By Sheila Cherry, Paula Cruickshank and Cindy Zirkle, CCH Washington Staff Writers

The Internet Tax Freedom Bill was approved in the Senate on October 8 by a vote of 96-2, despite political wrangling over the course of the last two days that seemed put a full Senate vote in doubt. The House passed a similar measure earlier this year, and President Clinton is expected to sign the bill after Senate and House conferees reconcile differences between the two versions.

The bill imposes a three-year tax moratorium on Internet access charges and protects against new Internet-specific levies such as bit taxes, web-search taxes and e-mail surcharges, according to a statement from Rep. Christopher Cox (R-Cal.).

It also creates a temporary advisory commission that will study electronic commerce and issue guidelines for appropriate forms of taxation in the future. In addition, the measure directs the President to work with multinational stakeholders to advocate establishing the Internet as a global free-trade zone.

Clinton Supports Moratorium

President Clinton said he looks forward to signing the Internet tax bill into law. Clinton, in a written statement, indicated that the measure strikes the proper balance between promoting electronic commerce and providing state and local governments with the revenue they need "to fight crime and invest in education."

"This bill will create a short-term moratorium on new and discriminatory taxes that would slow down the growth on the Internet, and will search for long-term solutions to the tax issues raised by electronic commerce," Clinton stated. "We cannot allow 30,000 state and local tax jurisdictions to stifle the Internet, nor can we allow the erosion of revenue that state and local governments need..." the President said.

Senators overwhelmingly passed an amendment by a vote of 98-1 that would exempt from the moratorium commercial pornographic web sites that do not restrict access to sexually explicit material that is harmful to minors. Sen. Dan Coats (R-Ind.), who offered the amendment, advised that current technology allows web site operators to determine if users are minors or adults. Coats said that the "massive tax shelter" proposed under the Internet bill should not extend to pornographers who operate an estimated 28,000 sites worldwide.