By a 402-0 vote, legislators approved the seven-year ban, which was set to expire Thursday.
Members of the House initially approved a four-year ban earlier in October, but last week the U.S. Senate upped the duration to seven years.
"Seven years is better than nothing, and that's what we're doing today," Rep. Fred Upton, R-Mich, said Tuesday during remarks on the House floor.
While there was support for a permanent moratorium - there were 238 House co-sponsors for such a bill, more than the simple majority needed - concerns over the possible long-term impact on state and local governments brought about the compromise.
The provision amounts to a moratorium on state and local taxes, David Quam, director of federal relations with the National Governors Association, told the Associated Press. And with the Internet changing rapidly, the issue should be revisited periodically, he said.
"The implications could be pretty severe down the road if they got that wrong," he said. "It's actually a decent compromise that state and local governments and industry helped craft."
The Internet Tax Freedom Act, which was first passed in 1998 and was extended in 2001 and 2004, prohibits local and state governments from collecting taxes on various types of Internet services. It was developed out of concern that a tax would slow the adoption rate of Internet connections, especially broadband, in the United States.
In addition to lengthening the ban from four years to seven years, the legislation also contains a provision aimed at preventing state and local governments from assessing taxes beyond those levied on simple Internet access.
The legislation specifically prohibits taxation on e-mail and instant messaging services provided independently or not packaged with Internet access.
The extension also exempts some states that approved taxes prior to the original enactment.
The bill now goes to the White House for President Bush's signature.