Senate OKs Net Tax Act; Funding Bill Imminent

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The Senate approved the Internet Tax Freedom Act yesterday and was expected to act on the Treasury-Postal bill, which finances the Treasury Department and the U.S. Postal Service.

At press time, Capitol Hill was working to resolve several spending issues and avoid a government shutdown as temporary financing was set to expire. The House passed its version of the Treasury-Postal bill on Wednesday.

The Senate voted 96-2 to approve the Internet Tax Freedom Act. An identical version of the bill must be approved by the House, which is expected before a final bill is delivered to President Clinton. He is expected to sign it into law as early as today.

If passed, the bill would prohibit state and local governments from imposing new taxes for three years on Internet access, prohibit multiple or discriminatory taxes on electronic commerce, create a temporary advisory commission to study e-commerce tax issues and report back to Congress within 18 months on appropriate taxation of Internet commerce and create a global tariff-free zone, which would direct the president to work in international bodies for the establishment of the Internet as a global free trade zone.

Existing Net taxes, taxes on mail-order goods and other excise taxes already in place won't be affected by the act.

At first glance, the Direct Marketing Association supports the part of the bill that addresses the Internet access tax moratorium, but was disappointed about an amendment by Sen. Asa Hutchinson (R-AR) that was adopted at the last minute.

"[This amendment] added to the duties of the Internet commission, looking at the question of mandatory interstate sales tax collection," said Mark Micali, vice president of government relations at the DMA. "We had preferred the version of the bill before his amendment was adopted, which had as the focus of the Internet commission the important technical review of varying state laws and often conflicting state laws in their treatment, terminology and definitions regarding the Internet."

Micali said he thought this was a much more important focus of the Internet commission and was disappointed the "issue of interstate sales tax has been added to a commission dealing with a moratorium on taxation. We think that is at conflict with the idea of a tax moratorium to add an issue dealing with tax collection."

The Senate debated the bill for several weeks, and insiders said it was delayed because of infighting relating to other hi-tech issues, including a new version of Sen. Dan Coats' (R-IN) Internet Censorship bill and one from Sen. Christopher Dodd (D-CT), which would force Internet service providers to supply filtering tools to parents for free. An assortment of children's privacy issues and digital signatures also were added to the bill.

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