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Seven States Face End to Their Internet-Related Taxes by 2020

Phillip Dampier February 2, 2016 Consumer News, Public Policy & Gov't 1 Comment

itfaSeven states that adopted Internet access taxes prior to 1998 and have continued them grandfathered under the Internet Tax Freedom Act (ITFA) may be required to phase them out by June 2020, leaving no states allowed to tax online access.

Congress is considering an extension of the ITFA this week because if they don’t, it is scheduled to expire on Friday. The law prohibits state and local jurisdictions from imposing telecommunications taxes on Internet services, which come predominately from charging state/local sales tax on Internet access.

Internet-related taxes are still collected by many jurisdictions in Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin because those states successfully won exemptions from the law. All were collecting sales and other taxes before the bill’s passage in 1998.

“This week, long-time proponents of making ITFA permanent attached a permanent extension to an unrelated measure covering federal customs and border protection,” wrote Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities. “The legislation also would repeal the grandfather clause [allowing those seven states to continue taxes] in 2020. Repeal would deprive these seven states of several hundred million dollars in annual revenue. ”

Most consumers in these states find the tax on their phone, cable, and wireless bills either from sales tax or a telecommunications tax on their Internet access or data plan.

Congress can either extend the provisions of the ITFA or let it expire without action later this week.

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txpatriot
txpatriot
8 years ago

I hate taxes as much as the next guy, but I don’t understand why Internet access s/b exempt from sales tax. We pay taxes on telephone, electricity, gas, water, and cable TV. What makes Internet so special that it s/b exempted? I understand back in the 1990s, home Internet access was still a new thing, and to encourage people to get on the Internet, maybe it should not have been taxed at the time. But people need electricity and water, yet those are subject to taxes, aren’t they? We don’t worry that sales tax may cause someone to not be… Read more »

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