Week Ending April 30

TheWeekInCongress.com

Week Ending April 30, 2004

S 150 Internet Tax Non-discrimination Act.

BRIEF

The bill extends a 1998 moratorium on State and local taxes on Internet Access. States and municipalities that began taxing Internet access prior to 1998 may continue to do so until October 2007.

Vote: Passed Senate 93 to 3 with 4 not voting.

Cost to the Taxpayer: The Congressional Budget Office sees no loss of revenue to the federal government but Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington, Wisconsin and some local jurisdictions in Colorado, Ohio, South Dakota, Texas, Washington, and Wisconsin who have been taxing Internet access since before October 1998 and are therefore ‘grandfathered’ in, will lose $80 to $120 million in revenue, annually, in 2007 if their grandfather status is allowed to expire. All Rights Reserved. No reproduction in any form without written permission from TheWeekInCongress.com

MORE INFORMATION.

Senator John McCain (R-AZ) introduced a substitute bill (the one that was ultimately passed with some amendments) that defined Internet access in a way that some Senators believed allowed for taxes to be waived on the entire Internet backbone and beyond. Senator Dianne Feinstein (D-CA) commented on the Senate floor, “Simply put, the definition included in the bill before us is far too broad. The bill says that telecommunications are taxable, and then it adds this: ‘..... except to the extent such services are used to provide Internet access.’ But what does the phrase ``to provide Internet access'' actually mean? Cities, counties, and States believe it means they won't be able to tax telecommunications services, which they currently can, to the tune of $2 to $9 billion annually all across the United States.”

The passed bill explained, “The term `tax on Internet access' means a tax on Internet access, regardless of whether such tax is imposed on a provider of Internet access or a buyer of Internet access and regardless of the terminology used to describe the tax.”

Congress clarified that telecom services are not exempt from taxation “except to the extent such services are purchased, used, or sold by a provider of Internet access to provide Internet access.”

Taxes are allowed on voice or similar services using Internet Protocol or any successor protocol. That section does not apply to any services that are incidental to Internet access, such as voice-capable e-mail or instant messaging.

The strongest opposition to the bill definitions came from municipalities and states. (Some 400 cities in California protested the impact on their revenues.)

The bill also directs the U.S. Comptroller General Office to conduct a study of the impact of the Internet tax moratorium. The study would determine S 150’s effects on the revenues of State and local governments and on the deployment and adoption of broadband technologies for Internet access throughout the United States and in rural areas of the country in particular. The study is to compare deployment and adoption rates in States that tax broadband Internet access service with States that do not tax such service, and take into account other factors to determine whether the Internet Tax Freedom Act has had an impact on the deployment or adoption of broadband Internet access services.

As has been common elements of the stalled energy bill were attempted to be passed in this and other bills. An amendment by Minority Leader Tom Daschle (D-SD) to to eliminate methyl tertiary butyl ether from the United States fuel supply, to increase production and use of renewable fuel, and to increase the Nation's energy independence failed on a vote to invoke cloture and bring the amendment forward (RV 73)