The Internet Tax Moratorium (ITM) is due to expire November 1. PC World - Bush Signs Internet Tax Moratorium

When it expires it would then allow state and local taxing authorities to place new taxes and fees on people's access to the Internet and Internet-based services, like e-mail, instant massaging, video downloads, VoIP calls.


Larry Irving ;former Clinton era Assistant Secretary of Commerce for Communications and Information makes a compelling case for the moratorium

Internet Innovation Alliance Blog - The Broadband Hub

This Google blog gives a good summary of what the moratorium does

Google Public Policy Blog: Continuing the Internet tax moratorium

Senators John McCain ,Trent Lott and John Sununu both support the idea of making the moratorium permanent and held a news conference to explain why .

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The current Internet tax moratorium, which Congress has extended twice since 1998, bans taxes on Internet access, as well as other taxes unique to the Internet. It's important for Congress to pass a permanent ban soon before state and local governments begin to tax Internet access, said Senator John McCain, an Arizona Republican.

Those who wonder what impact Internet taxes could have should look to U.S. telephone and mobile phone bills, where taxes are up to 20 percent of the cost, McCain said. "We cannot allow that to happen to the Internet -- likely the most popular invention since the light bulb," McCain said at a press conference.

Several senators, many of them former state governors, have opposed a permanent extension of the tax ban. Earlier this year, Senators Lamar Alexander, a Tennessee Republican, and Tom Carper, a Delaware Democrat, introduced a bill that would narrow the moratorium's definition of Internet access and extend the ban for four years. That bill would close what supporters have called a loophole allowing telecom providers to argue that voice and other services bundled with Internet service shouldn't be taxed.

In addition, nine states that were allowed to maintain their Internet taxes would lose a total of up to $120 million a year under a House of Representatives version of the moratorium extension, The National Governors Association has argued. The House version of the moratorium bill strips these states' exemptions.

If Congress makes the ban permanent, nothing would stop Internet providers from trying to expand the number of untaxed services, David Quam, director of federal relations for The National Governors Association, said in June. "The temporary provision keeps everyone honest," Quam said then.

But Senator John Sununu, a New Hampshire Republican, argued Thursday that a permanent ban is needed. If there's a problem with bundled services, that can be worked out in the bill, he said.

The Internet is "critically important to interstate and global commerce," Sununu said. "It makes no sense to have a national and global communications and business network to be subject to taxes by every state, city, and county in the country."

The news conference came a day after the American Homeowners Grassroots Alliance, an advocacy group, sent letters to Congress calling on lawmakers to extend the tax ban. New Internet taxes would hurt telecommuters and home-based businesses, the group said.

Supporters of a permanent ban say it will help more U.S. residents connect to the Internet, a policy goal of many lawmakers. Asked if they would support another temporary tax ban, the three Republicans rejected that option.

"If it's the right thing to do, we ought to make it permanent," said Senator Trent Lott, a Mississippi Republican.

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The bill right now is stalled as Harry Reid seems to be conflicted between those who want the ban permanent ,and those who see the internet as a future source of tax revenue. Also although Rep. John Conyers has supported a moratorium in the past ,no one is sure where he stands on a permanent ban. Any bill would need to go through his Judiciary Committee to make it to the House floor.

Without permanence, state and local governments could soon view Internet access as an easy target for additional tax revenues to fund ever-expanding state and local spending for their ever expanding and bloated governments . The expansion of the internet and wireless industry has been a tremendous boom for our economy and has increased the citizenry access to information... All good things for the country . We the people should make it clear to our policy makers that we support economic growth and innovation and unfettered access to information. Congress should act to make the moratorium on taxing the internet permanent .

Yes, there are more customers' purchasing goods from out of state over the Internet that States are at risk of losing their existing tax base.
Businesses can locate themselves in states where there is no sales tax for electronic purchase, making the loss of tax revenues a bigger problem.
Also, people can buy an electiric book that is downloaded directly online or muisc online while taxing the hardcopy of the same book and the CDs, DVDs, that's unfair.

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consumers are technically responsible for remitting any unpaid taxes

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That's true. Unfortunately,Many people are not clear about that...
There will be problem like the complexity of description of jurisdictions and the overhead for business of identifying where each consumer lives for sales tax purposes. The complexity of taxing internet makes it open to mistakes and abuse like that.

Maybe the internet is now robust enough to survive state taxes. Think of the emails any representative will get if he introduces a bill to tax it. Or perhaps we should dump all the complicated excise taxes on everything else.

Nicespringgirl
On many levels it would be a nightmare. Excon is fond of bringing up the internet gambling issue and he has a valid point ;as well as you ,when you correctly pointed out that business will migrate to where they can get the best deal. In the case of internet gambling they have moved off shore. That means all the revenue from the gaming industry is leaving the country .

But I have a feeling the biggest rub and pressure is coming from industries like telecommunications .Telecommunications services have been subject to taxes while e-mail and even chat formats like this are tax free. The phone companies would tell you that they have a competitive disadvantage due to this . As you know when you get a phone bill ,every grubbing gvt. Grabs a slice of the pie . Many have found a loop hole and bundle their phone services with internet access.

This could turn into an interesting debate once the issues emerge. The principles of federalism will be tested. Congress has steered away from interfering with the ability of states and localities to tax their constituents and it appears the moratorium is a rare exception. If one were to ask the National Governors Association or the U.S. Conference of Mayors I'm sure they have some things to say on the issue.

I love how the National Association of Governors and some Democrat Senators and Congressmen believe that we should tax the internet simply because it is one of the few services not currently taxed. No other reason. It isn't taxed, it CAN be taxed, therefore we should tax it. There's no reasonable ECONOMIC reason to tax it. There's no SOCIAL reason to tax it. There's no POLITICAL reason to tax it. It is simply the fact that it can be taxed but isn't currently being taxed that is the basis for taxing the internet.

Is anyone else as amused by that concept as I am? Or as fed up with Government taxing stuff for no good reason other than the fact that they can? I know you guys are. Or at least most of you are.

So what do we do about it?