taxation (by two different states, for instance) of Internet commerce. It does not, however, outlaw the collection of sales taxes on items bought in Internet transactions.

In addition to making the ban permanent, the bill would repeal in 2006 a grandfather clause that currently exempts nine states from the moratorium.

Gaining Support

Information technology groups and government officials praised the move as universally beneficial.

"This will help the industry and customers," says Scott Corley of the Information Technology Industry Council. "It gets rid of a regressive tax that hurts consumers and removes economic incentive."

The bill would apply the tax ban to all technologies used to provide Internet access, which now include wireless, DSL, cable modem, and dial-up connections. Some lawmakers have warned that the language is too broad and could allow too much maneuverability, but supporters of the bill counter that too many specifics could leave the bill vulnerable to obsolescence.

"The bill's definitions are broad on purpose," Corley said. "Broad is better. Technology moves faster than legislation, so you have to account for that."

The House Judiciary Committee approved a similar bill earlier this month. The House bill, sponsored by Rep. Christopher Cox (R-California), is largely identical to the Senate one, but it calls for an immediate end to the nine-state moratorium exemption rather than sunsetting it in 2006.