Nov 26, 2003 (08:11 AM EST)
Senate Postpones Web Tax Vote

Read the Original Article at InformationWeek

Legislation banning taxes on Internet access won't be voted on this year, because the U.S. Senate was bogged down in gridlock over the issue as senators headed home for the Thanksgiving holidays.

A spokesman for majority leader Bill Frist said the Senate couldn't reach a decision on the issue--tantamount to pushing the vote into next year's Senate session in January.

The original ban expired Nov. 1, leaving states and local governments in limbo until the issue is resolved in Congress. The House passed an extension to the ban in September, and the bill was expected to sail through the Senate. However, senators who had previously served as governors took up the cause on behalf of states and local governments and campaigned to give them approval to tax Internet access.

The issue is complicated because some states are grandfathered and tax Internet access because they were taxing before the legislation was passed in 1998. Some states tax DSL access, and the DSL providers who are taxed complain that they're at an unfair disadvantage because competing cable access isn't taxed.

The issue has been polarized in the Senate, where its leading supporter, Sen. Ron Wyden, D-Ore., says failure to pass the legislation would open up the Internet to wholesale taxation, including the ability of states to tax all E-mail messages. On the other side of the issue are Sens. Lamar Alexander, R-Tenn., and George Voinovich, R-Ohio--both former governors--who say the existing legislation is unfair and if allowed to be reinstated would deprive states and local governments of millions of dollars in revenue.

The Multistate Tax Commission, a lobbying group representing states, maintains the new tax ban legislation would cost state and local governments as much as $8.75 billion a year by 2006.