Senate Passes Moratorium on Internet Taxes Until 2014

After an amendment offered by Sen. John Sununu (R - N.H.) made it feasible to extend a four-year extension on the existing ban on Internet-related taxes to seven years, the US Senate yesterday passed the Internet Tax Freedom Act Amendments Act of 2007, reportedly by another overwhelmingly positive vote.

The existing federal moratorium on any state or federal tax on Internet use was set to expire next Thursday, after which time legislators were worried that states could be gearing up to create new broadband usage taxes that could be applied to users' ISP bills.

Revenue from those taxes would have conceivably been earmarked to fund the municipal side of the cost of renovating existing infrastructure for increasing broadband coverage, especially for DSL.

But states won't be able to raise funds through those means until at least November 2014, after the President signs the Amendments Act into law as he is expected to do. From here, the measure goes to conference committee to reconcile minimal language differences between the House and Senate versions, and then proceed to the President's desk.

Last week, the House passed its version of the Amendments Act by a vote of 405-2.

Among the Act's many supporters was Sen. Ted Stevens (R - Alaska), the former head of the Sen. Commerce Committee. In a recent statement, Sen. Stevens tried to leverage the wellspring of support for the bill to apply to measures that would improve rural broadband coverage.

"While the expiration of the Internet Tax Moratorium is the most pressing broadband issue before Congress right now," Stevens wrote, "several more issues should also be addressed to encourage greater broadband deployment and availability in this country. First and foremost, universal service should be updated so that rural America has the same broadband opportunities as the rest of America. This will require the work of both Congress and the Federal Communications Commission."

Without revenue earmarked from the federal government to pay for such rural upgrades, the task of funding these projects falls more on the shoulders of the ISPs and carriers. A Reuters report this afternoon cites ISPs as having warned that broadband rates could rise nationwide as much as 17% in the near future, after the Amendments Act becomes law.