Two bills circulating on Capitol Hill are looking at different ways to generate tax revenue from the Internet.

According to published reports, state and local governments recently resumed a lobbying push, asking Congress for the ability to impose sales taxes on purchases made over the Internet, along with the ability to charge monthly taxes on Internet connections.

Under current federal law, states and municipalities are typically barred from collecting both access and sales taxes. Proponents of the changes say that they could generate billions of dollars in new revenue from such taxes.

Last week Sen. Michael Enzi, R-Wy., introduced a bill that would create mandatory sales tax collection for Internet purchases, while a House of Representatives hearing found congressmen debating whether to allow a temporary ban on Internet access taxes lapse when it expires on Nov. 1.

Lobbyists have argued that reduced sales tax revenue threatens budgets for local schools and police and that all retailers should be required to play on a level field (though Enzi's bill would exempt small businesses with less than $5 million in out-of-state sales from paying taxes). But a major obstacle to the change would be reconciling the complexity of more than 7,500 different tax agencies that already have their own policies.

The ability to tax access to the Internet is likely to be linked to legislation such as Enzi’s. Allowing the Nov. 1 moratorium to expire would allow local and state governments to tax broadband or dial-up connections.


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