Senate Finally Backs Internet Tax Ban

Gretchen Gallen
WASHINGTON – After laboring over the issue of Internet taxation since November 2003, the U.S. Senate voted 93 to 3 to give the ban on taxing high-speed, wireless and dial-up services another four years.

The temporary extension was presented as a salvo by senators who felt that a permanent moratorium on online telecommunications services would unduly harm state and local governments and deprive them of badly needed revenue.

The decision is considered a compromise and is expected to spur the rollout of high-speed and wireless services.

The original ban, which was passed in 1998 as the Internet Tax Freedom Act, occurred before the advent of high-speed access and only applied to dial-up services. Prior to this week's decision, high-speed access was subject to taxation, although service providers are now expected to phase out that taxation process over the next two years, taking a projected loss of $100 million.

The bill that passed through the Senate yesterday was an amended version of the former, and managed to strike middle ground in the fierce debate among lawmakers.

"The bottom line is, the Senate passed a bill that will end technological discrimination and save consumers millions of dollars," said Ron Wyden (D-Ore.), one of the authors of the original bill, which asked lawmakers to approve a permanent ban on Internet taxation.

The Senate vote also ended the controversial debate over the 10 states that had been exempt from the 1998 tax ban, which enabled them to tax both dial-up and high-speed access. Lawmakers in favor of keeping those states exempt were concerned that revenue losses would tally into the billions of dollars. According to the Senate's vote, those states will remain exempt from the four-year ban.

Those states include Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington and Wisconsin.