As part of the 1998 budget package, Congress passed the Internet Tax Freedom Act (ITFA), effective Oct. 1, 1998 and ending Oct. 20, 2001. The ITFA exempts Internet service providers (ISPs) from state and local sales (and similar) taxes.
The ITFA exempted Internet access from state and local taxes. For this purpose, a tax includes any kind of charge other than a fee imposed due to a specific benefit or service. The exemption is only temporary, however, and contains many exceptions. The exemption applies to taxes that were not imposed and enforced prior to Oct. 1, 1998; ISPs cannot be subjected to any new taxes, but taxes already in force may still be imposed.
The ITFA prohibited discriminatory taxes on electronic commerce. Discriminatory taxes include taxes imposed on electronic commerce not generally imposed on transactions accomplished by other means. For example, a state could not impose a tax on access to an online newspaper if the sale of a newspaper from a street corner is tax-free. In addition, discriminatory taxes include taxes imposed at a different rate on electronic commerce than on the same transactions accomplished by other means. For example, a state could not impose a 7% sales tax on sales of flowers via the Internet if it imposes a 5% tax on sales from a local florist.
The ITFA was renewed in 2003, but is set to expire. That is why I, along with Judiciary Committee Chairman John Conyers (D-MI) introduced an extension of 4 more years. While I would prefer the tax moratorium to be permanent, the current majority will not go along. We still have hopes that it will be permanent and eventually, it will be. But I wanted to make sure the prohibition on taxes didn’t expire and the circling tax vultures did not get a chance to strike.
Related articles on Internet Tax Freedom:
- Press Release on Introduction of HR 3678: “While I would have preferred to make the internet tax moratorium permanent today, this extension is necessary to prevent the circling tax vultures from descending on American families. New taxes would stifle economic growth. Ronald Reagan said of government’s view of the economy, ‘If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.’ This legislation preempts that cycle before it starts.”
Cannon continued, “This legislation is a victory for consumers and American entrepreneurship. Tax cuts, innovation, and the free market are the surest formula for economic growth and prosperity. The surest way to stifle achievement, progress, and growth is to involve the government. Technology drives economic growth and the government needs to stay out of the way.”
- Infoworld Article: "...Wyden, Cox, and Representative Chris Cannon, a Utah Republican, pushed for the passage of the Internet Tax Non-Discrimination Act at the news conference. Cannon's House Judiciary Subcommittee on Commercial and Administrative Law will host a hearing on the bill Tuesday, and he said he expects the bill to pass out of the House Judiciary Committee quickly and then come before the full House for a vote. The tax moratorium, in effect since 1998, will expire Nov. 1."
- TechLawJournal Article: Rep. Chris Cannon (R-UT) advocated passage of the bill. He is the Chairman of the Subcommittee on Commercial and Administrative Law, which approved the bill on May 22, 2003. This Subcommittee held a hearing on the bill on April 1, 2003.
- DontTaxOurWeb Press Release: "First of all, I'd like to thank and commend Chairwoman Rep. Linda Sanchez (D-CA-39) and Ranking Member Rep. Chris Cannon (R-UT-3) for holding a hearing on a bill that has significant economic and social ramifications for American consumers everywhere. According to the Federal Communications Commission's (FCC), 59% of all new high speed lines in the first half of 2006 were wireless. This statistic suggests that wireless broadband is growing faster than cable and DSL combined and is now a critical part of our nation's strategy to close the digital divide.
- CNET News Article: "Keeping Internet commerce and access free from discriminatory taxes has been a success in the American economy," said Rep. Chris Cannon (R-Utah), the subcommittee's ranking member, adding that he hoped the panel will soon pass pending bills that would make the ban permanent.
