House Approves Internet Tax Moratorium

SAN FRANCISCO (05/11/2000) - In what's seen as a potential boon for online retailers, the U.S. House of Representatives passed a bill yesterday that would extend until 2006 the current ban on new Internet taxes.

The Internet Nondiscrimination Act, sponsored by Representative Christopher Cox, a California Republican, and Senator Ron Wyden, an Oregon Democrat, swept through the House with an approval vote of 352 to 75. The issue now moves to the U.S. Senate.

The bill would extend for five years the Cox-Wyden Internet Freedom Act of 1998, which is due to expire in October 2001, and prevents new laws from being introduced at the federal, state and local levels that might hamper the growth of electronic commerce.

The bill doesn't deal with sales taxes directly. Rather, it outlaws any new taxes on Internet access, double taxations -- where fees are levied in two or more states -- and any taxes that treat online purchases differently from other sales.

While online retailers have embraced the legislation, traditional brick-and-mortar firms say the new law discriminates against them by giving e-commerce firms preferential treatment.

The National Governors Association criticized Washington politicians for moving too quickly on the bill, saying it passed through the House without a hearing.

Senator Ernest Istook, a Republican from Oklahoma, accused politicians of trying to curry favor with the Internet community.

"The tougher fight -- but the right fight -- is to bring down overall taxes for everyone, especially federal taxes," Istook said in a statement issued yesterday.

Sam Stratman, a spokesman for the Judiciary Committee, denied that the House failed to give the bill a full airing, but he said the last hearing on Internet taxation was in the summer of 1998. There were many "ancillary hearings" in the House that touched on the issues contained in the Internet Nondiscrimination Act, Stratman added.

The original version of the Internet Nondiscrimination Act, proposed in February, would have made the current moratorium permanent. Earlier this month, the House Judiciary Committee shortened the moratorium to five years. That version of the act passed after the House rejected a proposal to extend the moratorium for only two years.

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