As stated in this post about the internet tax, the law prohibits state and local government from taxing internet access. It doesn’t address charging sales tax on the internet sales. States that already had Internet access taxes before the ban are Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas, Washington and Wisconsin (according to the National Conference of State Legislatures.)

The bill did include a small change, leaving options for providers to tax “home page electronic mail and instant messaging (including voice–and video–capable electronic mail and instant messaging), video clips, and personal electronic storage capacity, that are provided independently or not packaged with Internet access.” That infers they’d like the option to tax other services, but not individual emails sent or instant messaging. In general Republicans wanted a permanent moratorium and Democrats wanted to keep options open for the future but both parties are in strong favor of a ban – it’s just the length or permanency that’s debated.

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Efforts to push the ban out beyond four years hit a wall with House Democrats. Texas Republican Lamar Smith said on his website a permanent ban offers a boost to economic growth.

“High-tech and IP industries account for over half of all U.S. exports, represent 40 percent of our economic growth and employ nearly four percent of U.S. workers,” he said.

“Americans want and need a permanent ban on Internet access taxes,” said Smith. “Unfortunately for most Americans, the Democrat leadership’s love for the tax man has overcome their common sense.”

Smith also claimed the Democratic majority refused to look at any bans beyond the four year extension they have granted.

Some lawmakers in Congress want to create a new tax system in order to have a "level playing field" for shoppers, businesses and governments to help states collect taxes on Internet purchases.

 In a separate measure lawmakers will decide whether to let a temporary ban on Internet-access taxes continue when it expires November 1. If the ban does not continue, it could lead to taxes on broadband, dial-up connections and e-mail accounts.

Supporters of lifting the ban include the Jewelers of America and the E-Fairness Coalition, who say traditional retailers, local governments and states are losing revenue as Internet sales increase.

Those opposed to lifting the ban include the National Taxpayers Union and the Direct Marketing Association, say new taxes are not needed because online consumers already pay a variety of fees.

Consumers who shop online pay fees and other charges for Internet service. Online shoppers also pay shipping fees, which vary due to weight of an item, and shipping methods.

"Given the potentially destructive impact that expanding or raising Internet and telecommunication taxes could have on this important economic sector, the remedy could not be clearer," said Jeff Dircksen, director of congressional analysis for the National Taxpayers Union.  "Congress and the states should declare this tax territory permanently off-limits."