House OKs New Net Tax Moratorium

FRAMINGHAM (05/11/2000) - E-commerce received a potential boost Wednesday in Washington when the U.S. House of Representatives passed a bill to stave off Internet taxes until 2006.

The Cox-Wyden Internet Nondiscrimination Act passed without a hearing in a 352-75 vote. It now moves on to the U.S. Senate.

The bill extends the present ban on new e-commerce taxes. That ban was enacted in 1998 and ends in October 2001.

The Senate and the president have indicated they would prefer a modified version of the bill.

Bill co-sponsor Rep. Christopher Cox, a Republican from California, who helped write the original moratorium, said the easing of taxes will help Internet commerce continue to grow.

Neither the present act nor its extension would change local sales tax laws. It does prevent federal, state and local governments from imposing fees and taxes on access to the Internet, double taxation (by two or more states) and discriminatory taxes that treat Internet purchases differently than other kinds of sales.

The intent, Cox said, is to keep Internet sales competitive. However, some traditional bricks-and-mortar retailers are complaining they bear an unfair burden for regular sales tax, since, they say, Internet buyers can avoid sales tax.

The original version of the Cox-Wyden bill called for an indefinite moratorium, but a compromise ends it after five years.

The National Governors Association is working on a policy it says will bring more parity to e-commerce and bricks-and-mortar taxation. Currently, companies with a physical presence in a state must charge sales tax to customers in that state. This effectively means that consumers walking into a conventional store must pay sales tax on purchases in states that charge such tax. However, an e-commerce operation with offices in one state can send goods tax-free to customers in the other 49 states.

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