New Net Taxes a Possibility

By eweek  |  Posted 2001-10-22

Consumers and businesses long accustomed to tax-free Internet access may see higher bills in the future, as a three-year moratorium on new Net taxes expires this week amid fading hopes of an extension from Congress.

Last week, the House passed a two-year extension of the law that expired Sunday, Oct. 21, but several senators — led by Sen. Byron Dorgan, D-N.D. — blocked consideration in the upper chamber. Dorgan wants states to be able to wrest more tax revenue from cyberspace.

Because of the war on terrorism and the anthrax attacks around the country, Congress is focusing almost entirely on issues relating directly to the national crisis, unless the issue can be rushed through without debate.

Even if the Senate managed to get a bill through this year, it would likely be quite different than the House version.

"Were in a protracted fight if the two-year bill doesnt go through — a long fight," said Stan Sokul, a Washington, D.C., attorney who lobbies for Internet businesses on the Internet tax issue.

Frank Shafroth, the National Governors Associations director of state-federal relations, applauded the Senates derailment of the moratorium, which blocked states from imposing new Internet-specific taxes on things such as Internet access. The moratorium did not apply to sales taxes. Shafroth said that while new Net taxes are not expected immediately, the subject will be on many state agendas over time.

"Im sure as governors and mayors say, I want an option of cuts I can make and revenues I can get, to help protect people from terrorists, this will appear on a list," Shafroth said.

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