Lawmakers Revive Net Connect Tax Ban

Just months after Congress extends Internet access tax ban by four years, senators push to make measure permanent.

By Roy Mark | Posted Apr 19, 2005
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WASHINGTON -- U.S. Sen. George Allen continued his assault on Internet taxes today, proposing legislation to permanently ban taxes on Internet connections.

Allen's proposal would keep in place the current grandfather clause but will strip away that exemption in 2007 and make the ban permanent, a move that is likely to force another Senate confrontation over the taxation of the Internet.

Earlier this month the Virginia Republican rolled out a bill to exempt the Internet from excise taxes.

Last year, Congress passed a new four-year ban on state and federal taxation of Internet connections, extending a moratorium that dates back to 1998.

After a bitter, two-year struggle over the measure, the measure passed only after states that were taxing Internet connections prior to 1998 were granted a grandfather exemption. Now Allen is targeting those grandfathered states.

"Last year President Bush and the Congress took an important step by banning Internet access taxes in the short term," Allen said. "It is important right here and now to establish that the Internet will be a no tax zone."

Joining Allen at the Capitol press conference announcing the measure were Sen. Ron Wyden (D-Ore.) and Rep. Chris Cox (R-Calif.), the original authors of the 1998 bill.

"Internet users and entrepreneurs who breathed a sigh of relief at this law's extension should have the security of knowing its protections will never go away," Wyden said.

Cox added that it was "time to remove the expiration date from one of America's most popular laws."

Sen. John Sununu (R-N.H.), a co-sponsor of the Allen-Wyden bill that extended the moratorium until 2007, issued a statement warning that "everyone should be on notice that the existing grandfather in the current law will expire at the end of 2007."

Sen. Lamar Alexander (R.-Tenn.), who led the fight last year to keep the grandfather exemption, was unavailable for comment.

The current Internet Tax Nondiscrimination Act expands the original dial-up definition of access to include DSL, cable modems and wireless Internet connections. The bill blocks states from differentiating for tax purposes between dial-up and broadband hookups.

The ban now is limited to three types of taxes: Internet access, double taxation of a product or service bought over the Internet and discriminatory taxes that treat Internet purchases differently from other types of sales.

"There are still far too many Americans who are waiting for the chance to harness the opportunities that come with broadband," Allen said. "Higher taxes will only make it more difficult for people to afford that empowering service and for companies to provide broadband for people with lower incomes or who live in rural areas."

Sen. John Ensign (R-Nev.), chairman of the Senate subcommittee on Technology, Innovation and Competition, said he looked forward to the "fight" over taking away the grandfather exemptions.

"It is important that access to the Internet is neutral," he said. "The Internet was designed as a tool to enhance business, and taxation will do nothing but slow it. We're united, and we're ready for the fight to keep the Internet a tax-free zone."

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