Senate moves to extend ban on Internet taxes

Senate Democrats are gearing up to pass a short-term extension of a moratorium on Internet access taxes, according to aides and K Street officials.

{mosads}The Internet Tax Freedom Act expires on Nov. 1, and Democratic leaders are pushing to extend the moratorium through 2014.

A bipartisan group of senators, including Majority Whip Dick Durbin (D-Ill.), is seeking to merge a proposal barring states from levying taxes on Internet access with a more contentious measure that would give states more power to charge sales tax on online purchases.

A vote on the short-term extension could come as soon as next week, or when lawmakers return to Capitol Hill after their August break, a Democratic aide said Wednesday.

Aides also stressed that Senate supporters weren’t backing away from their plan to merge the Internet access measure and the online sales tax bill, and that they were setting up a push for the combined bill in the fall or after November’s election. Durbin and Senate Majority Leader Harry Reid (D-Nev.) have both said recently that the two measures would move together.

“The sponsors wanted to move that bill before the August recess, but we simply ran out of time on the Senate floor,” one aide said.

The House easily passed a permanent extension of the Internet Tax Freedom Act last week.

But GOP leaders there and House Judiciary Committee Chairman Bob Goodlatte (R-Va.) have reacted coolly to the Marketplace Fairness Act, the online sales tax bill the Senate passed last year.

They have shown little interest in taking up such a proposal, setting up a potential showdown between the two chambers if the Senate insists on pushing their melded bill.

The Senate’s proposal would combine the online sales tax measure with a 10-year extension of the Internet Tax Freedom Act.

Outside supporters of the Marketplace Fairness Act insisted Wednesday that the short-term Internet access measure wasn’t a setback. Lawmakers have little interest in telecom companies potentially sending notices to customers about rate increases shortly before November’s election. 

“No long-term extension of ITFA will occur without MFA because it’s important to keep the Internet tax-free and protect local jobs,” the Marketplace Fairness Coalition said.

Senate Finance Committee Chairman Ron Wyden (D-Ore.), an original co-author of the Internet access measure, is a staunch opponent of the online sales tax measure.

Wyden, whose home state doesn’t have a sales tax, says the two measures contradict one another and that the online sales tax measure would place burdens on Internet retailers not felt by brick-and-mortar stores.