Moratorium on Internet Access Taxation Set to Expire

Binary Code Waves
Binary Code Waves

The Internet Tax Freedom Act (ITFA) is set to expire on October 1, and NLC is fighting to ensure that any further preemption of taxation of Internet access remains temporary. ITFA is a moratorium that prohibits state and local governments from taxing access to the Internet (ie Internet subscriptions). When ITFA first became law in 1998, the Internet was very new and to encourage its widespread use, Congress opted to preempt state and local governments from assessing a tax on the access component of the service. At the time, 10 states already had an Internet access tax in place so were grandfathered in and allowed to maintain them. Since then, the ITFA moratorium has been extended 4 times, the most recent being last December when Congress extended it to October 1, 2015.

Earlier this year, both the House and the Senate introduced versions of ITFA, the Permanent Internet Tax Freedom Act, PITFA (H.R. 235/S. 431) that would permanently extend the tax moratorium, as well as repeal the grandfather clause. The termination of the grandfather clause would result in a loss of almost $500 million in the seven states that still tax Internet access (since 1998, 3 states have repealed their Internet access tax.)

Despite opposition from NLC, on June 9, the full House passed H.R. 235, setting a process in motion that would permanently block state and local governments from collecting hundreds of millions of dollars in potential revenue. The legislation now awaits action in the Senate. NLC continues to lobby against a permanent moratorium.


Related Topics