* Congress passes tax moratorium bill
During its November session, Congress passed a bill that would eliminate taxes on Internet access for three years. The bill, which passed with unanimous consent in both the House of Representatives and the Senate, is expected to be signed into law by President George W. Bush in December.
Originally passed in 1998, the Internet tax moratorium expired one year ago. Delays in renewing it created a confusing situation, with some states collecting tax on Internet access and purchases while others did not. The new bill is retroactive and covers the past year as well as the next three years.
If signed into law, the new Internet tax moratorium will expire Nov. 1, 2007. The bill prohibits taxes on Internet access, including DSL and T-1 lines. The bill also prohibits states or municipalities from levying special sales taxes or delivery fees on Internet purchases that differ from the taxes applied to in-store or catalog purchases.
The bill does not apply to VoIP services, which the states may tax.
Seven states – including Texas, Wisconsin and Ohio – are exempt from the law and can levy Internet taxes because they did so prior to the original law’s passage in 1998.
High-tech industry trade groups – including the U.S. Telecom Association, the Telecommunications Industry Association, the Information Technology Association of America and the Business Software Alliance – applauded Congress’ actions.
“TIA has been a long-time advocate of a national broadband policy. This legislation is an important step in achieving that goal,” said TIA President Matthew Flanigan in a statement. “The U.S. should be a worldwide leader in Internet usage, and national policies that promote universal access to broadband will help us achieve the position of the world’s innovation leader.”
Even with the latest Internet tax moratorium signed, corporate network managers face a patchwork of state laws that mean some branch offices will pay tax on Internet access and certain Internet services like VoIP while other offices will not pay these taxes. Also, companies that paid Internet access taxes during the past year should be eligible for refunds.
“It’s kind of a minefield,” says Bartlett Cleland, associate general counsel of the Information Technology Association of America (ITAA). “Some ISPs have been charging and collecting taxes while other companies collected some of these taxes and held the money aside waiting for the Internet tax moratorium to be extended.”
It’s for this reason that ITAA and many other high-tech lobbying group support the idea of a permanent Internet tax moratorium. “Why are we taxing communications,” Cleland asks. “Why do we think that every time a new communications system comes along we should tax it?”
