Internet Tax Freedom
On October 30th, the House passed the final version of the Internet Tax Moratorium Extension, H.R. 3678, which temporarily bans state and local taxes on Internet access. The bill extends the Internet tax moratorium for seven years. The President signed the bill on October 31st.
Following are highlights of the bill.
The final passed bill extends the moratorium on Internet taxes for seven years. The final version of the bill extends the moratorium on state and local taxes on Internet access, which expires on November 1, 2007, for seven years – to November 1, 2014. The version of the bill that the House had passed on October 16 extended the moratorium for four years.
Like the original House bill, the final bill also includes certain needed adjustments. Like the earlier House-passed bill, the bill also includes several needed adjustments to the current moratorium statute, including clarifying the treatment of gross receipts taxes in certain states. As the “Don’t Tax Our Web” coalition points out, “[The] bill contains important definitional and statutory changes that improve current law.”
The final bill adds certain clarifications on the definition of “Internet access.” In order to ensure that certain activities that are currently tax-exempt remain tax-exempt, the final bill adds certain clarifications to the definition of “Internet access” to those already included in the House-passed bill. For example, the final bill explicitly includes within the definition of “Internet access” certain Internet services, such as e-mail or homepages, which are provided independently of Internet access.
The bill has been endorsed by a wide range of groups – including industry groups. This is a strong bill that is supported by such groups as the “Don’t Tax Our Web” coalition. The “Don’t Tax Our Web” coalition includes such companies as AT&T Inc., Comcast Corp., Time Warner and Verizon, and Internet giants Amazon.Com Inc., eBay Inc., and Yahoo! Inc.
Having a seven-year extension gives industry the certainty they need. Providing an extension that is seven years long allows companies a sufficient amount of time to plan their investments.
Having a seven-year extension also allows Congress to revisit the moratorium in 2014 and determine if adjustments need to be made. The Internet tax moratorium was first enacted in 1998. Congress has extended the moratorium twice before, in 2001 and 2004, and both times included provisions to make specific needed adjustments in the moratorium statute’s provisions. By providing a seven-year extension, Congress will be able to re-visit the moratorium in 2014 and determine if further adjustments need to be made.