House votes to extend Net tax ban
Bill extends moratorium to the year 2006
ASSOCIATED PRESS
WASHINGTON, May 10 � The U.S. House of Representatives voted Wednesday
to extend the current moratorium on new Internet taxes for a further
five years. The moratorium is aimed at encouraging the growth of
electronic commerce by preventing encroachment from thousands of state
and local tax jurisdictions.
Online sales currently enjoy the same status as catalog sales,
only collecting sales tax from customers in areas where the
companies have a physical presence.
THE BILL EXTENDS TO 2006 an existing moratorium, due to
expire in October 2001, on taxing Internet access charges. It
also removes an exemption granted to 11 states under the current
moratorium, but put aside for now the thornier issue of how state
sales taxes should apply to electronic commerce.
�We have the momentum for this. We don�t want to get
caught up in the more controversial sales tax issue,� said Rep.
Bob Goodlatte, R-Va.
The Republican-led House voted 352-75 to pass the
legislation after an amendment that would have extended the ban
for two years and kept that provision, backed by the Clinton
administration, was defeated by 219-208.
The White House today issued a statement opposing the
five-year version because it could delay congressional
consideration of the sales tax issue and create �uncertainty in a
vital and rapidly growing industry.�
The bill, which now goes to the Senate, is part of an
effort this month by the House GOP leadership to underscore their
support for the Internet and the high-tech industry in this
election year. The Commerce Committee was moving legislation
permanently banning fees on Internet use and next week a bill
repealing the 102-year-old 3 percent telephone excise tax is
likely to move through the Ways and Means Committee.
In addition, Republican leaders today announced details of
their �E-Contract 2000� that highlights the tax measures and
several other bills sought by the high-tech sector Congress will
consider this year, including an increase in visas for highly
skilled foreign workers and permanent normal trade relations with
China.
�We are talking about maintaining freedom and growth of
this driving engine of the world economy,� said House Majority
Leader Dick Armey, R-Texas. �We believe that we are hitting the
injustices in the tax code that the American people see as either
obstructive to progress or just plain unfair.�
Many Democrats, however, see the list of GOP initiatives
as geared mainly to gain political favor with Internet and
computer companies � with their deep pockets of campaign
contributions � as the two sides struggle for control of the
House.
�The leadership sees this as another opportunity to play
to the high-tech crowd,� said Rep. William Delahunt, D-Mass.
Arrayed against the extending the moratorium are state and
local officials, including 39 governors worried about future
revenue losses, and bricks-and-mortar retailers afraid the
Internet will get an unfair advantage. Although the moratorium
doesn�t directly affect sales taxes � under a Supreme Court
ruling, states can�t collect them unless an Internet or catalog
business has a physical presence in that state � opponents say it
could effectively put the issue off for too long.
�In five years, it may be too late to do anything,� said
Rep. Ernest Istook, R-Okla., in a letter to colleagues.
�Destroying the tax base that finances education won�t boost a
high-tech future, but it will destroy the chances for that
future.�
But Democrats and Republicans alike say either the
extension is likely to easily pass the House, to head for an
uncertain future in the Senate. Armey said that would give states
and traditional retailers a chance to gather better information
about the impact of Internet sales and how to streamline tax
rates in thousands of different states, counties and cities.
�What we are essentially saying, rather than legislate
what is your worst fears, let�s legislate our highest hope for
growth and development,� Armey said.
Meanwhile, Reps. Jerry Weller, R-Ill., and John Lewis,
D-Ga., introduced a bill Tuesday that would eliminate any income
tax consequences for workers who take advantage of their
employers� gift of free computers or cut-rate Internet access.
Ford Motor Co., Delta Air Lines, American Airlines and Intel
Corp. have all begun such programs, but most tax experts say
workers will likely owe taxes unless the law is changed.
� 2000 Associated Press. All rights reserved.
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