2004 Adopted Resolutions
72nd Annual Meeting
Boston

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URGING SUPPORT FOR REINSTATING A TEMPORARY MORATORIUM ON TAXES ON INTERNET ACCESS FEES

WHEREAS, in order to ensure the growth of electronic commerce and examine how state and local taxes should be applied to the market place on the world wide web, Congress in 1998 enacted the Internet Tax Freedom Act (ITFA), which imposed a temporary moratorium on state and local taxes on Internet access fees, as well as banned multiple and discriminatory taxes; and

WHEREAS, temporary legislation was adopted to allow electronic commerce as well as telecommunications technology time to develop and establish trends before determining how state and local taxes should be applied; and

WHEREAS, a sea of change is still occurring with many technologies migrating to the Internet that state and local governments have traditionally taxed such as phone service (or Voice over Internet Protocol--VoIP), music, games, movies and magazines; and

WHEREAS, the Internet Tax Freedom Act expired last November amid disagreement in Congress over two key issues: whether or not it is time to make the moratorium permanent and whether or not the definition of Internet access should be expanded; and

WHEREAS, the House passed legislation, H.R. 49, last year that would make the moratorium permanent and expand the definition of Internet access to include telecommunications services, which under the original act were excluded; and

WHEREAS, under the House bill, telecommunications services used to provide Internet access would not be subject to state and local taxes, which could be interpreted to mean state and local governments would not be permitted to tax traditional telephone services used to provide Internet access, or collect taxes on music, games movies or other items bundled with Internet access and sold as a package; and

WHEREAS, the language used to define Internet access in the House bill is so vague that the Congressional Budget Office could not fully estimate the financial impact it would have on state and local governments, although state and local groups believe it could cause them to lose billions on an annual basis; and  

WHEREAS, similar legislation was introduced in the Senate on behalf of the telecommunications industry by Senators George Allen (VA) and Ron Wyden (OR) but the Conference and other state and local groups prevailed in convincing members of the Senate that it would have a severe adverse impact on state and local revenues; and  

WHEREAS, Senators Lamar Alexander (TN) and Thomas Carper (DE) sponsored legislation (S. 2084) on behalf of state and local governments that would have extended the moratorium for two additional years and adopted a definition of Internet access more in line with current law, (it merely clarified that Internet access provided over digital subscriber lines, DSL, as well as other forms of Internet access--wireless, cable and etc...would be treated the same); and

WHEREAS, as a compromise Senator John McCain (AZ) offered legislation, S. 150, which was approved by the Senate on April 29, and it calls for a four-year extension of the moratorium, language ensuring that state and local governments may continue to collect taxes on music, games and other items bundled with Internet access, a grandfather clause that would allow state and local governments with taxes on Internet access in effect when the original act was adopted in 1998 to continue collecting such taxes for the next four years, and those with taxes on DSL to continue to collect them for the next two years,

NOW, THEREFORE, BE IT RESOLVED that The United States Conference of Mayors urges all members of the House and Senate to support the Senate bill, S. 150, as final legislation without any changes, and avoid the need for a House-Senate conference; and

BE IT FURTHER RESOLVED that The United States Conference of Mayors urges all members of the House and Senate to oppose any compromise that embraces the permanent moratorium or the definition of Internet access outlined in H.R. 49.