Internet Taxes on the Road to Extinction

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The House Judiciary Committee voted to approve legislation that would permanently extend the moratorium on Internet access taxes. The bill must now be approved by the full House before it proceeds to the Senate.

Meanwhile the Senate Commerce Committee indicated it will not attach the issue of sales tax on Internet purchases to the Internet tax moratorium legislation. Members of the Streamlined Sales Tax Project, the group trying to make sales tax on all Internet purchases mandatory, agreed that this is not the time to try to push their legislation through Congress.

"It's a complicated topic that when you combine them confuses everyone," said Neal Osten, director of commerce and telecommunications for the National Conference of State Legislators. "The access tax moratorium gets into a whole nest of issues that are outside the scope of what we want to do."

The moratorium on Internet access taxes, if it becomes permanent, would block efforts to charge taxes on Internet access. Although there is a moratorium in place, which expires this November 1, several states have found ways to get around the moratorium and are charging sales taxes on certain Internet services.

For example, Alabama, Florida, and Kentucky assess tax on residents who subscribe to digital subscriber line (DSL) services. Other states charge tax on Internet access that is packaged with other services such as telephone services. "This clearly violates the intent of the [moratorium on access taxes]," said Mark Beshears, assistant vice president of state and local tax for Sprint.

Backers of the Streamlined Sales Tax Project in both the House and the Senate have indicated the issue is probably dead for now but perhaps not for this session of Congress. Senator John McCain (R-AZ), chairman of the Senate Commerce Committee, and Representative James Sensenbrenner (R-WI), chairman of the House Judiciary Committee, have pledged to try to hold hearings on the issue later this year.

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