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Cable Fights Calif. Web Tax

5/31/1998 8:00 PM Eastern

California operators have banded with Silicon Valley
companies to support a state proposal that will fend off taxes on Internet-service
providers, at least for a while.

The executives support the so-called California Internet
Tax Freedom Act, which aims to keep online commerce growing, unfettered by sales and other
taxes. The bill passed the Assembly nearly unanimously this past fall. It is modeled along
the lines of a similar bill contemplated by Congress.

"Actually, we're for a moratorium, period, with
no sunset," said Dennis Mangers, vice president of governmental affairs for the
California Cable Television Association.

But it is unlikely that an open-ended bill will pass. The
state's cities' lobby said any bill that strips members of their ability to levy
taxes cuts them off from their life's blood.

Further, they are concerned that exceptions outlined in the
bill that they must qualify for before charging ISPs taxes will make it more difficult for
them to account for applicable revenues for franchise fees.

One official said he is concerned that cable will shelter
some video costs, attributing them to Internet categories.

California officials hope that they have the same success
as operators and ISPs in Alabama, which recently saw Gov. Fob James sign a bill that
excludes Internet service from utilities' gross-receipts taxes and service-use taxes.

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