The five-year federal tax moratorium on Internet access expired a week ago. State governments in deep financial trouble are fighting efforts to make the ban permanent. NBC's Jim Avila reports.

A drive to permanently ban Internet access taxes stopped dead in the Senate on Friday, stuck in a clash over whether the legislation would shear millions from the budgets of state and local governments.

The problem arose over the definition of “Internet access” — services that connect consumers to the Internet. The strongest proponents for a permanent ban want to make sure that all access technologies — from phone lines to DSL to cable modems — get equal freedom from taxation.

Opponents said the definition supporters crafted to incorporate new technologies was too vague and could go too far — eliminating taxes on many types of Internet technologies and telecommunications delivered through the Internet.

Several states currently collect taxes on Internet access services, and opponents of the ban are worried that the legislation could limit this revenue source.

“You could see billions and billions of dollars lost,” said Sen. Byron Dorgan, D-N.D. “Definitions are everything.”

The two sides scrapped a planned Senate debate and instead began negotiations, hoping to strike a compromise by next week.

The proponents of the permanent ban offered a compromise — a temporary extension of the ban for about 5 years, as long as the new bill treats all Internet technologies equally.

“If you can have the set of definitions that ensure competitive environment, that you don’t favor one set of providers over another, I’m willing to consider a very significant concession,” said Sen. Ron Wyden, D-Ore.

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