Internet Tax Ban Is Bipartisan, But Going Nowhere Fast

There’s bipartisan tech legislation that could be an early win for the new Republican Congress. But thanks to the usual machinations of Capitol Hill, it doesn’t look like it will move anywhere quickly.

During the first week of the 114th Congress, House Judiciary Committee Chairman Bob Goodlatte (R-Va.) introduced a measure, H.R. 235, that would ban internet access taxation. He was joined by Rep. Anna Eshoo (D-Calif.) and other lawmakers who want to make permanent a temporary tax law that’s been around for almost two decades.

It was a familiar scene. The temporary ban has been extended four times since it was first enacted in 1998. Last month the bill was extended through September as part of a $1.1 trillion spending bill, after first getting tied to the more contentious debate on allowing states to tax online shopping.

“Year after year, Congress has chosen to temporarily extend the bipartisan ban on Internet access taxes,” Goodlatte said in a Jan. 9 statement. “The time has come to make this ban permanent.”

Most members of Congress would agree with Goodlatte. In 2014, the House passed the measure by voice vote under suspension of the rules. The bill was never taken up in the Senate. Despite having 228 co-sponsors, including 82 Democrats, the permanent tax ban got bogged down after it was paired with the more controversial Marketplace Fairness Act. The MFA attempts to put e-commerce businesses, like Amazon, on the same playing field as brick-and-mortar establishments by placing remote sales taxes on online purchases. But it carries far more detractors than the internet tax ban.

As the clock wound down on the 113th Congress, Speaker John Boehner (R-Ohio) refused to consider the online sales tax, but was in favor of extending the moratorium into the next year. So the internet tax ban was extended for the next Congress to deal with.

Support for making the ban permanent continues this year, but once again, the bill may find itself get caught up in other legislative debates.

Senate Finance Committee Ranking Member Ron Wyden of Oregon plans on introducing a version of the bill into the Senate soon. Wyden “hopes Congress moves quickly to protect the vital digital economy by ensuring Internet access remains tax free,” his spokesman said in an email. He also warned that pairing the bill with the online sales tax initiative would be a “dead-end.”

But passing the bill quickly may be hard without a sense of urgency. The current extension does not expire until October 1.

“That seems to be the tradition around here,” said Rep. Tom Marino (R-Pa.), one of the bill’s co-sponsors, in an interview. “Let’s wait ten weeks before the deadline and then let’s hurry up and try to put something together and then at the last moment, let’s extend it.”

And as Congress looks to reform the corporate tax code, it’s possible the moratorium could once again get injected into an entirely different debate, something Marino said he does not want.

“I still would like to see pieces of legislation, if they’re not germane, to be on their own initiative,” Marino said.

Seven states have internet taxes. They were passed prior to the firs federal internet access tax ban, and were grandfathered under the moratorium. Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin collectively stand to lose almost $500 million in annual revenue if internet access tax if the ban becomes permanent law, according to an analysis by the Center for Budget and Policy Priorities.