April 29, 2004

Senate Approves 4-Year Extensions of Ban on Unfair Discriminatory Internet Taxes

McCain compromise on Allen-Wyden Internet Tax Non-Discrimination Act approved in bipartisan vote of 93-3

Washington, DC -- U.S. Senators George Allen (R-Va.), Ron Wyden (D-Ore.) and Commerce Committee Chairman Sen. John McCain (R-Ariz) today hailed full Senate passage of the Internet Tax Non-Discrimination Act (S. 150), legislation extending the ban on multiple and discriminatory taxation on Internet access and online sales. The legislation 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. 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 the Senate approved a McCain substitute amendment to the underlying Allen-Wyden legislation, renewing and refining the original law and extending its protections for the next four years. "Today, the winners are the American people. I'm very pleased to see that this measure was passed with the bipartisan support of those who stand for freedom, opportunity, prosperity and more jobs rather than more taxation and burdensome regulations on the Internet," Senator Allen said. "The Internet is one of our country's greatest tools and symbols of innovation and individual empowerment. Its invention was as profoundly transforming and revolutionary for the dissemination of ideas and thoughts as was the Gutenberg Press. That is why I'm glad to see the majority of the Senate voted today with those who want to see the Internet continue to grow and flourish as a tool for information, opportunity and commerce. By passing this bill, we are helping to close the economic digital divide by promoting equal access to the Internet for all Americans." "Today the Senate 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 this law seven years ago," said Wyden. "This vote has protected consumers from a host of new Internet taxes on everything from web access to e-mail, and has saved fledgling online businesses from becoming tax collectors for thousands of jurisdictions. The future of the Internet is brighter and more secure because of the Senate's action today." "This bill will ensure that consumers will never have to pay a toll when they access the Information Highway. Plainly and simply, this is a pro-consumer, pro-innovation, and pro-technology bill. The Internet has started to become a fixture and core component of modern American life that has created and continues to generate social and economic opportunities throughout the United States. This was our goal then and it continues to be our goal today," McCain said. The Senators' legislation extends the previous moratorium, making 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 phone, 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; · 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; and The McCain substitute amendment to the underlying Allen-Wyden legislation makes 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 Voice Over Internet Protocol (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. S. 150 will now move into a conference with the House of Representatives to reconcile differences with legislation already approved there. Today Commerce Committee Chairman Chris Cannon (R-Utah), who co-authored the House legislation along with Rep. Cox, praised the Senate's action. "Passing the Internet Tax Nondiscrimination Act is a huge step in transforming the world of e-commerce," said Congressman Cannon. "In order to encourage continued growth and innovation, our economy should remain unfettered by duplicate and discriminatory taxes and regulation. While a temporary ban is a step in the right direction, we need clarity on this issue. Permanently eliminating these discriminatory taxes will not only boost the economy but pave a new path for Internet broadband deployment." The president has indicated that he will sign an extension of the ban on multiple and discriminatory Internet taxes into law.