New House Bill Would Extend Internet Access Tax Moratorium

Published September 13, 2013

Congress is considering two bills that would make the Internet Tax Freedom Act permanent.

Since 1998, The Internet Tax Freedom Act has placed a moratorium on state and local taxation of Internet access and discriminatory taxes on emails and other data. Cheap and reliable access to the Internet, allowed in part by the moratorium, was a key force behind the quick growth of the Internet and the online economy. The moratorium is set to expire in 2014.

The Permanent Internet Tax Freedom Act (H.R.3086) was introduced September 12 as the House counterpart to S. 1431. Co-sponsored by Representatives Anna Eshoo (D-CA), Bob Goodlatte (R-VA), Spencer Bachus (R-AL), Steve Chabot (R-OH), and Steve Cohen (D-TN), H.R.3086 also permanently extends the Internet Tax Freedom Act.

In August the Internet Tax Freedom Forever Act (S. 1431) was introduced in the Senate by Senators Ron Wyden (D-OR) and John Thune (R-SD). The Internet Tax Freedom Forever Act is designed to ensure access to broadband is protected from onerous local taxes and fees by permanently extending the ITFA’s ban on state and local taxation of Internet access service.

Worries Prompted by Wireless Taxes

Supporters of the moratorium have argued that restricting federal, state and local governments from adding new taxes and fees to internet access is important because it prevents Internet service provider bills from resembling phone bills and becoming another cash cow fueling government spending. Wireless phone bills have become a frequent target for new fees and taxes, funding any number of new programs. The national average tax on wireless service currently tops 17 percent, more than double the 7.3 percent average tax on other goods and services. In some states, wireless service taxes top 20 percent.

The initial reaction to the new House bill was positive from several groups. The Internet Tax Freedom Act Coalition, a partnership of businesses, associations and consumers dedicated to the growth of the Internet economy commended the bill’s cosponsors. “We commend Chairman Goodlatte and Representative Eshoo for their leadership on this important piece of legislation” said Annabelle Canning, executive director of the ITFA Coalition in a statement. “A permanent extension of ITFA will encourage continued adoption of broadband and protect consumers from having multiple and discriminatory taxes imposed on their online purchases.”

Vital to Consumers, Businesses

CTIA President and CEO Steve Largent argued in a statement that the moratorium is a necessary step towards ensuring technological development.

“The Permanent Internet Freedom Act permanently extends the moratorium on Internet access taxes and fees and provides a tax certainty that will continue to foster American technological innovation, growth and leadership in electronic commerce,” said Largent. “Affordable wireless broadband is no longer just a modern convenience, but a vital component in the lives of American consumers and businesses. From education to healthcare to commerce, a reasonable and permanent tax structure that guarantees affordable access to the Internet and the incredible services it provides is vital for consumers and continued innovation.”