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No extension of Net access tax ban

/ Source: The Associated Press

A proposal to extend a federal ban on Internet access taxes is dead for the year, as the Senate was unable to reach an agreement, officials said Tuesday. Bob Stevenson, a spokesman for Senate Majority Leader Bill Frist, R-Tenn., said senators were unable to reach a compromise to allow an extension of the ban, which expired Nov. 1. The Senate is wrapping up business for the year and is moving toward adjournment.

The ban, first passed in 1998, prevents state and local governments from taxing Internet access services such as America Online and Earthlink. It also limits state and local governments’ ability to levy taxes that target Internet commerce. It doesn’t address the broader issue of simplifying sales taxes on Internet transactions.

Sen. Ron Wyden, D-Ore., sponsor of the bill to permanently ban taxes on Internet access, said he was given similar information.

“My sense is nothing will be done this year,” Wyden said in an interview.

The expiration of the tax ban raises the possibility that local governments could pass laws taxing Internet access services. That’s unlikely, state and local officials said, since there was no rush to tax Internet services when the ban expired temporarily in the past.

The debate is expected to resume when Congress returns in 2004.

The Senate has been gridlocked for several weeks over efforts to renew the Internet tax ban.

State and local governments, backed by Sen. George Voinovich, R-Ohio, opposed the expanded measure, saying it would curb states’ authority to tax existing telecommunications services.

The Multistate Tax Commission released a study in September saying the Internet tax bill’s expanded definitions could let telecommunications companies avoid state and local telephone taxes, costing local governments up to $8.75 billion a year by 2006.