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WASHINGTON -- A permanent ban on taxes unique to the Internet has taken another step toward reality, with House approval of legislation that next goes to the Senate.

The House, by voice vote, passed the Internet Tax Nondiscrimination Act on Wednesday. The bill would permanently prohibit U.S. jurisdictions (including cities, counties, and states) from taxing such Internet-related activity as e-mail, access, bandwidth, or digital transmissions.

To become law, the bill must pass the Senate and be signed by President Bush. The Senate Commerce, Science and Transportation Committee approved its version of the bill on July 31, so its next stop is the full Senate.

Congress first approved a three-year moratorium on Internet-only taxes in 1998 and renewed it in 2001. The moratorium is set to expire November 1 unless Congress acts.

Some Taxes Allowed

Some House Democrats had questioned whether the bill would complicate efforts by states to collect sales taxes from retailers outside their borders, but the bill passed over their objections.

The bill does not prohibit states from collecting sales taxes on products that their residents order from catalogs or other remote retailers. However, it does require that Internet retailers be treated the same as other remote retailers.

The House bill also removes a grandfather clause contained in past versions of the moratorium that allowed ten states that had enacted Internet taxes before 1998 to continue to collect them. Some Democrats had protested the loss of those taxes for those states.

GOP Pleased

House Republicans cheered the passage of the bill.

"Today is a historic day," said Representative Chris Cannon (R-Utah), who chairs the House Judiciary Committee's Subcommittee on Commercial and Administrative Law. "This bill would broaden access to the Internet, expand consumer choice, promote certainty and growth in the IT sector of our economy, and encourage the deployment of broadband services at lower prices."

"Today we establish a consistent national policy of not taxing Internet access through this bill," Cannon added in remarks on the House floor.

Representative Chris Cox (R-California), who chairs the House Policy Committee, said he was proud to be the author of both the original 1998 moratorium and the bill passed in the House Wednesday. The tax ban will help the growth of the Internet, Cox added.

"Today, we are bringing to the end in the House a five-year struggle to make sure that consumers are not saddled with new, onerous taxes from multiple jurisdictions," Cox said at a press conference to announce the relaunching of the House Republican High-Tech Working Group. "What was a moratorium must be made permanent."

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