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WYDEN, ALLEN ANNOUNCE SENATE ACTION TO END STALEMATE ON INTERNET TAX BAN
Final fixes expected to allow final congressional approval of legislation, renewal of vital technology law

November 17, 2004

Washington, DC -- U.S. Senators Ron Wyden (D-Ore.) and George Allen (R-Va.) today hailed Senate action to slightly amend the Allen-Wyden Internet Tax Non-Discrimination Act (S. 150) and clear the way for its passage in the House of Representatives. The Senate action is part of a compromise to end the stalemate over extension of a ban on multiple and discriminatory taxation on Internet access and online sales; Allen and Wyden now expect House action on the bipartisan, bicameral agreement to renew and extend the ban. The legislation bans three types of taxes that unfairly single out the Internet, including taxes on Internet access, double taxation (for example, by two or more states) of a product or service bought over the Internet, and discriminatory taxes that treat Internet purchases differently from other types of sales; today’s changes extend a grandfather provision in the state of Wisconsin for two years and grandfather in a Texas utility tax.

The Internet Tax Non-Discrimination Act extends the original Internet Tax Freedom Act of 1998, authored by Wyden and Rep. Chris Cox (R-Calif.). The moratorium created by that legislation and then extended in 2001 expired last November.

“The future of the Internet will be brighter and more secure because of today’s action to shake this legislation loose and make it law again, to protect Internet users and the thousands of small American businesses harnessing the power of the web for economic growth,” said Wyden. “Renewing this law will protect consumers from a host of new Internet taxes on everything from web access to e-mail, and has saved those online businesses from becoming tax collectors for thousands of jurisdictions. Banning unfair and discriminatory taxes has worked for the Internet economy.”

“I’m extremely pleased to see passage of this opportunity measure which will positively impact small businesses, rural communities and lower-income families by banning harmful, regressive taxes on Internet access services, particularly broadband Internet access,” Allen said. “The Internet is one of our country’s greatest tools and symbols of innovation and individual empowerment. That is why I’m glad to see the majority of Congress stands with those who want to see the Internet continue to grow and flourish as a tool for information, opportunity, prosperity and commerce. Today, we have made sure that the avaricious tax commissars from every county, city and State in America cannot continue conniving new ways to tax the Internet and the people who use it. I’m very pleased that the advocates supporting Internet taxation will not have the opportunity to turn our Internet freeways into toll roads.”

S. 150 extends the previous moratorium on unfair and discriminatory Internet taxes and makes changes to address technological advances, with the following goals:

· To clarify and update the definition of Internet access to ensure technological neutrality, so that the moratorium applies consistently to any type of Internet access (DSL, dial-up, cable modem or wireless service);

· To ensure that nothing in the Internet Tax Freedom Act will affect State and local taxation of voice telecommunications services (including voice-over internet protocol, or VOIP), the application of any federal, State, or local regulatory fees, or other telecommunications services that are not purchased or used directly to provide Internet access; and

· To ensure that nothing in the Internet Tax Freedom Act will prevent the imposition or collection of any fees or charges used to preserve and advance the universal service program.

A substitute amendment from Commerce Committee Chairman John McCain (R-Ariz.) was accepted by the Senate in April of this year, making additional changes to address the concerns of a number of states and localities about the moratorium, including:

· Setting the length of the moratorium extension at four years;

· Narrowing the definition of Internet access by excluding traditional telephone service and carving out VOIP to the extent that such service mimics traditional telephone service;

· Grandfathering in states that taxed Internet access in 1998 for a four-year period, and grandfathering in states that currently tax high speed wireline and wireless Internet access (including those that tax the so-called “last mile”), but that were not protected by the 1998 grandfather clause, for a two-year period; and

· Incorporating accounting rules to address bundling, an explicit conclusion of non-transactional taxes from the Internet tax moratorium, and savings clauses addressing the regulation of Internet access, universal service and E-911.

The president has indicated that he will sign an extension of the ban on multiple and discriminatory Internet taxes into law.

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