House Votes for 3-year Ban on Internet Access Taxes

Over the objections of some mayors and governors, the U.S. House of Representatives on Friday voted to reinstate a moratorium on new state and local taxes on Internet access services.

The new ban would expire Nov. 1, 2007 and is expanded to include high-speed wireless and DSL services. At least 19 states tax Internet access over digital subscriber lines. The bill does not affect taxes on Internet sales.

"Reinstating the tax moratorium will promote the adoption of broadband and ensure its affordability," said Peter Jacoby, AT&T vice president of congressional affairs, according to Dow Jones Newswires. "We are confident Congress will see the long-term benefits of this policy.”

Governors, mayors and other officials spoke against the expanded broadband provision, saying it threatened roughly $20 billion in local tax collections, and the original version of the bill was tightened as a result.

The House had approved a permanent block on Internet access taxes earlier this year. The Senate, however, backed the four-year ban as a compromise with state and local interests.

Sen. Lamar Alexander, R-Tenn, called the compromise a “temporary solution,” in a statement after the vote. The bill now goes to President George W. Bush, who is expected to sign it.

“It is time for governors and mayors to sit down with telecommunication company leaders and suggest a permanent solution that simplifies regulation and taxation of Internet telephone technology without harming state and local governments,” Alexander said.

Republicans plan to make the temporary ban permanent. "There is nothing in three-year moratorium that says we have to wait three years to solve this problem permanently," said U.S. Rep. Christopher Cox, R-Calif., a key sponsor in the House. "I'm inclined to move very fast."

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