November 19, 2004

Congress Passes Final Legislation to Renew Ban on Unfair, Discriminatory Internet Taxes

Cox, Allen, Wyden hail House action on S. 150; bill now heads to the White House for signature into law

Washington, DC -- U.S. Senators Ron Wyden (D-Ore.) and George Allen (R-Va.) and Rep. Chris Cox (R-Calif.) today hailed passage in the House of Representatives of the Allen-Wyden Internet Tax Non-Discrimination Act (S. 150). The House action is the final step in a compromise to end the stalemate over extension of a ban on multiple and discriminatory taxation on Internet access and online sales; the legislation now moves to the White House, where the President has indicated he will sign the ban, which extends through November 2007, into law. S. 150 still bans three types of taxes that unfairly single out the Internet, including taxes on Internet access, double taxation (for example, by two or more states) of a product or service bought over the Internet, and discriminatory taxes that treat Internet purchases differently from other types of sales; changes were made this week to grandfather in a Wisconsin tax for two years, and grandfather in a Texas utility tax. The Internet Tax Non-Discrimination Act extends the original Internet Tax Freedom Act of 1998, authored by Wyden and Rep. Chris Cox (R-Calif.). The moratorium created by that legislation and then extended in 2001 expired last November. "Today Congress has preserved the Internet as a thriving conduit of commerce and communication for all Americans, just as Rep. Cox and I intended when we wrote the original law," said Wyden. "Banning unfair and discriminatory taxes has worked for Internet consumers and for the web economy. Extending these protections will help more small businesses grow online and help more of our citizens tap the power of the web as well." "Today, the winners are the American people. I'm very pleased to see that this measure was a victory for those of us who stand for freedom, opportunity and prosperity rather than taxation and burdensome regulations on the Internet," said Senator Allen. "The Internet is one of our country's greatest innovations for individual empowerment. Its invention was profoundly transforming and revolutionary for the dissemination of ideas and thoughts as was the Gutenberg Press. By passing this bill, we are helping to close the economic digital divide by promoting equal access to the Internet for all Americans." "The case for allowing internet access to remain tax free has never been stronger," House Policy Committee Chairman Christopher Cox said. "A tax on the internet would be a tax on working families. Eighty-eight percent of Americans oppose new Internet access taxes. You might say this legislation, the Internet Tax Freedom Act and Nondiscrimination Act and this moratorium are the most popular tax issues in America. New internet taxes would be highly destructive to the American economy." S. 150 extends the previous moratorium and makes changes to address technological advances, with the following goals: · To clarify and update the definition of Internet access to ensure technological neutrality, so that the moratorium applies consistently to any type of Internet access (DSL, dial-up, cable modem or wireless service); · To ensure that nothing in the Internet Tax Freedom Act will affect State and local taxation of voice telecommunications services (including voice-over internet protocol, or VOIP), the application of any federal, State, or local regulatory fees, or other telecommunications services that are not purchased or used directly to provide Internet access; and · To ensure that nothing in the Internet Tax Freedom Act will prevent the imposition or collection of any fees or charges used to preserve and advance the universal service program. A substitute amendment from Commerce Committee Chairman John McCain (R-Ariz.) was accepted by the Senate in April of this year, making additional changes to address the concerns of a number of states and localities about the moratorium, including: · Setting the length of the moratorium extension at four years; · Narrowing the definition of Internet access by excluding traditional telephone service and carving out VOIP to the extent that such service mimics traditional telephone service; · Grandfathering in states that taxed Internet access in 1998 for a four-year period, and grandfathering in states that currently tax high speed wireline and wireless Internet access (including those that tax the so-called "last mile"), but that were not protected by the 1998 grandfather clause, for a two-year period; and · Incorporating accounting rules to address bundling, an explicit conclusion of non-transactional taxes from the Internet tax moratorium, and savings clauses addressing the regulation of Internet access, universal service and E-911.