The House, by voice vote, passed the Internet Tax Nondiscrimination Act on Wednesday. The bill would permanently prohibit U.S. jurisdictions (including cities, counties, and states) from taxing such Internet-related activity as e-mail, access, bandwidth, or digital transmissions.

To become law, the bill must pass the Senate and be signed by President Bush. The Senate Commerce, Science and Transportation Committee approved its version of the bill on July 31, so its next stop is the full Senate.

Congress first approved a three-year moratorium on Internet-only taxes in 1998 and renewed it in 2001. The moratorium is set to expire November 1 unless Congress acts

Some House Democrats had questioned whether the bill would complicate efforts by states to collect sales taxes from retailers outside their borders, but the bill passed over their objections.

The bill does not prohibit states from collecting sales taxes on products that their residents order from catalogs or other remote retailers. However, it does require that Internet retailers be treated the same as other remote retailers.

The House bill also removes a grandfather clause contained in past versions of the moratorium that allowed ten states that had enacted Internet taxes before 1998 to continue to collect them. Some Democrats had protested the loss of those taxes for those states

By: DocMemory
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