House Passes Two Year Extension of Internet Tax Ban

The U.S. House of Representatives passed legislation today to extend by two years the current moratorium on taxes that specifically target the Internet.

The House passed the bill, H.R. 1552, just five days before the current moratorium was set to expire. The legislation bans for two more years the imposition of any tax that specifically targets the Internet. The bill also prohibits Internet access charges, but grandfathers in at least 11 states that already levy the tax.

The bill does not include measures that would allow states that simplify their tax systems to tax remote online sales, a provision sought by many Democrats in both the House and Senate.

The Senate leadership has yet to signal whether it will seek a vote on one of several measures to marry the two issues, or whether it will seek a stand-alone moratorium extension.

Sen. Byron Dorgan, D-N.D., has introduced legislation to extend the current ban until next summer, with language calling on Congress to consider criteria allowing states to tax remote Internet sales.

Sens. Ron Wyden, D-Ore, and Senate Commerce Committee Ranking Republican John McCain, Arizona, say states need more time to simplify their tax jurisdictions, and have introduced a bill that is nearly identical to the measure passed by the House today.

"My concern is that you extend it for just a few months, people won't see it as credible," Wyden said in an interview with Newsbytes.

Wyden said he and McCain plan to talk with Dorgan and a handful of other senators to win them over to the two-year extension. Their main selling point will be that the two leading states rights groups on the issue - the National Association of Counties and the National Conference of state Legislatures - have said they can live with the two-year extension.

"There are still 7,600 taxing jurisdictions in the United states, and it seems to me that if you don't act before the act expires on Sunday, you are running the real risk of mischief by the states come Monday," Wyden said.

--Reported by Brian Krebs, Newsbytes.com, http://www.newsbytes.com .