Senators jockey over ban on Internet taxes

Lawmakers are battling over how long to renew a ban on state and local taxes of Internet access.

A customs package that had been slated to hit the Senate floor would ban the taxes indefinitely, locking in place a policy that has been around since 1998.

{mosads}But a Senate aide on Tuesday said work on the customs bill will be pushed to January because of delays on the year-end government funding package.

Sen. John Cornyn (Texas), the No. 2 in Republican leadership, suggested that the legislation likely wouldn’t be taken up this week with the holiday recess looming. 

“I think we’re running out of time, but we can take it up in January when we come back,” he said. 

The ban on Internet access taxes has been extended a half a dozen times since the late 1990s, but proponents have long tried to extend the ban indefinitely and close off a carve-out that allows a handful of states to continue to tax Internet access.

Temporary extensions have been wrapped into year-end spending deals in the past. That could happen again in this year’s omnibus package, since the tax ban is set to expire in the next few days. 

Led by Sen. Ron Wyden (D-Ore.), negotiators included an indefinite ban on the Internet taxes in an unrelated customs enforcement conference report last week. The House passed the deal Friday.

Critics of barring taxes on Interent access point to the billions of dollars in lost revenue that states are not allowed to take in. They say the moratorium first enacted during the emergence of the Internet is no longer relevant.  

In the past, critics have attempted to make up for the revenue that could be collected from taxing Internet access by tying the moratorium to a more controversial proposal that would allow states to collect sales tax from their residents who make an online purchase from an out-of-state retailer — something that is currently not allowed. 

Sen. Dick Durbin (D-Ill.) who wants to tie the two proposals together, criticized the way the long-term ban was airdropped into the customs bill. His office had warned he had enough votes to strip the provision out of the broader customs bill if it hit the floor. 

“It’s what happens towards the end of the legislative session, when things go bump in the dark,” he said, noting he would only support a nine-month extension of the ban on the taxes. 

Durbin said that if lawmakers try to bring up the legislation it would have to overcome procedural hurdles, which could eat up the limited time remaining in the Senate.

“It’s possible the Republican leadership wants to hold this over,” he added, while stressing that isn’t his decision to make. 

During the Senate floor debate, Durbin and others planned to use a procedural move to try and strip the language out of the broader customs package. 

They planned to raise a point of order against the addition of the tax language. The permanent ban would have been stripped unless proponents could muster up 60 votes to waive the point of order.

Durbin’s office on Monday night expressed confidence he had the votes to stop the tax provision, with the help of many Democrats and a handful of Republicans. 

“Senator Durbin is working with his Republican colleagues, and they have the votes to defeat a motion to waive the point of order with broad Democratic support,” a Durbin aide said.

But Wyden’s office said, “If it comes to a vote on taxing the Internet, we think we’ll win.”

If Durbin succeeds in removing the Internet tax ban, it would force senators to send the customs bill back the the House.

– This story was updated at 3:33 p.m. Jordain Carney contributed.