Senators Introduce Bill to Permanently Ban Internet Taxation

The Permanent Internet Tax Freedom Act would forever prohibit three types of taxes that unfairly single out the Internet, including taxes on Internet access, double taxation (for example, by two or more states) of a product or service bought over the Internet, and discriminatory taxes that treat Internet purchases differently from other types of sales.

"Without this ban, consumers would face upwards of a 17 percent increase in their costs for access to the Internet and businesses would face a barrage of discriminatory taxes. Why should a product that's not taxed on the street or taxed in a store be taxed on the Internet?" Wyden said. "It's unfair, anti-competitive and would greatly harm one of the booming sectors of our economy. I commend Senators McCain and Sununu for their continued dedication to this long battle."

Wyden and former U.S. Rep. and current SEC Chairman Chris Cox (R-CA) began the fight for preventing discriminatory Internet taxes in 1998. Congress passed the first Internet Tax Freedom Act in l998. In the fall of 2001, Congress extended it for two additional years and in 2004, it was extended to November 1, 2007. Both extensions were passed under the leadership of Senator McCain as Chairman of the Senate Commerce Committee, and with the support of Senator Sununu.

"The Permanent Internet Tax Freedom Act would ensure that consumers never have to pay a toll when they access the Information Highway. Keeping Internet access affordable to all Americans is a worthy policy goal. The Internet has become a fixture and core component of modern American life that has created and continues to generate social and economic opportunities throughout the United States," McCain said.

"State and local politicians should not be allowed to use the popularity of the Internet as an opportunity to broaden their tax base. Simply put, taxing consumers for accessing the Web discourages Internet use, reduces investment, stifles innovation, and limits the services available to consumers," Sununu said. "I am also developing legislation to expand the Internet tax ban in order to prevent discrepancies and harmful practices by certain taxation jurisdictions."

The Permanent Internet Tax Freedom Act also defines Internet access in a manner to ensure technological neutrality, so that the moratorium applies consistently to any type of Internet access (DSL, dial-up, cable modem or wireless service).

There is little doubt that the development and growth of the Internet was aided by the tax moratorium. In 1998, the year the moratorium was first enacted, 36 percent of U.S. adults reported using the Internet. In 2006, that number grew to 73 percent, an all time high, according to an April 2006 Pew Internet & American Life Project Report.

Wyden, McCain and Sununu pointed out examples of the different scenarios that might happen without a permanent extension of the ban:

• Consumers could face a 17 percent increase or more to have access to the Internet.

• If a consumer lived in one state and bought a shirt in a different state, he or she might be subject to a double- taxation imposed by both states.

• If a person bought a newspaper on the street, there would be no tax. If he or she read that same paper on the Internet, they could be taxed.