Internet Tax Moratorium is Law

A bill to extend a moratorium on Internet access taxes for seven years was signed into law Wednesday by President Bush, after being approved 402-0 by the House Tuesday, according to media reports. The bill was set to expire Thursday.

The House initially approved a four-year ban, but last week the Senate passed a seven-year prohibition, despite considerable support for a permanent ban.

A House bill that would make the moratorium permanent has 238 House co-sponsors, more than a majority, The Associated Press reports.

The tax ban was first approved in 1998. This is the third time it has been renewed.

Support for a permanent ban was strong in both the House and Senate, but concerns over the potential long-term impact on state and local governments forced a compromise.

The provision amounts to a moratorium on state and local taxes, David Quam, director of federal relations with the National Governors Association, told the AP. And with the Internet changing rapidly, the issue should be revisited periodically, he said.

Rep. Linda Sanchez, D-Calif., said it was supported by businesses, state and local government organizations, and labor unions, the AP reports.

In addition to lengthening the ban from four years to seven years, the legislation also contains a provision aimed at preventing state and local governments from assessing taxes beyond those levied on simple Internet access.

At the urging of Sen. Ron Wyden, D-Ore., the legislation specifically prohibits taxation on e-mail and instant messaging services “that are provided independently or not packaged with Internet access,” the AP reports.

The extension also exempts some states that approved taxes prior to the original enactment.

Sen. John Sununu, R-N.H., supported a permanent ban, but helped craft the seven-year compromise.

“Seven years is better than we’ve ever done before,” he told The Associated Press. “I think that’s an important place to start.”