Seven-year extension of Internet tax ban sent to president

IDG News Service - The U.S. House of Representatives today approved a bill that would extend the soon-to-expire moratorium on Internet taxes by seven years, the final step before the legislation heads to President Bush for his signature.

The House voted 402-0 to accept a version of the moratorium extension bill that was passed by the Senate last Thursday. The Senate proposed the seven-year extension, amending an earlier iteration of the bill that the House had approved with a four-year extension.

The current ban on access taxes and other Internet-only levies is scheduled to expire on Thursday. The moratorium, which doesn't prevent the imposition of online sales taxes, has been in effect since 1998, except for a lapse during most of 2004.

Bush is expected to sign the extension bill, which is officially -- and awkwardly -- named the Internet Tax Freedom Act Amendments Act. The president has supported the idea of an outright ban on Internet taxes, and he signed the last extension of the moratorium after it was passed by Congress in late 2004.

Many supporters of the moratorium had called for a permanent tax ban to be enacted now, but some lawmakers as well as state and local government groups voiced concerns that a permanent ban could hamper the future ability of government entities to raise money. Opponents also questioned whether telecommunications carriers would try to expand a permanent ban to cover services such as voice over IP.

Sen. John Sununu (R-N.H.) praised the House for approving the seven-year extension, which he jointly proposed along with Sen. Tom Carper (D-Del.) during the Senate's deliberations last week. The amendment put forward by Sununu and Carper also modified the original House bill to specifically exempt e-mail and instant messaging from any potential usage taxes.

"It's great to see Congress act on time for a change and take an enormous step for Internet tax freedom -- banning access taxes and protecting e-mails and instant messaging for the next seven years," Sununu said in a statement. "I will continue to fight for a permanent ban on access taxes, but this is a strong step forward. Taxing the Internet is wrong for consumers and wrong for the economy."

The United States Telecom Association, a Washington-based trade group, and Verizon Communications Inc. both praised Congress for approving the proposed extension. Proponents of extending the moratorium say that continuing it will help promote the adoption of broadband services, which in turn should create new jobs and help drive the U.S. economy.