Thursday, November 01, 2007

Internet Access Tax Ban OKd for 7 Years

Congress unanimously approved it and the president has signed it. A ban on taxing internet access until 2014 has been made into law. However ....

Not everyone is safe from taxes under the bill. States that already had Internet access taxes in place before the ban took effect several years ago would still be allowed to keep them through a grandfather clause in the bill. (Nine states--Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas, Washington and Wisconsin--fall into that category, according to the National Conference of State Legislatures.) Officials can also tax Internet services, albeit more indirectly, if they had already enacted broad-based laws on their books that tax the gross income or receipts of a business.

The bill isn't a blanket ban on all Internet-related taxation, either. It bars states from taxing services that provide a connection to the Internet, such as cable, DSL, and wireless-type services. But governments are free to tax "voice, audio, or video programming" that charges consumers a fee--such as IPTV and subscription-based Internet phone services--and basically any other "products and services" delivered over the Internet and not specifically exempted by the bill. (The bill also does not deal with the separate question of sales tax on goods purchased online.)

The politicians did opt to carve out from the possibility of taxing the following services: "home page electronic mail and instant messaging (including voice--and video--capable electronic mail and instant messaging), video clips, and personal electronic storage capacity, that are provided independently or not packaged with Internet access." That section was added at the last minute in response to concerns raised by Sen. Ron Wyden (D-Ore.), the original author of the tax ban, which dates back to 1998."

Cities and counties and states continue to eye the internet as a cash cow. A brief period of sanctuary exists for now, and the issue has been pushed aside until another election cycle. The battle now shifts back to states, where voters will need to demand the internet does not get taxed into oblivion.

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