President George Bush on Friday signed into law a three-year moratorium on Internet access taxes.
The law extends a ban on Internet taxes that expired on November 1, 2003. The original version of the Internet Tax Nondiscrimination Act, passed by the House of Representatives in September 2003, would have permanently extended a five-year congressional moratorium on taxes unique to the Internet, including taxes on access and bandwidth.
But the bill was held up in the Senate over concerns that it would allow telecommunications carriers to avoid taxes on traditional telephone service as they move traffic to Voice over Internet Protocol services. A compromise version crafted in the Senate and approved by the House last month allows states and cities to continue to collect taxes on telephone services, even if the calls are made over the Internet.
The compromise version of the bill also allows states already collecting taxes on Internet access to continue to do so for up to four years.
Technology and telecommunications trade groups praised Bush's decision to sign the bill. Roger Cochetti, group director of U.S. public policy for the Computing Technology Industry Association, called the bill signed by Bush an "important, if imperfect, win."
"With today's signing of the Internet Tax Moratorium by George Bush, Americans can remain confident that the Internet will flourish as a powerful consumer and business tool," Cochetti said in a statement. "Though temporary, the moratorium's benefits are clear. Internet access will not, for the most part, face taxes. More important, consumer purchases made on the Internet will not be taxed differently just because they were made using the Internet."
With the moratorium, the U.S. economy will benefit from increased investment and innovation in the telecommunications sector, added Walter B. McCormick Jr., president and chief executive officer of the United States Telecom Association.