The following editorial appeared in the Miami Herald on Tuesday, July 22:

The moratorium on taxing Internet services, created in 1998 and extended in 2001, was set to expire this November for good reason – the young industry has had time enough to grow. Since 1998, the number of American Internet users almost doubled to nearly 60 percent of the population last year. So in passing a measure recently to make the tax moratorium permanent, the House Judiciary Committee simply blessed renewing another tax exemption for special interests. Other lawmakers shouldn’t make the same mistake.

The measure would bar states and local governments from adding fees to Internet-service bills. Such fees would be similar to those now added to phone bills. The moratorium doesn’t affect sales tax for online purchases – an entirely separate issue.

Despite the existing ban, several states do tax Internet services. A provision in the original 1998 moratorium allowed states to grandfather any tax that existed at the time. In Florida and other states, the state and municipalities may tax Internet services when they are listed jointly on a bill with phone or cable-TV charges.

But the measure approved by the committee may close those loopholes, potentially depriving Florida of millions of dollars in revenue from the communications-services tax. The Internet-services industry says that providers would be hampered by different tax laws among hundreds of jurisdictions. This argues for creating uniform communications taxes among local governments – an effort Florida began two years ago – not for eliminating taxes. Besides, phone and cable-TV companies cope with the same challenge.

As customers go wireless and more mobile, the industry says, it will be impossible to figure out which jurisdiction’s taxes to apply. This argument is bogus; even a user paying by credit card must have a billing address, and that’s where he should pay taxes.

The industry also says that taxes would curtail Internet access for the poor. That’s not necessarily so. In Texas, for example, the first $25 of Internet access is tax-free – a break for users of inexpensive dial-up connections. As for rural areas where access is often harder to obtain, states could opt to have the Internet-service fees subsidize universal service as they do now with phone service.

There is no longer any compelling reason to leave Internet services untaxed. America Online, Sprint and other industry giants are merely clinging to their beloved exemption. States, desperate for revenue, deserve the right to formulate their own tax policies. In Florida – which reaps more than $1 billion annually from taxing all communication services – the price of any exemption is especially high. Congress should end the moratorium, not make it permanent. The industry is mature enough to manage.