WASHINGTON (AP) --
A House committee acted Wednesday to permanently bar states from taxing Internet service and access and to require the few states that currently tax those services to end their levies.
The bill, which must be passed by the full House and Senate before becoming law, would extend a moratorium on the taxes that will expire Nov. 1. The moratorium has been in place since 1998.
Supporters told the House Judiciary Committee said a continued ban would promote innovation and make Internet access more affordable. The ban also covers taxes that single out the Internet.
Separately, America Online Inc. Vice Chairman Joseph A. Ripp told Congress that taxing the basic dial-up subscription for their average member would increase monthly costs $2 to $3. The monthly rate for faster and more expensive broadband services could become $5 to $10 more costly.
One critic said the bill will deprive states of much-needed revenue without compensation.
I believe that we are interfering with the rights of states on their own taxation policies," said Sheila Jackson Lee, D-Texas.
The measure ensures that companies cannot tax Internet services delivered by wireless, satellite, cable or other means, and cannot tax those services if sold in a package with other telecommunications products.
Because of the quickly changing technology behind Internet access, the Multistate Tax Commission urged Congress to extend the ban for no more than two years. A temporary ban would allow the law to keep pace with technology, and give states time review its impact on state and local revenue.
Lawmakers avoided stepping into a highly charged debate over whether states should collect sales and use taxes on electronic commerce.
The Information Technology Industry Council, which backs a permanent ban on the taxes, said New Mexico, North Dakota, South Dakota, Tennessee, Texas and Wisconsin would have to end the taxes they imposed before the moratorium began in 1998.
