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Internet Tax Freedom Act heads to full House

June 19, 1998
Web posted at: 4:30 PM EDT

by Nancy Weil


(IDG) -- A bill that prohibits taxes on Internet access and goods purchased online for three years is destined for the full U.S. House of Representatives as early as next week after gaining approval Wednesday from the House Judiciary Committee.

The Internet Tax Freedom Act was approved by a voice vote, so individual votes were not tallied. It calls for a three-year moratorium on state and local taxes and also forbids new tax liability for consumers and vendors conducting Internet commercial transactions.

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Sponsored by Representative Christopher Cox, a Republican from California, the bill amends the 1934 Communications Act so that the U.S. Federal Communications Commission (FCC) cannot regulate charges for Internet access and online services paid by subscribers. The FCC would be forbidden to collect regulatory fees from Internet access or online services.

The Clinton administration would be required to work with the Congress to study U.S. and international taxation of Internet commerce before proposing recommendations for how the United States should deal with such taxes. The administration would be directed to demand that other nations also forbid taxes and tariffs related to the Internet.

"We are one step closer to establishing a national policy against taxing information," Cox said Wednesday in a written statement.

The bill does contain a provision allowing states to collect existing Internet access taxes. Before the Judiciary Committee vote, Texas and South Carolina asked to be excluded from that "grandfather" section of the bill. Opposition to the bill mostly has come from lawmakers representing less populous states and rural areas. They have argued that the bill would hurt state and local governments by hindering their ability to bring in revenue through Internet-related taxes.

President Bill Clinton has endorsed the measure. The bill has to be approved by both the House and the Senate before it goes to the president, who can sign the bill into law or veto it.
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