But with 30,000 taxing jurisdictions in the U.S. alone, the specter of multiple taxes imposed on almost anything passing across the worldwide network threatens a spiral of levies that could choke the nascent communications medium. To date, only a dozen states have levied taxes on the Internet, in most cases simple communications fees tacked onto monthly Internet bills. Texas adds a separate form of sales tax that applies to services supplied via the Net but not similar ones in the physical world. By themselves, those taxes amount to little. But Net activists fear further taxation will creep in just as it has in the physical world.
Backers say the Net shatters traditional notions of jurisdiction.
Say, for instance, an accountant in Georgia orders a sweater for her father in Maine over the Net from a retailer in Nevada. That's the fear, chief sponsor Wyden says. This means that if a state has a 3 percent sales tax, then the state can only charge a 3 percent sales tax on goods ordered over the Internet. The debate over taxing the Internet still rages, but finding a solution that pleases everyone seems unlikely. After dozens of changes to the Internet Tax Freedom Bill, local and state officials complain the measure could create a safe haven against taxation on the Internet.