Inclusion of Internet Tax Measure Adds Some Controversy to Customs Bill
The inclusion of an extension of Internet Tax Freedom Act within the conference version of customs reauthorization legislation adds some additional controversy to the long-debated bill. The National Retail Federation asked Congress to vote against the bill unless changes are made to the Internet provisions (see 1512110029) and others say the languages mark Congressional overreach. Seven states could lose several hundred million dollars of tax revenue annually if Congress extends ITFA, said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities, in a blog post (here). The House voted to adopt the customs bill on Dec. 11 and the Senate is expected to consider the bill soon.
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Passage of this bill would be an unprecedented move on Congress’ part -- telling states they can’t tax this one service -- Mazerov said in an interview. "This is just flat out Congress telling states, 'You can't tax X,'" he said. "I think there is a question as to whether there could be grounds for a Constitutional challenge to that." Mazerov said it also would put every state and thousands of local governments at risk of losing tax dollars because the grandfathering clause also preserves states’ pre-1998 taxes that could be considered indirect taxes on Internet access. Examples include state and local taxes that Internet access providers pay on the things they buy in order to provide Internet service, such as computer servers, fiber cable or even gasoline for their vehicles, he said.
Among supporters of a permanent ITFA were CenturyLink, the Information Technology Industry Council (ITI), the Latino Coalition (TLC) and TechNet. CenturyLink called the permanent moratorium on Internet access taxes “sound economic policy” that brings “certainty to the market” and encourages broadband adoption and network adoption. TLC, an organization for Latino-owned small businesses, agreed, saying a tax-free Internet is essential for “economic growth, development and innovation. “