RealTime IT News

Internet Access Definition Still Divides Senate

U.S. Sen. John McCain said Monday he hopes the Senate can pass some version of an Internet access tax ban within the next two weeks. The five-year moratorium on taxing consumers' connections to the Internet expired on Nov. 1.

McCain predicted Monday the issue would be resolved before the Senate leaves for its Christmas break, which is currently scheduled to begin before the Thanksgiving holidays. However, a highly partisan dispute over judicial nominations is roiling the Senate and may extend the current session into December.

Senators Ron Wyden (D.-OR) and George Allen (R.-VA) last week tried to win passage of a permanent moratorium but ran into opposition over the legislation's expanded definition of Internet access. Opponents, led by a coalition of Republican and Democratic senators who formerly served as governors of their states, claim the new definitions are too broad and could cost the states as much as $9 billion annually in taxes.

A number of states contend the new definitions would exempt not only certain telecommunications services used for Internet access, but would also expand the pre-emption to include bundled telecom services that offer high-speed connections and local and long distance telephone service in one package.

The cash-strapped states' concerns prompted Sen. Lamar Alexander (R.-TN) to introduce an amendment to extend the language of the just expired access tax moratorium for another two years.

"What we are proposing is a two-year extension of the current law with one exception: level the playing field between the phone companies and the cable companies," Alexander said. "This short term solution allows us to craft careful changes in a rapidly changing technological world."

Wyden said the Alexander amendment would make it easier for states to tax wireless connections and other types of Internet access never contemplated by the original 1998 ban on access taxes. Wyden said he and Allen offered to compromise by extending the ban for only five years but with the new language included. The compromise failed.

Senators Wyden and Allen have said they were willing to compromise on the length of the moratorium but were holding fast on the definitions, which, they claim, are designed to keep states from taxing DSL connections. Some taxes have interpreted DSL connections as a telecommunications service and subject to taxation.

The U.S. House of Representatives has already passed legislation, which includes the expanded definitions of Internet access, to make the access tax ban permanent. Any differences between the Senate and House versions would have to be resolved by a joint conference committee.

"We're down now to one basic difference: the definition of Internet access," said McCain, chairman of the Senate Commerce Committee, where the Wyden-Allen legislation originated. "I would hope absolutely before we leave for the Christmas break that we would have this issue resolved and voted on by the Senate," McCain said.