LEGISLATION DESIGNED TO stop state and local governments from imposing new taxes on Internet transactions for at least three years and creating a special commission to study the issue cleared its first hurdle in the House in June when the Commerce Committee unanimously voted to recommended its adoption. Two other House panels, the Judiciary Committee and the Ways and Means Committee, had yet to vote on the measure, sponsored by Rep. Christopher Cox (R-CA), at deadline, but the committees are expected to endorse the bill’s passage. Under Cox’s bill, and similar legislation pending in the Senate, state and local governments would be prohibited from imposing new taxes on Internet services, including sales, for at least three years. While the National Governors Association generally favors the measure, it wants a provision included that would eventually let states tax both Internet and mail order sales regardless of whether the seller has a physical presence in the buyer’s home state. In 1992, the U.S. Supreme Court ruled that states could not tax mail order sales unless the seller had a substantial physical presence in the taxing state or Congress adopted legislation permitting the imposition of such taxes.
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