Internet access tax

Permanent Ban On Internet Access Taxation Approved By Congress

On Tuesday, the House passed the Permanent Internet Tax Freedom Act (PITFA), bipartisan legislation that would permanently prevent states from taxing internet access. The legislation was passed by a voice vote.

The first Internet Tax Freedom Act was a moratorium as part of Public Law 105-277, first signed by President Bill Clinton in 1998. Extensions to the moratorium have been passed five times, but the law was set to expire on October 1 if no further actions were to be taken.

Rep. Bob Goodlatte (R-Va.), a sponsor of PITFA, said in a statement that making a ban on internet access taxation permanent promotes innovation. “If the moratorium is not renewed or made permanent, the potential tax burden on Americans would be substantial. It is estimated that Internet access tax rates could be more than twice the average rate of all other goods and services – and the last thing that Americans need is another tax bill on their doorsteps,” he said.

Some regions of states had already enacted taxes on internet access before the first moratorium was signed, including Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin. Those regions have been allowed to continue taxing internet access under a grandfather clause, but they would no longer be allowed to do so if PITFA becomes law. The Congressional Budget Office estimated that the loss of internet access tax revenue could total “several hundred million dollars annually.”

While a ban on taxing internet has received support, the debate over expanding power to tax purchases made online continues. When a similar permanent internet tax ban was passed by the House last year, an attempt was made by senators to pair it with an expansion of online sales taxes to create the Marketplace Fairness Act. That bill never made it out of Senate.

Rep. Jason Chaffetz (R-Utah), the House Oversight and Government Reform Committee Chairman, is expected to introduce a bill next Monday that would allow states to collect taxes from out-of-state online purchases.

National Journal reports that Goodlatte is a proponent of a limited online sales tax law, but has yet to support legislation that would compel online vendors to abide by sales tax codes that vary by state and municipality.