Internet Tax Ban Gets Extended

It came down to the wire, but President Bush signed into law a temporary ban on Internet taxes that had been set to expire today.

The law, “Internet Tax Freedom Act Amendments Act of 2007,” will add seven years to the life of the moratorium, which prohibits state and local government from taxing Internet access and electronic commerce. As a result, the act now will expire Nov. 1, 2014.

Retailers, ISPs, consumer groups, trade associations and lawmakers all hailed the bill’s passage as a victory.

“The DMA has worked tirelessly over the last six months to help ensure that access to the Internet is not impeded by unnecessary taxes. We are especially thankful that this priority legislation was passed by Congress in advance of the pending November 1 deadline,” said Steven Berry, executive vice president for government affairs and corporate responsibility at the Direct Marketing Association, in a statement.

“Congress clearly understands that taxing the Internet at this critical juncture is irresponsible public policy that would have dire economic consequences for our nation … the Internet is far too valuable of a commodity to our economy to be impeded by various taxes at every level of government.”

Broderick Johnson, chairman of the Don’t Tax Our Web Coalition, said in a statement that the extension represents “a great bipartisan victory that will benefit millions of consumers and businesses.”

“Continuing the ban on Internet taxes will ensure that the gateway to the Internet remains tax free in the vast majority of states and local jurisdictions,” said Johnson, whose group includes members like AOL,, Cisco, AT&T, Google, and others.

“As the longest extension ever enacted, this bill makes significant improvements in the moratorium, will help keep the cost of Internet access affordable and will help further our national goal of broadband access for all Americans.”

Small e-tailers and other online businesses had also pleaded for protection from Internet taxation, which they claimed would stymie growth in the sector.

The extension marks the third time the Internet tax ban had been prolonged by legislators since it was first enacted in 1998.

In recent weeks, as the moratorium’s deadline neared, legislators redoubled their efforts to take the measures necessary to extend the ban. After hearing testimony from small businesses and industry observers in committee in early, the U.S. House of Representatives passed its version of the tax moratorium extension Oct. 16 in a vote with wide bipartisan approval.

It took until Friday, however, for the Senate to approve its own version of the bill, which likewise passed by a wide margin. On Tuesday, the two then reconciled their different bills in a final edition for presidential sign-off.

There had been some concern that portions of the House bill, which only extended the ban four years, would unintentionally pave the way for new taxes on e-mail and other Web-based services.

Those problems now appear moot; the bill submitted to the president removed the language in question from the House version and accepts the Senate’s longer seven-year ban.

Despite the bill’s passage, some continue calling for a permanent ban on Internet taxes. Discussion on making the moratorium permanent had been tabled in favor of ensuring at least a quick and relatively simple passage for the temporary ban before the deadline expired.

“While we continue to believe strongly that a permanent moratorium is more beneficial to businesses, we are encouraged by the House’s action on the Senate’s seven-year extension of the Internet Tax Moratorium,” said the DMA’s Barry.

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