Washington -- States and cities would be blocked from
imposing new taxes on the Internet under legislation passed by the Senate Thursday.
The bill, which passed 96-2, would impose a three-year
moratorium prohibiting local governments from taxing the Internet until a national plan on
cyber-taxation can be developed.
The measure now goes to the House of Representatives, which
passed a similar bill earlier this year. Sponsors said they hoped that differences in the
House and Senate versions could be hashed out before Congress adjourns this weekend.
If so, President Clinton said in a prepared statement that
he would sign the legislation.
Business groups had pushed for passage of the bill, arguing
that the federal time-out would protect the burgeoning electronic-commerce industry from
being squashed under layers of tax regulations.
Most states do not directly tax the Internet. Only 10
states have taxes on providers, usually in the form of sales taxes on the company's
monthly or hourly fees or "telecommunications taxes." Existing taxes would not
be banned -- an amendment passed this week would "grandfather" them.
The primary focus of the occasionally cantankerous debate
during the past two weeks has been the bill's potential impact on states'
ability to collect sales taxes from companies that do business over the Internet.
States would be able to collect sales taxes from those
companies, but under the same restrictions as current mail-order law. Many Senate critics
pointed out that the fogginess of current law results in most states losing out on the
taxes from their residents' remote purchases.
And as electronic commerce grows, states' losses will
In the end, proponents for expanding states' ability
to collect taxes won out -- a commission established to study the issue would not only
examine electric commerce in general, but also the impact of the Internet on Main Street
businesses and on state and local governments' ability to collect sales taxes from
States News Service