Senate restores Net access tax ban

WASHINGTON -- The Senate voted yesterday to restore a ban on state and local taxation of the services that connect consumers to the Internet.

''We have held steadfast to the proposition that the Internet, this extraordinary and global treasure, shouldn't be subject to multiple and discriminatory taxes," said Senator Ron Wyden, an Oregon Democrat.

The Senate voted 93-3 to prohibit state and local governments from imposing taxes on Internet access but to allow some states already collecting to continue.

The House last fall voted to permanently ban taxes on Internet access, but the permanent ban couldn't win enough support to pass in the Senate despite a strong push from the telecommunications industry.

President Bush called the Senate's vote ''an important step toward permanently banning access taxes on broadband that will help make high-speed Internet services more affordable, increase the number of broadband users, and enhance our nation's economic competitiveness."

Some senators argued the ban amounted to an unnecessary subsidy for telecommunication companies and a drain on state and local revenues. They won multiple changes, such as an exemption for some taxes already in place.

Senator Lamar Alexander, a Republican from Tennessee, said the changes succeeded in ''minimizing the effects of this legislation doing harm to state and local governments."

The House and Senate have to reconcile their differences before the bill becomes law. Neither version affects sales taxes charged on merchandise purchased using the Internet.

Congress first banned taxes on Internet access in 1998. A temporary ban expired nearly six months ago.

Senators spent much of the week arguing whether language in a renewed ban would effectively exempt telecommunication companies from all taxes as the businesses increasingly take advantage of Internet technology.

The problems erupted when lawmakers broadened the ban to cover newer high-speed Internet connections like DSL, cable modems, and satellite.

Some said the rewrite went too far and created a loophole for telecommunication companies. Others said the ban simply leveled the playing field and allowed new broadband technologies to compete with cheaper but slower dial-up connections.

To address that concern, senators agreed to clarify that the ban does not affect taxation of Voice Over Internet Protocol, or VOIP, which allows consumers to make telephone calls using the Internet.

Senators also decided to let seven states that started taxing Internet access before the initial 1998 ban, and haven't ended their taxes, keep collecting them.