Three more years without Internet taxes came closer to reality November 17 when the U.S. Senate, breaking a year-old impasse, finally passed a tweaked version of a bill it reworked in April that answered some concerns of state and local governments.
And the House is expected to pass the Senate version November 18, according to Rep. Christopher Cox (R-California). "The Internet makes American workers and companies more productive," he said in a statement after the Senate passage. "By protecting consumers from new taxes, the new law will keep Internet access affordable."
The bill the Senate finally passed will ban Net access taxes of any kind through November 2007 and ban taxing items bought online by more than one state, not to mention a ban on sales taxes that treat Net purchases differently than other kinds of purchasing.
A number of state and local governments have held that they stood to lose billions in tax revenue with more traditional communications migrating to cyberspace, but numerous industry trade groups with big stakes in cyberspace have held that no taxes in cyberspace would mean more e-commerce and more people switching to broadband.
Access taxes in states such as Tennessee and Texas will be unaffected, as those states already have those laws on the books.
A federal moratorium on Internet taxes – it blocked states from taxing Internet access – expired in November 1993, but states could still collect taxes on DSL lines because that moratorium was written before DSL became widespread. Cable lines are not considered telecommunications by the federal government, but states collecting taxes on those before the federal Net tax moratorium were allowed to keep doing so.
Under the bill the Senate finally passed, those states would have three years to end those Net tax collections, which pleased such lawmakers from those states as House Judiciary Committee Chairman F. James Sensenbrenner (R-Wisconsin).
What can be taxed under the Senate bill, which President Bush is expected to sign after the House passes it? Voice-over Internet protocol can be taxed and so can any service that results in a telephone call, according to the bill’s language.
Sen. Thomas Carper (D-Delaware), former Delaware governor, said the version the Senate finally passed was acceptable in light of state and local government concerns that they could have lost up to $10 billion a year of all telephone services were made tax exempt.
"More than a year ago, the Senate was prepared to pass legislation that would have done irrevocable harm to state and local governments," Carper said in his own statement. "But the compromise we worked out will do minimal harm to states, while also protecting consumers from taxes on their monthly Internet bills."
