WASHINGTON, Nov 8: US senators on Friday abandoned an attempt to vote on a bill to permanently ban Internet access taxes but said they hoped to agree by next week on a controversial definition of Internet access.

The Senate leadership canceled a Friday vote on the bill amid Democrats’ concerns it could unintentionally cost state and local governments billions in lost tax revenues.

We are talking in good faith with them to get a reasonable compromise, Virginia Republican Sen. George Allen told reporters after the vote was nixed, saying votes on amendments and even on final passage were possible next week.

A moratorium that had been in place since 1998 expired Oct. 31 and some lawmakers fear states and localities will start levying new taxes on the Internet unless Congress reinstates it soon.

The House of Representatives voted last month to make the ban on access taxes permanent and include high speed access services such as DSL lines under the moratorium. That bill also eliminates a carve-out for taxes in place before the ban was first passed.

A nearly identical bill has cleared the Senate Commerce Committee, but opposition has stiffened over the past couple of weeks as state and local governments say broad wording could cost as much as $9 billion in tax revenues a year by 2006.

They worry the bill’s definition of Internet access could undermine their ability to tax phone calls, software sales and other activities likely to migrate to the Internet over the next several years.

Proponents reject that interpretation and estimates of state and local tax revenue loss by the Congressional Budget Office come in lower, showing a loss by 2008 of around $195 million.

But the CBO said costs could rise if states were truly unable to collect sales and use taxes or gross receipts taxes on communications services, such as local and long distance phone calls, offered via the Internet.

California Sen. Dianne Feinstein joined other Democrats who said they were in favor of an access-tax moratorium but concerned about unintended consequences for states and cities.

This issue has energized cities in my state like no other, said Feinstein, a Democrat, urging colleagues to support a simple two-year extension of the old moratorium, which would also ensure all transmission lines including DSL remained tax-free.

City mayors are incensed we would pass a law without knowing with certainty how it would impact local revenues, Feinstein said.

A Democratic Senate staffer said lawmakers sensitive to states’ concerns had also rejected a behind-the-scenes proposal from Allen, Wyden and Republican Sen. John McCain of Arizona to keep the bill’s wording without making the ban permanent.—Reuters