Tax policy analysts say that anytime an industry reports revenues of more than $2 billion, as Internet access and consumer online services did in 1995, taxing authorities and regulators sit up and develop an urge to do what they are trained to do.

• Foreign nations, including Italy and Belgium, are experimenting with "bit taxes" on any information that crosses their borders.

• In the U.S., Texas is mulling a variety of Internet levies -- from taxing the creation of graphics using a drawing program for a client's home page to taxing home pages sitting on the server.

• Nebraska's legislature recently passed a law allowing the tax commissioner to require all out-of-state vendors without a physical presence in Nebraska to report all purchases by the state's residents to the tax agency.

• Massachusetts is considering taxing Internet service providers retroactively to 1990 to make up for what it would consider lost tax revenues.

These and other states appear poised to battle one another for revenues from the information superhighways, despite the fact the Clinton administration suggests the U.S. declare the Global Information Infrastructure a worldwide free trade zone.

A bill now beginning to circulate in Congress, entitled "The Internet Tax Freedom Act," would forbid states and localities from slapping commerce-killing taxes on Internet traffic.

While states would still be able to impose sales or use taxes on goods and services sold through the Internet, the proposed legislation is reportedly beginning to attract bipartisan support on Capitol Hill. However, groups which lobby for city and state governments are beginning to mount a full-scale lobbying effort to defeat it.

Source: Don Jonas (Hudson Institute), "Keep Tax Man's Mitts Off Internet's Bits," Investor's Business Daily, June 12, 1997.