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No tax relief for adult sites

Sites that give minors access to "harmful" material could face new taxes under a provision added to Net Tax Freedom Act.

Commercial Web sites that give minors access to "harmful" material could face new taxes under a provision added to the Internet Tax Freedom Act by a 98-1 Senate vote today.

The moratorium legislation was debated for most of today and will be voted on tomorrow. Sen. Ron Wyden's (D-Oregon) bill would temporarily halt new or discriminatory taxes on Net access and services for two years.

The House version of the bill imposes a three-year moratorium and "grandfathers" Net taxes passed before March 1998. If two amendments are adopted by the Senate tomorrow its bill will do the same thing.

If passed by the Senate, the bill would have to be approved by a joint-house conference committee before being approved by Congress.

But not all e-commerce sites will be protected from new taxes during the time-out. An amendment introduced today by Sen. Dan Coats (R-Indiana) would exempt an array of sites from the moratorium, unless they check the identification of visitors.

The proposal attempts to lay out an economic disincentive for sites that give underage Net users access to any communication, image, or writing that contains nudity, actual or simulated sex, or that "lacks serious literary, artistic, political, or scientific" value. The provision also requires Net access providers to offer customers products to screen out this material.

Coats had been expected to submit a much more controversial amendment that would make it a crime for commercial Web sites to allow underage surfers to view adult-oriented material deemed "harmful." Violators could be fined up to $50,000 and imprisoned for six months.

Still, civil liberties groups say the provision added today also will stifle access to constitutionally protected speech.

"A criminal penalty is harsher than a denial of a tax benefit, but the government cannot make this distinction and only give the tax break based on sites' willingness to censor themselves," said Ron Weich, a legislative consultant for the American Civil Liberties Union Washington National Office.

That legislation, nicknamed the Communications Decency Act II by foes, already passed the Senate as part of a major spending bill in June, and is still being debated by a joint-house conference committee.

Also this week, the House could pass a stand-alone version of legislation that mirrors Coats's CDA II: Rep. Mike Oxley's (R-Ohio) Child Online Protection Act.

Although the CDA II could be ushered into law in a variety of ways, the Net Tax Freedom Act seemed like a good vehicle because President Clinton has agreed to sign the bill and champions it as a necessary tool for fostering e-commerce.

Sites that sell pornography are no doubt some of the Net's biggest money makers and could stand to loose revenue if localities and states are able to slap them with new levies. But the problem, civil liberties groups say, is that "harmful" material could be interpreted differently by various communities and courts around the country.

"Any attempt to regulate online content by labeling it 'harmful to minors' will chill the exercise of free speech on the Net because that standard is highly subjective and will open up Web sites, regardless of where they are physically located, to prosecution anywhere in the country," said David Sobel, general counsel for the Electronic Privacy Information Center.

Coats was an original sponsor of a controversial part of the CDA that made it a felony to send "indecent" material to minors over the Net. That was the portion that was struck down by the Supreme Court last summer on grounds that it was vague and broadly infringed on adults' rights to free speech.

Since coming up for Senate debate, the Net tax bill has been strapped with other Net-related proposals.

Amendments passed Friday lay out online privacy protections for children and requirements to put government documents on the Net. Senate Majority Leader Trent Lott (R-Mississippi) is said to be working behind the scenes to push an amendment that would reverse Congress's decision in May to retroactively approve up to $60 million in taxes that were collected in Internet domain name registration fees.