The ban on Internet tax expires this weekend
Congress has failed to pass an extension on an Internet tax ban that expires this weekend. The House passed a straight two-year extension of the current moratorium that did not address the sales tax issue; the measure was blocked in the Senate. Meanwhile, a Senate bill that included an 8-month extension and language about simplifying the sales tax system also failed to pass. Congress hopes to pass an extension on the moratorium before it adjourns for the year.
The Internet tax moratorium passed in 1998 prohibited taxes on Internet access and banned any tax that singled out the Internet, such as for sales. State governments have argued that they are losing billions of dollars in uncollected taxes with the ban in place, while organizations such as the National Retail Federation argue that the ban gives online sellers an unfair advantage over offline retailers who must collect sales tax. Meanwhile, the Direct Marketing Association says charging tax for Internet sales and access is a barrier to entry for smaller retailers. Currently, online companies must charge state sales taxes if they have a physical presence in a state.
Congress has been in dispute over how state sales taxes should be applied to e-commerce. Lawmakers supporting the ban believe states will unduly target the Internet business segment, which they say could add to the current economic slowdown. Lawmakers on the other side want to at least allow states to simplify their tax laws to make it less burdensome on retailers. There are 7,500 different state tax jurisdictions.
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