Internet Tax Ban Extension Nears Light of Day

The next step is for both houses to reconcile that Senate version (S.1453) with the House version (H.R. 3678), which extends the moratorium for four years. The goal is for President Bush to sign the bill into law before the current ban expires on Nov. 1.

There were two schools of thought in the Senate on the bi-partisan bill: one that supported a permanent end to the taxation of Internet access and one that favored a four-year ban. Those in the first camp argued that taxing Internet access impedes economic growth. Those in the second maintained that forbidding future taxation may jeopardize state and local governments to raise money.

The compromise bill offering a seven-year moratorium was thus crafted by U.S. Senators Tom Carper (D-Del.) and. John Sununu (R-N.H.). Carper had initially endorsed a four-year ban, while Sununu favored making it permanent. The amendment also made some provisions within the House bill intended to protect e-mail messages and instant messaging from usage taxes.

Carper, in a statement with Lamar Alexander (R-Tenn.), said: "This agreement is a common sense victory both for internet users and for state and local governments. It continues the moratorium on Internet taxation, avoids unfunded federal mandates on states and cities, updates the definition of Internet access, and allows Congress to revisit the issue after seven years."

The original legislation was introduced in 1998 and was updated in 2004.