House passes extension of Internet tax ban

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The House on Tuesday passed a bill that would permanently extend a ban on state and local taxes on Internet access. 

Lawmakers approved the legislation on a voice vote, which would also ban discriminatory taxes on e-commerce. 

The ban, first passed in 1998, has required a series of extensions over nearly two decades. But Tuesday’s proposal would put the law in place for the long term, removing any sunset date. 

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The long-term extension is largely noncontroversial. The House bill sponsored by Judiciary Committee Chairman Bob GoodlatteBob GoodlatteOvernight Finance: Anxiety grows over Brexit vote | Investors prefer Trump to Clinton in poll | Key chairman open to censuring IRS chief Judiciary chairman signals openness to censuring IRS chief A fix for the well-intended ethanol flop MORE (R-Va.) had 188 co-sponsors, and 50 senators are backing a similar bill in the Senate. 

Goodlatte warned that failing to renew the ban would result in a “substantial” tax increase on consumers.

“Imagine if we, you, your constituents, everyone in the country that uses the Internet, has to pay for access to the Internet,” said Rep. Anna Eshoo (D-Calif.).

The House easily passed the proposal last Congress, but it stalled in the Senate after some members attempted to tie the measure to a more controversial online sales tax bill, which would give states the power to collect a sales tax from businesses that don’t have a physical presence in their boundaries. 

Tying the two items together faced resistance in the House last year and would prove harder in the current Congress, now that Republicans control the Senate. 

The hold-up last Congress forced both chambers to pass another short-term extension in an omnibus spending bill last December. It is slated to expire again on Oct. 1. 

First signed by then-President Clinton, the temporary ban was meant to give the Internet industry time to breathe as it emerged as a huge boon for the economy in the 1990s. Clinton said he did not want burdensome taxes to stifle the Internet’s growth, but was at odds with state governors at the time.  

The law also played a heightened role in the fight surrounding the Federal Communications Commission’s net neutrality rules, which would reclassify broadband Internet under rules governing traditional telephones. 

Proponents of the net neutrality rules slated to take effect Friday have pointed to the tax ban to push back on one major argument of critics. 

Critics argue that the reclassification could open Internet service up to billions of dollars in new state taxes and fees. They say even with the tax ban in place, states could impose a number of fees — rather than taxes — on Internet service providers that could later get passed on to the customer. 

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