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Internet Tax Freedom Act Extended Again

  • Oct 1, 2015 | Gail Cole

 Internet Tax Freedom Act lives another day.

Update 2.26.2016: ITFA has been made permanent with the enactment of H.R. 644. States that currently tax Internet access have until June 30, 2020 to phase out these taxes.

It was extended for a month in September 2014. Then it was extended through September 30, 2015. And yesterday, the Internet Tax Freedom Act was extended again, this time through December 11, 2015. For the time being, at least, the moratorium on taxing internet access that was initially implemented in 1998 continues.

The extension of the Internet Tax Freedom Act (ITFA) comes with the passage of H.R. 719 on September 30, which narrowly averted a government shutdown. According to a White House statement, President Obama will sign the measure once he receives it. “But the American people deserve far better than last-minute, short-term legislating.”

States prepare

With the uncertain fate of ITFA, some state tax authorities provide “what if” information to taxpayers. For example, a Massachusetts Department of Revenue Technical Information Release dated September 8, 2105, references the looming expiration and advises “vendors of Internet access to customers in Massachusetts" to tax as usual "until further notice from DOR.” The North Carolina Department of Revenue took similar measures in 2014, as did the Georgia Department of Revenue. Nebraska has referenced the possible expiration of ITFA in general interest letters to taxpayers.

Attempts to make the ITFA permanent have thus far failed.

Internet tax freedom and Internet sales tax

Internet tax freedom and Internet sales tax are not one and the same. However,  ITFA is often linked with Internet sales tax (attempts to combine the two issues into one bill have as yet gone nowhere).

The City of Louisville, Colorado, explains the issue as follows:

“There are many misunderstandings about internet sales and purchases and a misconception that these transactions are not taxable due to the Internet Tax Freedom Act.  This act exempts the internet access service fees only and not the sales of goods and services.”

It will be interesting to see if ITFA and remote sales tax legislation such as the Marketplace Fairness Act or the newer Remote Transactions Parity Act are brought up together in the coming month. There is speculation that House Speaker John Boehner (R) may address these issues before stepping down the end of October — he has said he doesn’t want to leave his successor a dirty barn.

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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.