If a coalition of congressmen has its way, the government's temporary moratorium on Internet-access taxes could soon become permanent.
This week, a House of Representatives committee is expected to consider a proposal that would bar states from imposing levies on Internet service, but would not affect their ability to collect sales taxes.
The Internet Tax Nondiscrimination Act, introduced by Rep. Christopher Cox (R-Calif.), would make permanent a moratorium the congressman initially introduced in 1998. The current ban is set to expire in November.
Cox urged support for the measure, backed by more than 30 other representatives, partly on the grounds that taxes would make it harder for lower-income Americans to afford Internet service.
"The average American does not need new taxes, especially on their Internet access," he said, citing a recent Commerce Department report that found families making less than $25,000 per year represent the fastest-growing segment of the Internet population.
Another motive in keeping the ban is to prevent the Internet access business from becoming like the phone industry, where consumers are forced to pay hefty fees and taxes on top of their regular bills, Cox staffers said.
In addition to the House bill, two senators, Ron Wyden (D-Ore.) and George Allen (R-Va.), also proposed legislation with the same title in the Senate, to make the Net-access tax ban permanent.
The flurry of bills comes as Internet service providers and other tech industry lobbyists are pressing legislators to refrain from doing anything that could slow the flow of bandwidth to American homes.
"Right now, we're opposed to anything that slows the growth of broadband use, and we certainly think imposing a tax on Internet access will do that," said Garrett Ashley, executive director of the Orange County, California, chapter of TechNet, an organization of technology industry executives.
Cox's proposal, staffers say, goes beyond barring new taxes -- it also would eliminate a clause in current legislation that lets a handful of states collect Net-access taxes.
Currently, seven states do impose a tax on Net access, ranging from about 4 percent to 10 percent, according to EarthLink, which in the past absorbed the additional cost for customers who lived in the tax-collecting states. Starting next month, however, the money-losing ISP will begin adding state tax charges onto customers' bills, in a move to reduce its expenses.
The proposed ban on access taxes hasn't cropped up at an optimal time for states, most of which are grappling with budget deficits induced by the sluggish U.S. economy.
But since the proposed legislation only addresses Internet access fees, it leaves states free to pursue more aggressive collection of sales tax from online purchases. Earlier this year, several large chain retailers "volunteered" to begin collecting taxes on online sales after states agreed that in return they would not hold them liable for back taxes on Internet sales.
Most retailers who sell exclusively online, meanwhile, collect taxes only in states in which they have a physical presence.
