DMA Fears States May Tax Internet Access

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The Direct Marketing Association expressed concern this week that states may begin requiring companies to charge their customers Internet access taxes as a result of the Senate's failure to reach a consensus on extending the Internet tax moratorium that expired Oct. 21.

Congress passed the original moratorium, part of the Internet Tax Freedom Act, in October 1998, banning for three years Internet access taxes and multiple and discriminatory taxes on remote sales.

The moratorium's end opens the possibility of states imposing taxes on monthly Internet service provider charges, potentially putting another burden on the slowing U.S. economy and e-commerce in particular, the DMA said.

Though no states have changed their policies as of yet, "states do have the opportunity to go out right now and start taxing Internet access," said Louis Mastria, director of public and international affairs at the DMA.

Because Congress is concerned primarily with anti-terrorist measures now, it is uncertain when the Internet tax matter might be raised again.

"We are a little disappointed that the action of just a couple of senators were able to deny that from happening," Mastria said.

Earlier this month, the House of Representatives approved a measure that provides a two-year extension of the tax moratorium.

"We understand that there are some legitimate reasons why [the Internet tax issue] is being held up," Mastria said. "But, at the same time, this should have been passed [by Oct. 21]."

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