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Net tax moratorium to committees

A bill in the House that puts a hold on Internet taxes is moving closer to a floor vote now that it has unanimously passed two subcommittees.

A bill in the House of Representatives that puts a hold on Internet taxes is moving closer to a floor vote now that it has unanimously passed two subcommittees.

The Internet Tax Freedom Act yesterday cleared the House Commerce Committee's subcommittee on telecommunications, trade, and consumer protection and the House Judiciary Committee's subcommittee on commercial and administrative law. The bill, sponsored by Rep. Chris Cox (R-California), would prohibit state and local governments from levying taxes on Internet and related computer services for the next six years.

The bill now moves to the Judiciary and Commerce committees, where the bills are expected to move quickly, according to a spokesman for Cox. It should reach the House floor within the next month.

Speaking before the telecommunications subcommittee yesterday, Cox said Internet taxes are not yet a problem, but he added that multiple local and state taxes could wreak havoc on the electronic marketplace that is expected by blossom within the next few years.

"The Internet's very design--its decentralized, packet-switched architecture--makes Internet transmissions vulnerable to multiple taxation," Cox said. "Far more than traditional interstate commercial transactions, the Internet is threatened by the specter of new, targeted, special, and discriminatory taxes."

Cox introduced a number of amendments to the bill that are designed to address concerns articulated by critics. Most notably, Cox removed language pertaining to "interactive computer services," which critics said would have prohibited taxes on corporate intranets and dial-up informational services. The representative also added language to make it clear that ISPs must still pay taxes on the phone lines it leases in order to deliver its services.

The bill is cosponsored by 87 representatives and also has received support from a number of trade groups, as well as California Gov. Pete Wilson. The National Governors Association and the National League of Cities, among others, remain opposed.