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WASHINGTON, D.C. — The free ride on the Internet ends this Sunday.

Congress on Thursday chose not to extend a 1998 ban on taxes that target the Internet, meaning that, theoretically, state and local governments could begin imposing Internet taxes on Monday.

That's not considered likely. The ban will likely be reinstated later, and was only prevented from passing now because of a complex debate about how to handle the lost state-tax revenue.

But given enough time and a need for revenue, we could eventually be paying the piper to browse the Web.

"Starting Monday, there's an opportunity for considerable economic mischief," Sen. Ron Wyden, D-Ore., said.

There is concern that tax officials around the country could begin interpreting their tax laws as applying to the Internet. Some lawmakers say that would be a drag on the already faltering economy.

"This is no time for Congress to permit a new onslaught of taxes on the consumer, or on the tech sector," Rep. Christopher Cox, R-Calif., said.

The moratorium wasn't without its problems, though. It left unresolved a complicated issue involving uncollected state sales taxes on electronic commerce. There is an estimated $26 billion or so at stake for the year 2000 alone. Because the Senate couldn't agree on what to do about it, they declined to extend the moratorium immediately.

State and local governments want a piece of that $26 billion action. They say that if Congress does renew the ban, it should let them make out-of-state Internet, catalogue and telephone sellers do the work of collecting sales taxes and passing them back to the governments.

A state is barred under a Supreme Court decision from forcing an out-of-state business to collect its sales tax unless the business has a physical presence, or "nexus," in that state. But buyers are generally supposed to pay the tax when they purchase something from an out-of-state retailer under current law, but the laws are rarely enforced.

"A lot of mayors and governors don't want the political heat of collecting those taxes," Wyden said.

In their quest for their share of the $26 billion, government officials are backed by most traditional retailers, including many of the nation's largest chains. They say Internet competitors have an unfair advantage.

Internet sellers want the current patchwork of tax rates and rules in some 7,500 jurisdictions replaced by something less burdensome. They also fear being subjected to dozens of other kinds of state taxes and audits, particularly involving corporate taxes.

Earlier this week, the House passed a straight two-year extension of the current moratorium that did not address the sales tax question. That was blocked in the Senate.

"We ought to deal with both sets of problems at the same time," Sen. Byron Dorgan, D-N.D., said. "I would object to a two-year moratorium that doesn't address the second problem."

But Dorgan failed Thursday to win Senate approval of an extension until June 30 that encouraged states to work on a simplified system to collect taxes on remote sales.

That sealed the moratorium's fate for the time being. Both houses of Congress are in recess until Tuesday while the Capitol complex is checked for anthrax contamination.

Sen. Michael Enzi, R-Wyo., said he wants sales tax simplification that would result in "one form, once place to send your check, and one audit."

Republicans and Democrats insisted Thursday that they would resolve their differences and pass an extension of the moratorium before adjourning for the year. There may be an effort to take up the House-passed two-year extension next week in the Senate and allow votes on a series of sales tax amendments.

"There is an interest on both sides of the aisle to extend the moratorium," Senate Minority Whip Don Nickles, R-Okla., said.

-- Anonymous, October 19, 2001