Congress waited until the last minute, but the moratorium on taxing Internet access will continue for seven more years. The US Senate approved the extension by voice vote on October 25th, and the House passed it a 402-0 vote on October 30th. President Bush signed the extension into law on October 31st.
The moratorium was originally enacted in the 1998 Internet Tax Freedom Act, which was signed into law on October 21, 1998 by President Bill Clinton in an effort to promote and preserve the commercial, educational, and informational potential of the Internet. This law prohibited Federal, state and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. Congress extended the law twice previously in 2001 and 2004. The 2004 extension was scheduled to expire at the end of October 2007.
Contrary to popular belief, the law does not exempt sales made on the Internet as they will be taxed at the same rate as non-Internet sales just like mail order sales. The law also does not prohibit state use taxes imposed on Internet sales. Ten states that managed to enact Internet access taxes prior to the moratorium's enactment in 1998 were exempted from the original ban--Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington, and Wisconsin.
The AITP Legislative Affairs Committee joined other technology professional organizations to support the 1998 Internet Tax Freedom Act, as well as the subsequent extensions to the Internet tax moratorium.