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U.S. House Votes to Extend Internet Tax Ban

The U.S. House of Representatives voted late Wednesday to extend the current moratorium on new Internet taxes for an additional five years.

The moratorium passed the House with a 352- to-75 vote after nearly six hours of debate. The Internet Non-Discrimination Act [H.R. 3709] extends the current moratorium set to expire in October 2001, to 2006.

The bill was sponsored by Christopher Cox (R-Calif.) and was amended by Congressmen Bob Goodlatte (R-Va.) and Rick Boucher (D-Va.).

House Policy Chairman Cox compared the art of successful e-commerce taxation to plucking a goose, in that the objective is to get the greatest amount of feathers with the least amount of squawking.

"Recognizing that," Cox said, "policymakers will be wise to steer clear of new Internet taxes, if the object is to protect and expand the tax base. Our latest legislation will be a useful means of ensuring that result."

Rep. Goodlatte said Internet access must remain free of burdensome regulations.

"Our children should not be taxed for researching school projects online. Consumers should not have to pay to simply browse e-commerce sites on the Internet," Goodlatte said. "The Internet must remain unfettered by burdensome taxes and regulation, to ensure continued growth and innovation in the 21st century."

The bill seeks to protect e-commerce from excessive tax burdens because the industry remains in its infancy. Exorbitant taxes could over-burden online businesses and kill e-trade in the cradle. As it stands, the bill would also permanently ban sales taxes on Internet access fees.

The bill exceeds by three years what the Clinton Administration supports, setting the stage for a possible Clinton veto of the e-tax portion of the bill, should the Senate craft similar legislation.

Joe Lockhart, White House spokesman, said that the tax moratorium should be only extended two years past its current expiration date because it provides an unfair tax break to Internet-based businesses at the expense of traditional bricks-and-mortar retailers.

"We think if you go and extend out through five years you really run the risk of putting off some decisions that need to be made," Lockhart said. "We oppose, and are for a permanent moratorium on any excess taxes, where we oppose any discriminatory taxes."

Lockhart added that the current mark-up language of the bill merely postpones the inevitable.

"Our concern is if you move, you just kick the can down the road for another five years," Lockhart said. "Congress states all the affected parties will find a way to put off the tough decisions that need to be made as far as how state and localities handle sales tax and their own tax issues,"

Lockhart said that the Clinton Administration believes that the federal government has a partnership role to fulfill with state governors.

"I think the President talked about it the last time the governors were here, it was a big part of the conversation," Lockhart said. "We support a two-year extension because, our position is that we are opposed to discriminatory or access taxes. But we think if you go and extend out through five years you really run the risk of putting off some decisions that need to be made."

The House bill would also remove an exemption granted to 10 states under the current e-tax moratorium. Connecticut, Montana, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington and Wisconsin and 16 cities would have to repeal taxes on their law books.

Online sales currently enjoy the same status as catalog sales, only collecting tax from