House Committee Approves Cox-Wyden I-Tax Bill

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The House Judiciary Committee yesterday approved the Internet Non-Discrimination Act, H.R. 3709, by a vote of 29-8.

If the bill becomes law, it will extend the current nationwide ban on new, special and discriminatory Internet taxes for five years. The moratorium is due to expire Oct. 21, 2001. The bill would extend the ban until Oct. 21, 2006.

"The facts are in and conclusively so," said Rep. Christopher Cox, R-CA, the House Policy Committee chairman and co-author with Ron Wyden, D-OR. "The Internet economy is generating tremendous tax revenue for state and local government. Making the moratorium on new and discriminatory Internet taxes permanent will help sustain that growth in jobs, wages and government revenue."

In addition to banning new taxes for five years, the latest version of the Cox-Wyden bill strikes a grandfather clause that permitted a handful of jurisdictions that had begun collecting new taxes to the Internet to be protected. In the original bill, they could continue collecting taxes on behalf of their jurisdictions; under the new version, they can no longer collect taxes.

"Contrary to the predictions of grandfather clause advocates, Internet taxes never became a significant source of government revenue," said Cox. "Different taxing jurisdictions ought to play by tax rules that are as similar as possible -- particularly when those rules are also good tax policy."

Moments after the vote, House Majority Leader Richard Armey, R-TX, announced that the bill will be considered by the full House next week. In addition, Rep. George Gekas, R-PA, chairman of the Commercial and Administrative Law Subcommittee of the House Judiciary Committee is holding a hearing May 17. It will be the first in a series of hearings that will look at aspect of I-taxes, including the states' expanded duty to collect sales and use tax.

Direct marketers are happy about the movement of the bill.

The extended moratorium "gives the states the time to simplify," said Ross Starek, senior vice president for the catalog industry at the DMA, Washington. "It gives people the time to see what the effect of Internet commerce is really going to be and what the effect is going to be on the states."

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