Bill to keep e-mail tax-free for 7 years

A late fix in the bill closed a loophole that could have taxed e-mail and other Web services.

MCCLATCHY NEWSPAPERS

WASHINGTON — Internet access, as well as e-mail and text messaging, will remain tax-free for at least another seven years if President Bush, as expected, signs a bill passed Tuesday by the U.S. House that extends a moratorium on such taxes.

The final bill, on a vote of 402-0, was the result of last-minute maneuvering between the Senate, which passed its version last week, and the House, which had approved a four-year extension of the tax ban.

The current moratorium, first enacted in 1998 and renewed twice since then, was due to expire Thursday. President Bush is expected to sign the measure promptly.

The moratorium does not affect sales taxes related to Internet purchases, but rather use taxes that local or state government might charge customers for Internet connections.

Rep. Anna Eshoo, a California Democrat, and other Silicon Valley area members, along with many Republicans, had supported a permanent moratorium. But many governors, other state officials and some congressional leaders objected, saying that a permanent ban would overstep state and local taxing authority.

Though it’s not permanent, Eshoo said she was happy with the final bill, noting that it was “the longest extension ever approved by Congress.”

A late fix in the bill, pushed by Eshoo and Sen. Ron Wyden, D-Ore., closed a loophole that might have allowed taxation of e-mail, instant-messaging and other Web services.

Wyden, a sponsor of the original moratorium, was able to add a provision in the bill stating that states and localities can’t tax “home page electronic mail and instant messaging (including voice- and video-capable electronic mail and instant messaging) and personal electronic storage capacity, that are provided independently or not packaged with Internet access.”

Extending the moratorium had the support of Internet giants such as eBay and Google, Verizon and other telecommunications firms and smaller businesses. Eshoo said the bill would “continue to spur innovation and advance our goal of broadband for everyone.”

The final bill is not a comprehensive ban on services delivered by the Internet.