H.R. 49, the Internet Tax Non-Discrimination Act, makes permanent a tax moratorium first enacted in 1998 as the Internet Tax Freedom Act. The original measure expired in October 2001, and Congress approved an extension until November 2003.
After the House approved H.R. 49 on September 17, the measure was placed on the Senate calendar the following day. The full Senate is expected to take up the matter before year-end. The Senate Commerce Committee approved a nearly identical bill in July 2003.
H.R. 49 prohibits taxes on Internet access; taxation by multiple states on products purchased over the Internet; and discriminatory taxes that treat Internet purchases differently from other types of sales.
The current moratorium prohibits states from imposing multiple or discriminatory taxes on electronic usage and from imposing taxes on Internet access. The moratorium does not prohibit states from collecting either sales or use taxes on Internet purchases.
The current moratorium exempts Hawaii and local jurisdictions in New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington and Wisconsin, allowing them to continue taxing Internet access because they already had a law in place before the ban was enacted. H.R. 49 would phase out that exemption.
H.R. 49 does not address the “streamlined sales tax” plan put forward by a coalition of states seeking approval to collect sales taxes on purchases made online.
Under the current tax moratorium, the Internet is strong and growing stronger. More than 150 million people in the United States use the Internet, a number that has tripled since 1997. More than 600 million people around the world now access the Internet, more than twice the number of just two years ago.