Another temporary moratorium on Internet taxes likely

Halloween's in a couple of weeks, but for Internet users, the really scary thing about Oct. 31 is that it's the last day of the moratorium on Internet access taxes.

But fear not Web heads! It looks like most of us are about to get another four years without worrying whether our service provider will tax our online connections.

Nine years ago, eons in the Internet age, folks were worried that taxing online services might slow the adoption of the technology.

So in 1998, Congress passed a temporary moratorium that restricts states and localities from taxing Internet access and imposing additional taxes on electronic commerce. The tax freeze applies to all types of online access, including DSL, cable modem and portable wireless transmission services.

That legislative trend looks like it's going to continue.

A vote is scheduled today in the House on H.R. 3678, the Internet Tax Freedom Act Amendments Act of 2007. This latest extension will forestall Internet access taxes  through Oct. 31, 2011. It also narrows the definition of "access" to a consumer's Internet connection and exempts e-mail and instant messaging from taxation by local and state authorities.

And it continues the grandfather clause allowing nine states (Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas [dang it!], Washington and Wisconsin), which had been taxing Internet access prior to 1998, to continue to collecting connection fees.

Permanent vs. temporary: Most lawmakers support the no-Internet-tax efforts. So the biggest battle of late has been whether to keep enacting short-term bans or make the no-tax stance permanent.

According to CQ.com, the way H.R. 3678 will be considered today in the House has angered the permanent ban contingent. The Web site reports that although supporters of a permanent tax ban are in the majority, the bill is scheduled for consideration under suspension of the rules, a procedure that bars amendments and is usually reserved for less controversial legislation.

"Basically, what the Democratic leadership has said is, 'Here's four years, take it or leave it,'" Rep. Robert W. Goodlatte (R-Virginia) told CQ.com. "Congress will probably take it, but I don’t know. We’ll have to wait and see what the vote is."

On the Senate side, once the House passes its four-year measure, Majority Leader Harry Reid, (D-Nevada), is expected to quickly take it to a vote by the full Senate.

Additional info: For more on the Internet Tax situation, you can read my earlier blog item on the issue,  as well as the CQ.com article and this piece from Internet.com.

And also check out the official statement of Treasury Secretary Henry M. Paulson and Commerce Secretary Carlos M. Gutierrez lending their, aka the Bush Administration's, support for a permanent ban on Internet access taxes.