Senate Votes to Continue Internet Tax Ban - May 3, 2004 Vol.5, No.9

May 3, 2004 Vol.5, No.9:

Published: 05/03/2004

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Senate Votes to Continue Internet Tax Ban

On April 29, under heavy pressure by the telecommunications industry, the Senate voted 93-3 on S. 150 a bill that extends the moratorium on Internet access taxes for four years from its expiration date of November 1, 2003.

While extension of the ban was heralded as a victory for Internet users, this bill benefits the telecom industry, not consumers. For more about the Internet tax ban and efforts to make it permanent, see a previous OMB Watch analysis.

Under this compromise bill, states that had begun taxing Internet access services prior to 1998 can continue to do so through the end of the four-year moratorium, and states that taxed Digital Subscriber Line transactions even after 1998 would be allowed to continue taxation for two years. The bill also includes language that allows states to continue to tax telephone service even as it moves over to the Internet (VoIP), however, the definition of Internet access remains troublingly broad.

The good news is that the Senate did not vote to make the ban on Internet taxation permanent. The bad news is that the continuation of the ban will deprive states of much-needed revenue and primarily benefits industry, not consumers.

It is still uncertain whether the bill will go to conference with the House.