Internet tax moratorium bill gains support

WASHINGTON -- More than 100 members of the U.S. Congress have sponsored a bill that would make permanent a five-year moratorium against levying taxes on the Internet that aren't levied elsewhere.

The Internet Tax Non-Discrimination Act, pushed by Senator Ron Wyden, an Oregon Democrat, and Representative Christopher Cox, a California Republican, would extend the sometimes misunderstood Internet Tax Freedom Act, which bans the 7,500-plus taxing jurisdictions in the U.S. from creating taxes unique to the Internet. The bill, introduced in early January, would ban Internet access taxes, as well as multiple taxes such as "bit taxes," which would tax Internet information as it moves across servers in many taxing jurisdictions.

"The fact of the matter is there is not a single state in the country that can show that it has been hurt by its inability to discriminate against electronic commerce," Wyden said at a news conference Monday. "Under the Cox-Wyden bill, you simply must treat merchants online like you treat those offline. It is simply about ... technological neutrality."

Wyden, Cox, and Representative Chris Cannon, a Utah Republican, pushed for the passage of the Internet Tax Non-Discrimination Act at the news conference. Cannon's House Judiciary Subcommittee on Commercial and Administrative Law will host a hearing on the bill Tuesday, and he said he expects the bill to pass out of the House Judiciary Committee quickly and then come before the full House for a vote.

The tax moratorium, in effect since 1998, will expire Nov. 1.

The three lawmakers were quick to emphasize that the bill doesn't prohibit jurisdictions from levying sales taxes against Internet companies, as the Internet Tax Freedom Act was misunderstood to do. The new bill does require states and other taxing jurisdictions to treat Internet sales the same way they treat other non-local sales, such as catalog and telephone sales. States are currently barred from collecting sales taxes on retailers not within their borders.

Wyden noted that the home states of tourist/shoppers at the Mall of America near Minneapolis, Minnesota, don't charge sales tax on the items those shoppers bring home. Internet sales make up only about 3 percent to 4 percent of all retail sales in the U.S., he added.

"What we are insistent is we don't come up with ways to try and soak people who are in the information sector in ways that don't have an offline analog," Cox said. "Our law is working. The Internet is growing."

The National Governors Association, which has pushed for collecting sales taxes on Internet commerce, does not have a position on the Cox-Wyden bill because it doesn't prohibit such a sales tax, if that tax were applied to other non-local sales, a spokeswoman of the association said. The association's position on Internet sales taxes is outlined here: http://www.nga.org/nga/lobbyIssues/1,1169,C_LOBBY_ISSUE^D_4907,00.html.