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Senators back renewed Net tax ban

Six lawmakers urge passage of a two-year moratorium on new Internet taxes, prompting complaints from some state and local government organizations.

A letter sent by six senators urging passage of a two-year moratorium on new Internet taxes has prompted complaints from some state and local government organizations.

On Monday, the senators sent a "Dear Colleague" letter asking the rest of the Senate to support a proposal that would simply extend a moratorium on new Internet taxes for two more years.

In the letter, the senators argued against the support of a competing bill sponsored by Sen. Mike Enzi, R-Wyo., which would establish a structure by which states could set up a streamlined sales tax system.

The letter was signed by John McCain, R-Ariz.; Ron Wyden, D-Ore.; Patrick Leahy, D-Vt.; Barbara Boxer, D-Calif.; Conrad Burns, R-Mont.; and George Allen, R-Va.

"Several states and local government organizations are opposed to a 'Congress directed' road map that they see as an unreasonable intrusion in their own processes," the letter says. "Furthermore, while we recognize that a two-year moratorium is the best we can do this year, it is important to note that there is wide consensus that Internet access should never be taxed and that two years, even by the states' calculation, may not be enough time to resolve the plethora of conflicts facing them regarding tax simplification."

That brought a rebuttal from the National Governors Association, the National Association of Counties, the Council of State Governments and the International City/County Management Association.

In a letter to Senate leaders Thomas Daschle, D-S.D., and Trent Lott, R-Miss., those groups voiced their support for the Enzi bill, saying it would "create a level playing field so that remote and Main Street sellers receive equal treatment."

The Internet sales tax issue has become something of a mess in Congress. In 1998, Congress passed legislation imposing a temporary moratorium on any new taxes that applied solely to Internet sales, in an effort to boost the new market and buy some time to work out the legal issues involved. (Under a Supreme Court ruling, states are currently forbidden from requiring out-of-state businesses to collect sales taxes, but Congress does have the power to authorize such levies.)

The House recently approved a measure that would have extended the ban another two years, but the Senate was unable to come to a compromise before the bill expired last month.

Legislative maneuvering this week brought the Senate closer to a vote on both bills. Daschle's office circulated a plan Wednesday that would bring a vote on the "clean" extension of the moratorium. As part of the plan, Enzi would be able to offer his bill as an amendment to the clean extension.

Senate staffers said there's a good chance that the bills will come up for a vote by the end of this week. But the vote could still be derailed. Enzi has not yet released the wording of his proposed amendment and any senator can object to the calling of a vote.