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Congressional panel to vote on bill to ban VoIP taxes

Next week, a move to block states from taxing Internet-connected phone service faces its first test.

A U.S. Senate bill that would ban states from taxing and regulating Internet phone calls will face its first hurdle in a committee vote next week.

Sen. John Sununu, R-N.H., said Tuesday that the Senate Commerce Committee has scheduled a vote on his voice over Internet Protocol (VoIP) bill on July 20 at 9:30 am. If approved by the committee, the bill--which is moving forward at an unusually rapid pace--would be sent to the full Senate for a floor vote that could take place this year.

"It is a simple choice for members: vote to establish a clear legal regime based on technological innovation and consumer choice or vote in favor of multilayered regulation of VoIP that will let chaos reign," Sununu said in a statement. "Those who use e-mail and instant messaging should know, if members vote to regulate Internet applications such as VoIP, those technologies are next."

Approval by the Senate committee is far from certain. At a hearing in June, some Democrats and Republicans complained that they could not support Sununu's bill because it did not permit states and counties to tax VoIP firms to pay for 911 service.

Another point of contention is universal service--a tax levied on phone lines to subsidize rural and low-income subscribers. Sununu's bill, called the VoIP Regulatory Freedom Act, says that VoIP firms that connect to the public phone network must "contribute, directly or indirectly," to universal service. It does not cover VoIP providers that do not link to the traditional phone network.

In addition, the Justice Department has indicated that it would like the measure's wiretapping rules strengthened. Laura Parsky, a deputy assistant attorney general in the Justice Department, suggested in an appearance before the committee in June that wiretapping requirements should cover Internet-only VoIP networks that do not touch the existing phone network, such as's Free World Dialup or the initial version of Skype.