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Senate OKs four-year ban on Net access tax

The vote promises to lead to tense negotiations in a conference committee with the House, which approved a competing plan that would have made a moratorium permanent.

The U.S. Senate on Thursday voted to renew a four-year ban on taxes on Internet connections such as DSL and cable modems instead of a competing plan that would have made a moratorium permanent.

By a 93-3 vote, the Senate adopted a compromise proposal favored by state governments, which argued that a perpetual ban would deprive municipalities of vital tax revenue and amount to an unfair subsidy for telecommunications companies.

"This proves the Senate can come to a good result on a complex issue that affects millions of Americans and every state and local government," said Sen. Lamar Alexander, R-Tenn., who had originally favored a two-year extension but reluctantly supported a longer one.

Thursday's vote promises to lead to tense negotiations in a conference committee with the House of Representatives, which overwhelmingly approved a permanent ban in September. The ban on access taxes, initially enacted in 1998, expired late last year. It does not affect sales taxes on items purchased over the Internet.

The compromise affects taxes singling out Internet access including DSL (digital subscriber line), wireless and even BlackBerry services. Its supporters said it does not change whether or not states may tax voice-over-Internet Protocol (VoIP) services.

President Bush entered the debate Monday by implicitly endorsing a more extensive tax ban. "Broadband technology must be affordable," Bush said in a speech. "In order to make sure it gets spread to all corners of the country, it must be affordable. We must not tax broadband access. If you want broadband access throughout the society, Congress must ban taxes on access."

Neither the pro-tax nor the antitax senators were delighted with the final bill. But both sought to claim credit for its approval, which came after four days of intense closed-door negotiations and lengthy floor speeches that brought normal Senate business to a sudden halt.

"I'm glad to see the majority of the Senate voted today with those who want to see the Internet continue to grow and flourish as a tool for information, opportunity and commerce," said Sen. George Allen, R-Va., who had been lobbying for a permanent moratorium.

Industry lobbyists welcomed Thursday's vote. The National Cable & Telecommunications Association said in a statement that "the U.S. Senate's passage of legislation extending the Internet Tax Freedom Act for four years is great news for American consumers and the U.S. economy."