(Adds background, lawmakers' comments)
By Kevin Drawbaugh
WASHINGTON, July 15 The U.S. House of
Representatives voted on Tuesday to ban permanently any taxation
of Internet access, a prohibition that is temporary and
currently set to expire in 16 weeks.
In a move opposed by some Democrats and state and local
governments, the House approved a bill that would bar state and
local governments from enacting Internet connection taxes.
The approval came on a voice vote, sending the legislation
next to the Senate, where it also has bipartisan support.
The bill does not involve state taxation of online shopping
purchases, which is a different issue. Rather, the Permanent
Internet Tax Freedom Act addresses Internet access.
Congress in 1998 approved a temporary moratorium on state
and local governments imposing any new taxes on Internet
connections. This ban has been extended three times, most
recently in 2007, but is set to expire on Nov. 1.
When the moratorium was first imposed, it grandfathered, or
allowed to remain in place, a handful of taxes that were
established before Oct. 1, 1998. That meant some states -
including Texas, Wisconsin and Ohio - that were already taxing
Internet connections could continue doing so.
Some did, and for them, especially Texas, the latest bill
would put an end to an important government revenue source, some
Democrats said during debate on the House floor.
Drawn up by Republican Representative Bob Goodlatte of
Virginia, the bill is opposed by a number of lobbying groups
that represent states and localities, including the National
League of Cities, and several large labor unions.
The Federation of State Tax Administrators estimated that
states and localities could lose at least $500 million a year in
tax revenues if the moratorium were made permanent. Texas alone
would take a hit of $358 million a year.
In a joint statement after the House vote, five Republican
and Democratic lawmakers said: "This permanent ban is crucial
for protecting access and opportunity for Americans in our
growing digital economy. We hope that the Senate promptly acts
on this vital legislation before the November 1st deadline."
The Goodlatte bill also would extend permanently the 1998
moratorium on "multiple or discriminatory taxes on electronic
commerce." This is meant to prevent a consumer from being taxed
multiple times on the same online purchase by multiple states
and to prevent states from taxing online purchases specifically.
When it was approved at the committee level last month, the
Goodlatte bill was supported by high-tech companies, including
AOL Inc, eBay Inc, Facebook Inc, Oracle
Corp, VeriSign Inc and Yahoo Inc.
(Reporting by Kevin Drawbaugh; Editing by Jonathan Oatis and