updated 11/17/2004 8:27:10 PM ET 2004-11-18T01:27:10

Lawmakers revived a long-stalled effort Wednesday to block state and local governments from taxing Internet connections, in a last-minute agreement to ban the taxes until 2007.

House and Senate negotiators expect to pass a bill this week and reinstate a temporary ban that lapsed more than a year ago while lawmakers argued over its extension.

"Today, we have made sure that the avaricious tax commissars from every county, city and state in America cannot continue conniving new ways to tax the Internet and the people who use it," said Sen. George Allen, R-Va.

Lawmakers sought to make sure that new and evolving Internet connections, such as satellite and broadband, got the same treatment as traditional dial-up connections. The plan would not effect sales taxes imposed on merchandise purchased over the Internet.

"Renewing this law will protect consumers from a host of new Internet taxes on everything from Web access to e-mail and has saved those online businesses from becoming tax collectors for thousands of jurisdictions," said Sen. Ron Wyden, D-Ore.

The House voted last year to permanently ban taxes on Internet access, but it could not find enough support to pass the Senate despite a strong push from the telecommunications industry.

Ban wouldn't include VOIP services
Some senators worried about the proposal's drain on state and local budgets. Others saw provisions that might communications companies might try to exploit.

Sen. Lamar Alexander, R-Tenn., said the compromise imposes the ban "while doing minimal harm to state and local governments."

The agreement clarifies that the ban does not effect the taxation of a new technology -- Voice Over Internet Protocol, or VOIP -- that allows consumers to make telephone calls using the Internet's backbone.

It also lets states that started taxing Internet access before the initial 1998 ban to continue collecting them. House Judiciary Committee Chairman James Sensenbrenner, R-Wis., won a change that ends his state's Internet access taxes in 2006, a year before the temporary ban must be reconsidered.

It calls on the handful of states that tax high-speed DSL connections to phase out the levies in two years.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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