Senators propose Net tax ban extension

By Scarlet Pruitt

(IDG) -- With the ban on discriminatory Internet commerce taxes set to expire in a little over two weeks, three United States senators introduced new legislation this week that aims to extend the moratorium for two more years.

Ron Wyden, a Democrat from Oregon, Patrick Leahy, a Democrat from Vermont, and Republican John McCain from Arizona rallied behind a new bill Tuesday, aiming to extend the 1998 Internet Tax Freedom Act, which prevents governments from singling out Internet commerce for new kinds of discriminatory taxes as well as new Internet access charges.

"Although electronic commerce is beginning to blossom, it is still in its infancy, " Leahy said in a statement regarding the new legislation. "Stability is the key to its reaching its full potential, and creating new tax categories for the Internet is exactly the wrong thing to do. E-commerce should not be subject to new taxes that do not apply to other commerce."

The current ban on Internet taxation is due to expire October 21, leaving Internet sales open to a host of possible taxes from myriad state and local governments.

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By extending the current moratorium, the senators are hoping that the more than 7,600 state and local taxing jurisdictions will have the opportunity to simplify their taxation processes so that companies engaging in electronic commerce, and other remote forms of commerce, do not have to bear an "undue burden" regarding tax collection.

The Supreme Court of the United States ruled in 1998 that the country's tax jurisdictions could not impose burdensome taxes on Internet sales that were already illegal for other forms of interstate sales, such as out-of-state mail purchases.

"I believe very strongly that no jurisdiction in this country has shown that they have been hurt by their inability to impose discriminatory taxes against the Internet," Wyden said in a statement. "State and local governments have a right to be concerned about where their revenue is coming from, but they should not be able to view the Internet as a cyber cash cow and treat it differently from other forms of commerce."

The new legislation is due be passed on to the Senate Commerce Committee, which has been working on resolving the issue of Internet taxation for the last 18 months. With the moratorium deadline looming, the senators are hoping that the bill is passed quickly, providing at least temporary relief for Internet retailers who say they're unprepared to deal with the numerous and disparate state and local tax codes.

On presenting the legislation, Leahy, McCain and Wyden said that the two-year extension would give Congress an opportunity to come up with a long-term approach to dealing with Internet commerce taxation, given that Congress is currently mired in legislation relating to the September 11 terrorism attacks in New York and at the Pentagon.