Istook takes exception to bill extending moratorium on Internet taxation

Wednesday, May 10th 2000, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) -- While Congress considers a bill that would extend a freeze on Internet commerce taxation, Rep. Ernest Istook is stoking opposition to the measure, calling it unfriendly to non-Internet businesses.

"The Internet should not be singled out to be taxed nor to be freed from tax. If the goal is to lower taxes while keeping fairness, why don't we instead hear the cry, 'Don't tax any business?"' Istook wrote in a strongly worded letter to his colleagues in Congress.

The bill would provide a five-year extension for a moratorium on new, specialized taxes on Internet commerce. The current moratorium was passed two years ago and expires in October 2001. Istook said that leaves plenty of time to discuss the bill rather than hurrying to pass it.

The bill was scheduled for a vote today, which Istook attributed to "Washington politicians ... scrambling to show who can be friendliest" to the Internet community, while turning a deaf ear on brick-and-mortar businesses.

The White House today issued a statement backing a two-year extension but opposing the five-year version because it could delay congressional consideration of the sales tax issue and create "uncertainty in a vital and rapidly growing industry."

Rep. Bob Goodlatte, R-Va., helped write the bill and said keeping the Internet free from taxes benefits consumers, businesses, and state and local governments.

"The growth and potential of the Internet and electronic commerce is boundless and should not be inhibited," he said.

But some traditional businesses think the freeze gives online companies a competitive edge, since no sales taxes are assessed for online purchases. Most governors, including GOP Gov. Frank Keating, have said the moratorium cuts into state sovereignty.

Rep. J.C. Watts, R-Okla, the fourth-ranking member of the House GOP leadership, said he has not decided how he will vote on the moratorium.

"While he agrees with the overall issues of the legislation, he has some reservations with regard to the unfair advantage given to Internet businesses over traditional retailers in the long run," said Watts' press secretary, Bill Shapard.

The tax moratorium extension bill is H.R. 3709.

The tax-free computer bill is H.R. 4274.

On the Net: Congress: http://thomas.loc.gov