Senate Approves 7 Year Extension of Internet Tax Ban

October 25, 2007. The Senate amended and approved HR 3678 [LOC | WW], the "Internet Tax Freedom Act Amendments Act of 2007". This version contains a seven year extension. The version approved by the House on October 16, 2007 contains a four year extension. The current ban expires on November 1, 2007.

In the final approval, the Senate acted by unanimous consent, with little discussion. See, amendment in the nature of a substitute approved by the Senate.

The Congress enacted the original Internet Tax Freedom Act (ITFA) in late 1998. It is codified at 47 U.S.C. § 151 note. The original ban was for three years. The Congress has since provided short extensions, further definitions, and added to the exemptions.

The current ban provides that "No State or political subdivision thereof may impose ... Taxes on Internet access" or "Multiple or discriminatory taxes on electronic commerce". There are, however, grandfathered taxes, and numerous exceptions.

The House Judiciary Committee (HJC) amended and approved its version of HR 3678 on October 10, 2007. It contains a four year extension of the ban. See, amendment in the nature of a substitute [8 pages in PDF]. The final vote was unanimous. However, the HJC divided alone party lines on the length of the extension. Republicans and Rep. Zoe Lofgren (D-CA) sought a permanent ban, but were in the minority. See also, stories titled "Summary of HR 3678" and "House to Consider Extension of Act Limiting Internet Taxes" in TLJ Daily E-Mail Alert No. 1,655, October 16, 2007.

The full House approved the HJC version of HR  3678 on October 16, 2007, by a vote of 405-2. See, Roll Call No. 968.

Sen. Mitch McConnell (R-KY) stated in the Senate on October 25, 2007, that "This package will extend the current Internet tax moratorium for 7 years -- nearly twice as long as the bill passed over in the House of Representatives. This is a positive step in protecting American consumers from taxes on Internet access, taxes that strike at the heart of innovation and economic growth in America." See, Congressional Record, October 25, 2007, at Page S13429.

He added that "I particularly thank the distinguished Senator from New Hampshire for his skillful role in bringing this issue before the Senate, for pushing it aggressively, and getting, in my judgment, a much better solution to this problem than was achieved in the House of Representatives. I know he shares my view, and I assume the view of everyone in the Senate, that the House will simply take up the Sununu measure and pass it.

Sen. John Sununu (R-NH) stated in a release that "This bill -- a drastic improvement over what came out of the House -- makes a clear statement that taxes on Internet access are wrong for consumers and wrong for the economy".

Sen. Sununu (at right) added that "A seven-year extension nearly doubles the ban that was passed by the House and goes further on technical points to protect e-mails and instant messaging from taxation. Yes, a permanent ban would have been optimum, and I will continue that fight. In the meantime, the Senate has made real progress in the name of Internet tax freedom, passing improved legislation that offers more certainty for this national and global communication network."

Sen. Ted Stevens (R-AK) stated in a release that "I am pleased to see bipartisan support for extending the Internet tax moratorium, ... The Internet has provided a powerful economic boost to our nation, and has become an important everyday tool for millions of Americans. By keeping Internet access tax-free and affordable, Congress can encourage Internet use for distance learning, telemedicine, commerce and other important services."

The National Cable and Telecommunications Association (NCTA) stated in a release that "We applaud the leadership of Chairman Inouye, Vice Chairman Stevens, and in particular, the tireless work of Senator Sununu to bring this important matter before the Senate and to help secure its passage. Extending the Internet tax moratorium for seven years will protect consumers and small businesses from new and burdensome state and local taxes on Internet access. We urge the House to act quickly before the moratorium expires next week."