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Antitax bill clears roadblock

A bill to keep the Internet free of taxes took a significant step toward reality when an opposing senator dropped his objections.

A proposed federal law to keep the Internet free of state and federal taxes took a significant step toward reality when an opposing senator agreed to drop his objections for the time being, a Senate aide said today.

The legislation was making progress in the House but the Senate's version of the law had been stalled in the Senate Commerce Committee, where Sen. Ted Stevens (R-Alaska) was insisting that the bill contain language that would treat Internet service providers (ISPs) as telecommunications services--a provision that would allow them to be taxed.

But Stevens has decided to attach his ISP provisions to a different piece of legislation, said David Selden, press secretary for Sen. Ron Wyden (D-Oregon), who sponsored the Internet Tax Freedom Act. A vote on the tax freedom law is now expected "within the next couple of weeks," Selden said.

It was unclear when and how Stevens would resurrect his Internet taxation provisions. The senator could not be reached for comment today.

The proposed law is designed to encourage interstate and international commerce online. To that end, it specifically states that there "shall be no tax imposed by any state, county, or municipal taxing authority on the Internet."

After imposing a moratorium on Internet taxes from state and local governments, the bill gives the president two years to prepare policy recommendations on Internet taxation and draft an international agreement to make the Net a "duty-free" zone.

"The crazy quilt of state and local taxes could do irreparable harm to the Internet, killing the goose that could lay billions of dollars in golden eggs," Wyden said in a statement.

Selden said he expects the legislation to reach the full Senate by the beginning of next year. The bill is supported by the Association of Online Professionals, the Committee on State Taxation, the Information Industry Association, IBM, the California State Board of Taxation, CommerceNet, and the Silicon Valley Software Industry Coalition.

Parallel legislation in the House has already passed two subcommittees. That bill, which is awaiting review by the Judiciary and Commerce committees, is expected to reach the full House floor within a month.