Should state and local governments be able to collect taxes on your Internet service?
For years, Congress has repeatedly banned the practice, but only for short spurts at a time. Now, a bill that’s soon set to become law will make that ban permanent — meaning Internet providers, and by extension, consumers, won’t have to fear that their subscription to fixed broadband will be subject to state and local taxes.
Buried in a congressional trade bill whose final language is due to be considered by the House Friday and the Senate on Monday is a provision that officially extends a 1998 law called the Internet Tax Freedom Act. The ITFA (jump down to Title XI here) prohibited states and localities from levying access taxes, as well as taxes on Internet traffic. But because of a sunset provision in the law, Congress has had to renew it periodically. Friday marks the latest deadline, which is one reason why Congress is in a hurry to make this renewal the last one ever.
When you consider the rates many consumers pay in state and local taxes for their landline and wireless voice service — 11.5 percent for wireless alone, according to the Tax Foundation — it’s clear that the ITFA has potentially saved Americans a lot of money.
But almost as important is what Congress is not banning with this legislation. It’s not banning sales taxes on e-commerce, for instance, which states want to impose on your Amazon purchases. There’s a separate legislative fight occurring in Congress on that front. Nor does it prevent federal, state and local governments from imposing fees on your Internet service — which, as Politifact helpfully points out, are legally distinct from taxes even though consumers still experience it as a drain on their pocketbooks. There’s a political battle going on over these, too, especially in connection with the government’s net neutrality policy and whether Internet providers should be required to pay into the same fund telephone companies do to ensure that all Americans have equal access to the nation’s communications networks.
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Despite all that, permanently extending the ITFA — one of the few issues in Congress that has bipartisan support — may save consumers billions of dollars. Both chambers are expected to approve the bill, after which it’ll go to the president’s desk.
Brian Fung covers technology for The Washington Post, focusing on telecommunications and the Internet. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.