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US Senate Approves Net Tax Ban

by Mike Godfrey, Tax-News.com, Washington

19 November 2001


There was relief for the online sector in the United States last week as the Senate finally passed a bill extending the ban on internet sales and access taxes for a further two years.

The original legislation, which put in place a three year ban to allow the then fledgling sector to find its feet, expired on October 21, and opponents of the ban, including the majority of state authorities, wanted a provision put in place to allow states to charge sales taxes for online transactions.

However, the co-ordinated efforts of 20 states to simplify and standardize their sales tax regimes in order to make the amendment a more attractive option, were narrowly defeated when senators voted 57-43 on a procedural motion to kill the measure.

Proponents of the ban-extension have argued that despite simplification efforts, drawing up inter-state e-commerce tax rules would quickly become a bureaucratic nightmare. Democrat Senator Ron Wydon, who voted in favour of the simple extension warned that opening the online sales tax can of worms without significant further study, standardisation, and agreement, would create a 'crazy quilt' tax system, which would 'chew up a vast amount of time for compliance.'

However bricks and mortar businesses, supported by politicians such as Democrat Senator Byron Dorgan, a co-sponsor of the rejected amendment, say that the fight will go on. 'State and local governments are concerned about funding for schools and fairness for Main Street retailers,' he explained. It is estimated that uncollected state sales taxes on e-commerce transactions amount to around $26 billion per year.


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