The Internet has been characterized as the most free and open source of information and human connection in the history of mankind. With any luck – and the prescience of a few dedicated lawmakers – it could also stay free of taxation.
How? Through the Permanent Internet Tax Freedom Act (H.R. 3086). The bill specifically makes permanent the provisions of the Internet Tax Freedom Act (ITFA). First enacted in 1998, the ITFA bars federal, state, and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. The law also bars multiple taxes on electronic commerce and placed a moratorium on the ability of state and local governments to impose new taxes on Internet access.
The ITFA has been extended three times since its original enactment. The most recent extension, titled the Internet Tax Freedom Act Amendment Act of 2007, was signed into law on November 1, 2007, by George W. Bush and extended the moratorium until November 1, 2014.
The Permanent Internet Tax Freedom Act was introduced last year by House Judiciary Committee Chairman Bob Goodlatte (R-Va.), Congresswoman Anna Eshoo (D-Calif.), Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Spencer Bachus (R-Ala.), Subcommittee Ranking Member Steve Cohen (D-Tenn.), and Congressman Steve Chabot (R-Ohio). Currently, the bill is in subcommittee.
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Subcommittee Ranking Member Steve Cohen added, “The internet has become a driving force in our economy, but regressive taxes on internet access could have a chilling effect that ripples throughout the nation. During these tough economic times, state and local governments are understandably looking to raise revenue needed to provide critical services, but unfair and unnecessary taxes on internet access—a cornerstone of our 21st century lives—are not the right way to do it. The Permanent Internet Tax Freedom Act will help prevent unreasonable price increases for consumers that ultimately harm our businesses and stunt our economic growth.”
Unfortunately, the original ITFA included a grandfather clause allowing any state that already enforced taxes on Internet access before Oct. 1, 1998, to continue doing so. Ten states — Connecticut, Iowa, New Mexico, North Dakota, South Dakota, Ohio, South Carolina, Tennessee, Texas and Wisconsin — and the District of Columbia were the only areas that fell into that category. Whether these states will be allowed to collect Internet access taxes under the new bill remains to be seen.
To learn more about the Internet Tax Freedom Act, go to http://itfacoalition.org/.