Congress Extends Internet-Tax Moratorium

No Local Taxes on Internet Access, Transactions Until 2014

By John Eggerton -- Broadcasting & Cable, 10/30/2007 1:18:00 PM

With a House vote Tuesday approving a just-passed Senate version of an Internet-tax moratorium, Congress agreed to prevent local taxes on Internet access and transactions until 2014.

Sens. John McCain (R-Ariz.) and John Sununu (R-N.H.) proposed making the moratorium permanent in their Senate bill but compromised on a seven-year hitch to get the legislation passed and over to the House before the Nov. 1 sunset of the current moratorium.

The moratorium prevents local taxes on Internet access, including cable-modem service, as well as local taxes on online transactions. The House passed a four-year extension earlier this month, but both houses of Congress have to agree on the same language, so the House voted Tuesday to approve the Senate's longer version.

Congress had already twice extended the moratorium, which was established as part of the 1998 Internet Tax Freedom Act.

“Verizon applauds the House and Senate for once again extending the moratorium on taxes on consumers’ access to broadband," Verizon Communications senior vice president of government relations Peter Davidson said in a statement. "Broadband access is now a crucial driver of America’s economy, and this moratorium extension will ensure continued investment and growth in the broadband marketplace. This is good for consumers and businesses across the country.”

While McCain last week called the seven-year deal a "strong compromise," House Republican Whip Roy Blunt of Missouri, saw it as House Democrats leaving the door open to impose the taxes at some future date. “When it comes to taxing the Internet, Republicans have not wavered in our belief that it ought not happen today, tomorrow, four-years from now, or any time after that," he said. "Democrats in Congress have taken a far more ‘nuanced’ position on the matter, having decided that imposing new taxes on our digital economy right now is unpalatable, but that resurrecting the plan sometime in the future may hold greater promise."

Echoing its praise for Senate passage last week, the National Cable & Telecommunications Association called it "good news for consumers and small businesses."