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U.S. House votes for permanent ban on Internet access taxes

WASHINGTON (Reuters) – The House of Representatives voted on Tuesday to permanently bar U.S. states from taxing Internet access and replace a 17-year-old temporary ban that had been extended multiple times and was due to expire on Oct. 1.

The bipartisan measure, passed by voice vote, also bans discriminatory taxes on e-commerce.

“This legislation prevents a surprise tax hike on Americans’ critical services this fall,” said the bill’s sponsor, Republican House Judiciary Committee Chairman Bob Goodlatte.

A similar bill introduced in the U.S. Senate has 49 co-sponsors, including 11 Democrats, likely enough to secure passage.

But the House’s “Permanent Internet Tax Freedom Act” fails to address thorny questions over state sales taxes on goods and services sold via the Internet.

Currently, 45 states have imposed sales taxes on online purchases, but only some states require e-tailers to actually collect these revenues from customers.

Brick-and-mortar retailers have pushed for years for legislation that ensures full and consistent collection of online sales taxes in all 45 states. They argue that the current, patchwork system gives many online merchants a pricing advantage over traditional stores that must, under law, collect taxes from customers.

Online shoppers are supposed to submit payment for tax due, but almost no one does. As a result, many online purchases are effectively tax-free and cheaper than in-store purchases.

A House Judiciary Committee aide said lawmakers were working on a proposal to address the sales tax issue but declined to provide further details.

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