House passes Net antitax bill

The House today passed the Internet Tax Freedom Act, legislation that would temporarily ban new Internet access and service taxes.

The bill, sponsored by Rep. Chris Cox (R-California) and passed by voice vote, imposes a three-year ban on Net taxes but contains a controversial provision, a so-called grandfather clause that states the moratorium will not apply to taxes on Net access or online services that were imposed by states before March 1, 1998.

A similar Senate bill contains no such clause and bans taxes for six years. The Senate version of the bill has passed through a crucial committee and is likely to face a full Senate vote in July.

That bill is expected to pass in one form or another, and after differences are hammered out between the versions, President Clinton is expected to sign it.

Clinton endorsed the original version of the Internet Tax Freedom Act to prevent the nation's estimated 30,000 tax jurisdictions from draining the booming online industry's revenues.

Internet companies have lauded the bill, saying that to thrive and develop as a viable medium, the Internet needs to flourish in a tax-free environment.

"With today's vote the Congress recognizes the Internet needs the immense potential of the Internet as a vehicle for commerce across local, state, and national boundaries and the opportunity that it presents to American consumers and businesses," Steve Case, chief executive of America Online, said in a statement.

AOL is part of the Internet Tax Fairness Coalition, which has been calling for the tax moratorium, and which has endorsed the Cox bill, while still leery of the grandfather clause. The coalition also includes Microsoft and CommerceNet, among others.

Along with putting a moratorium on taxes, the House bill also authorizes the United States to work in international bodies for the establishment of the Internet as a global free-trade zone, and creates a commission to study U.S. taxation of e-commerce, according to Cox's office.