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Should The Internet Tax Freedom Act Be Made Permanent?

  • Apr 11, 2013 | Gail Cole

 Should the Internet be permanently tax-free?

The Permanent Internet Tax Freedom Act was introduced by Representative Steve Chabot (R-OH) in January of this year. H.R. 434 would amend the Internet Tax Freedom Act "to make permanent the ban on state and local taxation of Internet access and on multiple or discriminatory taxes on electronic commerce." It has been referred to the Subcommittee on Regulatory Reform, Commercial and Antitrust, where it presumably awaits discussion. A similar bill, S. 31, was introduced in the Senate by Senator Kelly Ayotte (R-NH) and Dean Heller (R-NV) .

This is not the first time lawmakers have considered making permanent the ban on Internet tax, which was "enacted in 1998 and renewed in 2001 and 2004." In 2007, President Bush signed the Internet Tax Freedom Act Amendments Act of 2007, which extended the moratorium until 2014.

Back in 2007, the Center on Budget and Policy Priorities argued against extending the moratorium, citing "adverse impacts on the ability of state and local governments to raise revenues needed to fund health care, education, public safety, and other critical services." It could "invalidate a wide array of state and local taxes currently paid by companies providing Internet access, such as sales taxes levied on their equipment purchases." In addition, the "extremely broad definition of Internet access'" in IFTA could prevent taxation of "virtually all goods and services delivered over the Internet."

On the flip side, Senators Ayotte and Heller note that "E-commerce is thriving largely because the Internet is free from burdensome tax restrictions." The proposed legislation will, they argue, "provide certainty to the marketplace, helping the Internet continue to be a driving force for jobs and growth."

The 2013 bid to make ITFA permanent has not received a lot of press, but it's still early. The current act is not set to expire until November 1, 2014.

Is your business prepared for ecommerce sales tax?

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.