Internet remains tax free – for now

GOODS and services sold via the Internet will almost certainly retain their tax free status after lawmakers in the US voted to approve a seven-year extension of a moratorium on online tax.

The US Senate voted overwhelmingly last week to approve the extension, while the House had two weeks earlier approved a four-year extension of the internet’s tax free status.

The internet tax ban was originally approved in 1998, but was due to expire on November 1. Though there had been efforts among some lawmakers to make the tax ban permanent, those efforts were ultimately unsuccessful.

The Senate moratorium extension received strong support from both side of the chamber.

In a joint-statement issued after the vote Democrat Senator Tom Carper and Republican Senator Lamar Alexander – who jointly introduced the bill – said the extension was a commonsense compromise.

“This agreement is a common sense victory both for internet users and for state and local governments,” the Senators said.

“It continues the moratorium on Internet taxation, avoids unfunded federal mandates on states and cities, updates the definition of Internet access, and allows Congress to revisit the issue after seven years.”

The two Chambers will now have to reach a compromise on the length of the moratorium and some other fine-print detail before it can be sent to President George Bush for his signature.

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Microsoft snares Facebook deal, expands advertising

MICROSOFT has scored a rare win over rival Google, snaring a small equity slice of the Facebook service in a US$240 million deal (A$263 million) that values the social networking phenomena at US$15 billion.

The deal gives Microsoft a tiny 1.6 per cent holding in Facebook.

More importantly, however, an expanded strategic alliance signed between the companies as part of the equity deal makes Microsoft the exclusive third-party advertising partner to Facebook.

Microsoft will also begin selling advertising for Facebook internationally on an exclusive basis, in addition to the United States.

“We are pleased to take our Microsoft partnership to the next level,” Facebook chief revenue officer Owen Van Natta said.

“We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users of Facebook.”

Microsoft Platforms & Services Division president Kevin Johnson said the two companies had partnered well together in the past year, and extending advertising opportunities would benefit both companies, as well as their collective users and advertisers.

“The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership,” Mr Johnson said.

With about 50 million users worldwide, Facebook is one of the most trafficked web sites in the world, registering 250,000 new users every day – of which 60 per cent are outside the US.

In August last year, the companies announced a US-only strategic alliance that named Microsoft the exclusive provider of standard banner advertising on Facebook using Microsoft’s digital advertising solutions and the Microsoft adCenter platform.

In early 2007, the terms were extended to 2011. This arrangement now applies globally to all advertising.

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