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House votes to ban new Internet taxes

graphic June 24, 1998
Web posted at: 9:20 a.m. EDT (1320 GMT)

WASHINGTON (CNN) -- The House voted Tuesday to ban new state and local Internet taxes for three years, while an advisory commission studies whether and how electronic commerce should be taxed.

Under the moratorium, no state or local government could tax the monthly fee that millions of Americans pay to companies such as America Online, CompuServe or Erol's for Internet access.

"Read my e-mail. No new Net taxes!" said Rep. Christopher Cox, the California Republican who sponsored the bill. It passed Tuesday on a voice vote after a brief discussion.

Eight states that currently tax Internet businesses would be allowed to continue if their legislatures review and approve the taxes within a year.

The bill would also protect Internet services from regulation by the Federal Communications Commission, and it urges the president to work internationally to make the Internet a "tariff free zone."

The Clinton administration "strongly supports" a temporary tax moratorium, according to Lawrence Summers, deputy secretary of the Treasury Department. But he warned the Internet must not become a "tax haven" that drains states and cities of crucial revenues needed for to build schools and prevent crime.

An even tougher moratorium on Internet taxes is under consideration in the Senate, but has not yet come up for a vote. That proposal would curb new state and local taxes for six years.

The Associated Press and Reuters contributed to this report.

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