House passes Internet tax ban

The U.S. House passed a bill Wednesday that would permanently ban governments in the U.S. from levying taxes unique to the Internet.

The House, on a voice vote, passed the Internet Tax Nondiscrimination Act, which would permanently prohibit taxing jurisdictions in the U.S. from levying such taxes as e-mail taxes, bandwidth taxes, or bit taxes. To become law, the bill would have to pass the U.S. Senate and be signed by President Bush. The Senate Commerce, Science and Transportation Committee approved its version of the bill July 31, and its next stop is the full Senate.

Congress first approved a three-year moratorium on Internet-only taxes in 1998 and renewed it again in 2001. The moratorium is set to expire Nov. 1 unless Congress acts.

Some House Democrats had questioned if the bill would complicate efforts of states to collect taxes from retailers outside their borders, but the bill passed over their objections. The bill does not prohibit states from collecting sales taxes on products their residents order from catalogs or other remote retailers, but requires that Internet retailers be treated the same as other remote retailers.

The House’s bill ended a grandfather clause in past versions of the moratorium that allowed 10 states that had passed Internet taxes before 1998 to continue to collect them. Some Democrats had protested the loss of those taxes for those states.

House Republicans cheered the passage of the bill. “Today is a historic day,” said Representative Chris Cannon, a Utah Republican and chairman of the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law. “This bill would broaden access to the Internet, expand consumer choice, promote certainty and growth in the IT sector of our economy and encourage the deployment of broadband services at lower prices.

“Today we establish a consistent national policy of not taxing Internet access through this bill,” Cannon added in remarks on the House floor.

Representative Chris Cox , chairman of the House Policy Committee, said he was proud to be the author of both the original 1998 moratorium and the bill passed in the House Wednesday. The tax ban will help the growth of the Internet, added Cox, a California Republican.

“Today, we are bringing to the end in the House a five-year struggle to make sure that consumers are not saddled with new, onerous taxes from multiple jurisdictions,” Cox said at a press conference to announce the relaunching of the House Republican High-Tech Working Group. “What was a moratorium must be made permanent.”