Congress Set to Tackle Internet Tax, Other Issues

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Internet taxation and privacy legislation are just some of the issues Congress is to address as both chambers return this week from recess.

Some of these bills may be adopted by early October, when Congress most likely will adjourn, while others may be reintroduced next year.

Marketers are watching Internet taxation closely. A moratorium exists on new e-commerce access taxes as part of the Internet Tax Freedom Act, which was signed into law in 1998 and imposed a three-year ban on new state and local Internet taxes. With that act set to expire Oct. 21, Congress is considering several proposals.

Before going on recess last month, a House Judiciary subcommittee approved by voice vote a bill that would extend the moratorium on sales taxes for online purchases through October 2006 and would permanently ban Internet access taxes. The bill, the Internet Non-Discrimination Act, HR 1675, is sponsored by Rep. Christopher Cox, R-CA. It is expected to reach the full Judiciary Committee and House floor this month.

"We expect the extension of the moratorium to be passed in the House," said Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association. "On the Senate side, however, it's a little bit more problematic because we don't know what is going to come out."

One Senate bill, the Internet Tax Moratorium and Equity Act, S. 512, was introduced by Sen. Byron Dorgan, D-ND. It would extend the Internet tax moratorium. But it also calls for a process that would require mandatory interstate sales tax collection for companies with no nexus, or physical presence, in a state without first requiring substantial simplification of the nation's 7,600 varying sets of sales tax rates and rules.

A bill similar to Cox's was introduced in the Senate in February by Sen. Ron Wyden, D-OR. The Internet Tax Nondiscrimination Act, S. 288, would extend the sales tax moratorium through Dec. 31, 2006, and encourage states to move toward a uniform tax code for Internet usage.

Before Congress recessed, there were negotiations in the Senate about tackling the sales tax issue as a part of extending the moratorium.

"There is an attempt to get some compromise between the two," Cerasale said. "They have been trying for a long time, and it hasn't happened."

Cerasale said he was unsure what would happen in a House-Senate conference.

The Social Security Number Privacy and Identity Theft Prevention Act, S 1014, was introduced by Sen. Dianne Feinstein, D-CA, earlier this year. It would make the practice of selling Social Security numbers for profit a federal crime. The bill would give the Federal Trade Commission rule-making authority to determine exceptions, such as when a person's health or safety is at risk, when the purchase or sale is necessary for law enforcement or national security reasons, or when the individual gives affirmative, voluntary consent.

In teleservices, the Know Your Caller Act, HR 90, a bill that would prohibit telemarketers from blocking caller-ID, has been resuscitated and likely will get reviewed, though Cerasale is unsure whether it will pass this session.

The act, which the House passed unanimously last year, died at the end of the 2000 legislative session when the Senate failed to vote on its version. Rep. Rodney Frelinghuysen, R-NJ, who sponsored the bill last year, resubmitted the proposal this session.


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