The Administration supports a permanent moratorium on taxation of
Internet access and opposes multiple and discriminatory taxes on the
Internet. The Internet is a fast-developing mode of commerce where the
technology and the economics change very rapidly. Five years is a very
long time in the fast-moving virtual world. Therefore, the many open
questions concerning Internet taxation should be resolved in "Internet
time" and not postponed for an additional five years.
The Administration supports an amendment that may be offered by
Representative Delahunt (D-MA) and Representative Thune (R-SD) which
would provide for a two-year extension of the current moratorium. H.R.
3709's proposed extension of the current moratorium, through 2006, would
in effect enact a five-year hold on any further consideration of
Internet tax issues, creating uncertainty in a vital and rapidly growing
industry. In addition, the proposed five-year extension would
significantly reduce the incentive for States to simplify their tax
systems right now, to the detriment of all interested parties,
particularly small businesses. Tax simplification and clarity in the
responsibility for tax payment are essential for the establishment of a
level playing field among different types of businesses, including both
Internet and main-street firms. The Administration opposes H.R. 3709
because it will delay consideration of important Internet tax issues and
will hinder, not foster, tax simplification efforts by the States.