The extension must be signed by President Bush before the current moratorium ends Thursday, or it will expire.
The Internet tax moratorium originally was passed in 1998, and this is the third time it has been extended. The House passed a four-year extension on Oct. 16, but senators who wanted a permanent ban passed a seven-year bill last week, sending the seven-year bill back to the House.
"By extending the ban on Internet access taxes for a longer period of time, we give businesses the certainty they need to spend billions of dollars to construct, maintain and update the broadband Internet infrastructure throughout the country," said Rep. Anna G. Eshoo, D-Calif., whose district includes much of Silicon Valley in Northern California. "This legislation will help keep the cost of Internet access down so that all individuals will continue to use the great informational tool that is the Internet."
Eshoo was among the lawmakers who supported a permanent ban, which also was supported by Internet companies such as Google Inc. and Yahoo Inc., and Internet service providers including AT&T Inc., Verizon Communications Inc. and Time Warner Inc.
But local and state governments pushed for the extension to only be temporary, arguing that Congress might need to adjust the legislation in the future as more services move to the Internet.
The bill states that services like telephone and TV provided over the Internet are not exempted from taxes. Local and state governments depend on money from such taxes.
Services related to Internet access, such as instant messaging, email and personal online storage, are included in the ban.
"This action came just in the nick of time," said Dorothy Coleman, vice president for tax policy at the National Association of Manufacturers, which along with the U.S. Chamber of Commerce and other business trade groups, supported a permanent extension. "American businesses of all sizes rely on high-speed, broadband Internet access to remain competitive in the global marketplace."