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Internet Tax Moratorium Goes to Bush

A bill to extend a moratorium on Internet access taxes for seven years was approved 402-0 by the House Tuesday, less than two days before it was set to expire.

The House initially approved a four-year ban, but last week the Senate passed a seven-year prohibition, despite considerable support for a permanent ban.

"Seven years is better than nothing, and that's what we're doing today," said Rep. Fred Upton, R-Mich, during remarks on the House floor.

A House bill that would make the moratorium permanent has 238 House co-sponsors, more than a majority.

The tax ban, first approved in 1998 and twice renewed, is set to expire Nov. 1.

Support for a permanent ban was strong in both the House and Senate, but concerns over the potential long-term impact on state and local governments forced a compromise.

The provision amounts to a moratorium on state and local taxes, said David Quam, director of federal relations with the National Governors Association. And with the Internet changing rapidly, the issue should be revisited periodically, he said.

"The implications could be pretty severe down the road if they got that wrong," he said. "It's actually a decent compromise that state and local governments and industry helped craft."

Rep. Linda Sanchez, D-Calif. called the bill "bipartisan legislation at its best" and noted it was supported by businesses, state and local government organizations and labor unions.

In addition to lengthening the ban from four years to seven years, the legislation also contains a provision aimed at preventing state and local governments from assessing taxes beyond those levied on simple Internet access.

At the urging of Sen. Ron Wyden, D-Ore., the legislation specifically prohibits taxation on e-mail and instant messaging services "that are provided independently or not packaged with Internet access."

The extension also exempts some states that approved taxes prior to the original enactment.

Sen. John Sununu, R-N.H., supported a permanent ban, but helped craft the seven-year compromise. "Seven years is better than we've ever done before," he told The Associated Press. "I think that's an important place to start."

The bill now goes to the White House for President Bush's signature.

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