Internet Tax Ban Going Nowhere - May 17, 2004 Vol.5, No.10

May 17, 2004 Vol.5, No.10:

Published: 05/17/2004

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Internet Tax Ban Going Nowhere

As reported in the last Watcher, on April 28 the Senate passed a four-year continuation of the now-expired Internet tax moratorium. Disagreements with the House make passage of the ban unlikely.

The continued prohibition of taxation on the charges a user pays to an ISP to connect to the Internet is strongly opposed by state groups, including the National Governors Association, the Multistate Tax Commission, and others, because of losses to state revenue. It is strongly supported by by the telecommunications industry — the primary beneficiaries of the ban. It appears that major differences between the House and Senate on the scope of the bill make it unlikely that it will move forward. The Senate bill, besides being only for four years, exempts VoIP (Voice over Internet Protocol) from the ban and also "grandfathers in" states with existing taxes. The House bill is much broader, does not include any grandfather clauses, and makes the ban on Internet taxes permanent.