Adult Sites' Tax Break Curbed http://web.archive.org/web/20010430073523/www.wired.com/news/...

Adult Sites' Tax Break Curbed

by Arik Hesseldahl

5:45 p.m. Oct. 7, 1998 PDT

The US Senate, with minimal debate, overwhelmingly passed an amendment that would exempt some adult
Web sites from a two-year moratorium on taxes proposed by the Internet Tax Freedom Act.

The amendment -- known as CDA II, after the Communications Decency Act struck down by the Supreme
Court in 1996 -- was offered as the last major legislative proposal by Senator Dan Coats (R-Indiana),
co-sponsor of the amendment that eventually led to the original CDA. Coats is retiring from the Senate this
year after a single term.

The amendment stipulates that adult sites on the Internet require proof of a customer's age before
providing access to pornographic content. Sites that failed to conform to the amendment's provisions would
not be covered by the two-year moratorium on new e-commerce taxes provided by S 442.

"This is a massive tax perk to porn sites that make their smut available to children," Coats said. "To think
that we would give it to those providers making obscene material available to minors is unthinkable."

Although Conrad Burns (R-Montana) said he would not oppose the amendment, he said it would accomplish
very little.

"The only thing we can do is raise the awareness of adult supervision whenever young people go on the
Internet," Burns said.

A secondary amendment, offered by Senator Christopher Dodd (D-Connecticut), would require Internet
service providers to offer content filtering software or face similar exemptions from the tax moratorium. The
two amendments were combined into one and passed by a vote of 98-1. Senator Patrick Leahy (D-Vermont)
cast the single opposing vote.

The House on Wednesday passed a similar version of CDA II (HR 3783), offered by Representative Michael
Oxley (R-Ohio), but that bill contained no counterpart to the Coats amendment.

Ari Schwartz of the Center for Democracy and Technology (CDT) said that if the amendment survives in the
final version and is signed into law by President Clinton, several civil liberties organizations, including the
CDT, stand ready to challenge it in court.

"We still have to see how the debate goes forward in conference committee," Schwartz said. He said the CDT
was in the process of drafting a formal response to the amendment.

The Internet Tax Freedom Act, sponsored by Senator Ron Wyden (D-Oregon) has yet to face a floor vote.
The final vote was expected Wednesday, but may not come until Thursday though senators said they were
close to working out final hurdles.

Wyden opposed the original CDA when he was in the House, but voted for the Coats amendment on
Wednesday. He was elected to the Senate in 1996 to fill the seat left vacant by Senator Bob Packwood's
resignation.

The Senate also added an amendment to the Internet tax bill that would expand the scope of a 19-member
commission created to study the issue of Internet taxation. Senator Tim Hutchinson (R-Arkansas) offered
the amendment, which would force the commission to consider taxation issues related to mail-order and
catalog sales businesses.

Many senators have said that Internet sales are analogous to mail-order and catalog sales businesses. As
such, they maintain, the commission created by the tax bill should also consider how state and local
governments should collect taxes on any kind of "remote sales," whether by catalog, mail-order, or online.
Wyden and others opposed to the amendment said it would distract the commission from the issue of digital
commerce. A motion to kill the amendment failed by a vote of 68-30.

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Senators also voted down an amendment to extend the length of the tax moratorium to three years offered
by Senator John McCain. Debate continues on a so-called "grandfather" provision that would allow
Internet-related taxes already in force to remain during the moratorium. The House version of the bill
contains both provisions. The Senate, which has only two days remaining before it is scheduled to go into
recess for the November election, is expected take a final vote on the bill Thursday.

Related Wired Links:

'CDA II' Passes Senate

24.Jul.98

Sex Sites and Self-Regulation

10.Aug.98

Negotiating the Global Net Filter

9.Jun.98

CDA Victors Celebrate with an Eye on Act II

26.Jun.97

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