Temporary Internet service tax ban proposed

By Lesley Jenkins
star staff
ljenkins@starhq.com

   Senator Lamar Alexander announced Wednesday that he and other supporters of an Internet tax moratorium have proposed extending the temporary ban on Internet access taxes for two more years.
   The proposal is designed to oppose a bill by Sen. George Allen, R-Va., and Sen. Ron Wyden, D-Ore. which calls for a permanent ban that could cost states millions of dollars per year.
   Along with Sen. Alexander, Sen. Tom Carper, D-Del., introduced the Internet Tax Ban Extension and Improvement Act to ensure Internet service providers -- including dial-up, cable modem, and DSL access -- continue to be tax-free, at least until Congress can figure out a better way to enhance the development of the Internet.
   Alexander said he and supporters have introduced, "legislation today that would continue for two years the current ban on state and local taxation of Internet access. The only changes in our bill from what has happened in the last six years is that we have made sure that all providers of high-speed Internet access are treated in the same way.
   "Second, we made sure that the 23 or 24 states that today collect taxes on Internet access can continue to do it for the next two years. We believe that a temporary solution which continues the ban of the last six years is the wisest course because it will permit Congress to consider the remarkable changes that are occurring in telecommunications and make good long-term decisions."
   Alexander said his view is that the issue is not about taxes or the Internet but congressmen in Washington who create expensive ideas and take credit for them, then send them to local governments.
   "This is especially the wrong time to be doing this when there are so many changes in telecommunications ... a temporary solution makes more sense. Governor Bredesen has told me that if the Allen-Wyden bill passed then it could cost Tennessee up to $360 million a year."
   The new bill temporarily allows current tax enforcing states to continue charging customers for Internet access. Since 1998, when the original bill went into effect, new innovations introduced high-speed access, or broadband.
   Internet service providers in Tennessee were told on Jan. 30 that the Court of Appeals ruled ISPs must stop taxing consumers. The notice reads, "Internet access is no longer considered a taxable 'telecommunication service' under Tennessee law."
   The case, Prodigy Services Corporation, Inc. v. Ruth E. Johnson, Commissioner of Revenue, is unrelated to the Alexander-Carper bill, Alexander said.
   "My bill wouldn't effect that. That's a matter of regulation of state law about what constitutes an information service," Alexander said. "What's happening here is that suddenly we have this new phenomenon called high-speed Internet access.
   "In the future your movies, NFL games, cable television, and your telephone all may be presided over by high-speed Internet access. Congress and the Federal Communications Commission need to decide how to regulate it. Second thing is Congress will have to decide what's the appropriate division of taxation between federal, state and local governments of all the services provided in this new way," he said.