Congress is poised to extend a ban on taxing Internet access, a move that would please Internet service providers but possibly cost states millions of dollars in lost revenue.
The bill, sponsored by Sens. George Allen (R-Va.) and Ron Wyden (D-Ore.), would forbid state and local governments from approving new taxes on Internet access until November 2007 and would require most existing taxes to be eliminated during the next two years. It also would ban taxing the Internet backbone, the network that carries online traffic around the world.
"Renewing this law will protect consumers from a host of new Internet taxes on everything from web access to e-mail, and has saved those online businesses from becoming tax collectors for thousands of jurisdictions," Wyden said in a statement.
The House of Representatives is expected to vote on the bill by the end of the week. President Bush in the past said he approves of a ban.
The ban would apply to high-speed DSL service, as well as cable, wireless and dial-up service, but would exempt 23 states that already tax broadband access for two years. Several other states that taxed Internet access before the 1998 moratorium are allowed to continue doing so.
It is unrelated to a separate effort by more than two-dozen state governments to force retailers to collect sales taxes on their Internet sales.
The ban, first approved in 1998, expired last November amid Senate debate about what it would cover and how long it would last. High-tech businesses lobbied for the ban during the height of the Internet business boom in the late 1990s, arguing that new Internet taxes would prevent many Americans from going online and keep electronic commerce from flourishing. Internet service providers also support the ban. But state and local governments said that cutting off a valuable source of revenue would lead to cuts in essential local services.
The Senate voted in favor of the extension in April after deciding that it would not say whether the increasingly popular trend of Internet-based telephone calls should be exempt. The House of Representatives had backed a broader measure that would permanently ban access taxes.
House Judiciary Committee Chairman James Sensenbrenner (R-Wis.), one of the chief backers of a permanent ban, agreed to support the Senate bill after getting its sponsors to make sure the legislation requires Wisconsin to get rid of its own access tax by November 2006. Wisconsin is one of 10 states that were allowed to tax Internet access because they already did so before the first ban was passed.
"[The] Senate bill is a step forward in that it reinstitutes the moratorium," said Sensenbrenner spokesman Jeff Lungren.
The bill's sponsors also will change the language to ensure that Texas can continue to charge a "utility tax" on Internet access.