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Move To Extend Ban On US Internet Access Tax Stumbles In Senate

by Mike Godfrey, Tax-News.com, Washington

01 October 2007


Legislative efforts to ensure that internet access remains free from state and local taxes have stalled in the Senate, after lawmakers failed to agree on the duration of the ongoing tax moratorium, which is set to expire at the end of this month.

The Senate Commerce, Science and Transportation Committee was due to vote on proposals to extend the internet access tax moratorium at a mark-up last week, but the issue was pulled from the agenda at the start of the proceedings, when it became apparent that the deadlock could not be resolved.

The committee was due to consider a bill sponsored by Sen. Tom Carper, a Democrat, and Sen. Lamar Alexander, a Republican, that would extend the moratorium by four years. But Senators John Sununu and John McCain, both Republicans, and Sen. Ron Wyden, a Democrat, are sponsoring legislation that would extend the moratorium permanently, while other members believe that state and local governments should be allowed to tax internet access as a legitimate revenue-raising measure.

Despite the setback, Commitee Chairman Daniel Inouye is hopeful that a compromise, which could see the moratorium extended for six years, will be reached before the current moratorium lapses on November 1, 2007.

“I am disappointed that the Commerce Committee was unable to act on legislation to extend the Internet tax moratorium at today’s markup," Inouye said in a statement. "But after discussions with my colleagues, I believe that further negotiations are warranted. It is my hope that a reasonable compromise can be reached and that the Committee will be able to take swift action in the future.”

However, Sununu accused the Democrat leadership in the Senate of being "uninterested in protecting Internet users from higher taxes".

"Time is running out as we approach the November 1 deadline, and today’s markup provided the right opportunity to pass a permanent ban on Internet access taxes,” argued Sununu, a member of the committee, last week. “We introduced a bill to permanently ban Internet access taxes back in January. I just don’t understand the continued delay in action. The clock continues to tick, placing Internet tax freedom in real jeopardy."

“The Internet is an essential national and global communication network that deserves permanent and immediate protection from access taxes,” Sununu continued. “Taxing the information superhighway is short-sighted policy that will discourage innovation, slow broadband deployment, and raise prices for consumers.”

Sununu's Permanent Internet Tax Freedom Act would permanently prohibit three types of taxes: taxes on internet access, double taxation (for example, by two or more states) of a product or service bought over the Internet, and discriminatory taxes that treat Internet purchases differently from other types of sales.

The internet tax moratorium was first signed into law in 1998, but only on a temporary basis, and has had to be extended by Congress a number of times, the last being for a three-year period in 2004. However, some states which introduced these taxes before 1998 are permitted to continue levying them under 'grandfather' clauses.


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