Senate won't extend Net-tax moratorium

Richard Sullivan, chairman of the E-Fairness Coalition, discusses how the expiration of the Net tax moratorium affects his pro-internet tax group. (8:10) Play clip

The Senate has refused to extend the moratorium on an Internet-tax ban set to expire Sunday.

Although the House on Tuesday approved a measure that would extend the moratorium on the 3-year-old ban, Sen. Byron Dorgan, D-N.D., tried unsuccessfully Thursday to get the Senate to approve the moratorium for two more years.

Negotiators between the House and Senate had been trying to hammer out a compromise but apparently were unable to do so. Congress is in recess until Tuesday while the Capitol is checked for anthrax.

Proponents of the moratorium argue that the bill would prevent Internet commerce from being bogged down in multiple taxes and fees. But opponents argue that state and local governments are losing millions of dollars as consumers do more of their shopping online.

A Supreme Court decision forbids states from collecting taxes on out-of-state retailers unless they have a physical presence in the state. But Congress could pass an enabling law that would allow them to do so.

While most states that charge sales tax also have laws that require consumers to remit the sales tax on their own, few enforce those laws stringently.

A coalition of state governments has been working on a plan that would simplify their sales tax structure, making it easier for merchants to charge taxes. Dorgan's proposal encouraged states to work on simplifying that system.