Internet tax moratorium bill gains support

More than 100 members of Congress sponsor bill

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:,1169,C_LOBBY_ISSUE^D_4907,00.html.

Representative Zoe Lofgren, a Democrat from the San Jose, California, area, introduced a similar bill Thursday. Lofgren's legislation would extend the tax moratorium another five years, instead of making it permanent. "She believes a five-year term would be much more effective in gauging where the growth of the Internet is and  where we could go in the future," a spokesman for Lofgren said.

But Wyden and Cox said it's time for Congress to stop coming back to the issue every couple of years. Lofgren's bill would be the third moratorium since 1998.

Governors can require in-state sales taxes and audit retailers for compliance, Wyden noted. "What this issue has always been about is that when elected officials do that, they get a lot of political heat," he said. "So they say instead, 'We'll go out and try to stick it to somebody 3,000 miles away. What this really comes down to ... is that it's a lot easier to tax a business that's located 3,000 miles away than it to tell somebody who lives locally that they have to pay up on what is owed."

The Cox-Wyden bill has received letters of support from eBay Inc., the Direct Marketing Association, the Software and Information Industry Association, the US Internet Industry Association, and others.

Copyright © 2003 IDG Communications, Inc.