Internet Tax Moratorium Backed by House Panel

Internet Tax Moratorium Backed by House Panel

The House Judiciary Committee backed a measure on Wednesday that would permanently extend a moratorium on certain state taxes on the Internet transactions, sidelining attempts by Democrats to allow states who have already implemented such taxes to continue doing so.

The panel voted 30-4 to approve a bill (HR 3086) that would make permanent a moratorium barring multiple states from imposing taxes on online purchases and Internet access. The current ban is set to expire on November 1. A floor vote for the bill has not been scheduled.

Democrats opposed making the moratorium permanent, arguing the Internet has changed significantly since the ban was put in place by Congress in 1998 in an effort to jumpstart digital commerce.

“The Internet is no longer a nascent idea in need of federal tax protection to grow. It is now a prosperous sector of the global economy,” said panel ranking Democrat John Conyers Jr., of Michigan.

Conyers noted the bill would not extend the “grandfather” clause that provides exemptions for states that have collected Internet access taxes since before to 1998. He argued that without such an extension, states like Texas would lose hundreds of millions of dollars in revenue.

The panel rejected 21-12 a Conyers amendment that would extend both the moratorium and the grandfather clause until fiscal 2018.

Chairman Robert W. Goodlatte, R-Va., argued that the seven states that the grandfather clause would apply to have had ample time to transition to other sources of revenue.

The National Governors Association said on Tuesday it opposes the measure for maintaining a ban on states collecting taxes from online retailers without a physical storefront in the state. A Senate-passed bill (S 743) would put a mechanism in place for states to collect taxes from out-of-state retailers.

Although Conyers and other Democrats on the panel had asked for a similar provision in the House bill, Goodlatte stressed the need for stand-alone legislation

“In the past, the moratorium has lapsed and been extended retroactively, but this time around, the consequences of a lapse would be worse,” said Goodlatte.

The panel also backed, 17-10, a bill (HR 4874) that would establish a nine-person regulatory review commission to review federal regulations for potential repeal. The committee rejected, 9-16, a Hank Johnson, D-Ga., amendment that would eliminate the bill’s “cut-go” provisions that would allow Congress to repeal any regulations recommended by the commission.