Internet Access Taxes Go into Effect in Three Weeks if Congress Doesn’t Act Now

After a brief extension courtesy of the latest Continuing Resolution, the ban on Internet access taxes is set to expire on December 11, 2014. With Congress only in session November 20, and December 1-4, 9-12, they have seven days to act to make sure that people don’t get saddled with additional taxes on their Internet use before the year is out.

Preventing new fees requires passage of the Permanent Internet Tax Freedom Act, which passed the U.S. House and was received by the U.S. Senate on July 16, 2014.  Now, it’s possible that the U.S. Senate will attempt to combine the Internet Tax Freedom Act with the more controversial Marketplace and Internet Tax Fairness Act, legislation that allows state and local governments to collect sales tax on items purchased through online retailers in a particular state, even if the retailer doesn’t have a physical presence in the state of purchase. But the jury is still out on what Senator Harry Reid and his peers will attempt to accomplish during this lame duck session.  Sources close to the issue say a combined MITFA/ITFA bill is dead in the water, as House leadership has already stated unequivocally that they will not pass any bills that increase sales taxes on Internet retailers.  Most people agree that Internet access should remain free of taxation, however, debate is open as to whether state and local governments should be able to levy taxes against online retailers for goods purchased in their state (the key point of contention in the MITFA battle).

The greatest chance that the Internet Tax Fairness Act has of passing during this session of Congress would be for the Senate to pass the PITFA in the final days of the lame duck session.

Should the current moratorium on Internet access taxes expire, we can expect to see an uptick in our monthly Internet service bills commensurate to the way other communications services like wireless phones and cable services are taxed at present.  According to MyWireless.org, a non-profit nonpartisan project of CTIA-The Wireless Association, on average, telephone and voice services are taxed in excess of 17% across the nation, while cable and video taxes average 12% of consumers’ monthly bill.

By the Federal Communications Commission’s own admission, cost is a primary factory contributing to the non-adoption of broadband technologies. Particularly for people of color and low-income folks who rely on wireless devices and services to access the Internet, an additional surcharge on Internet access would be a penalty against use that could slow down broadband adoption and reduce incentives for its use.

As the time comes closer to running out on the IFTA reauthorization, organizations ranging from the U.S. Black Chambers, Inc. to the National Taxpayer Union and the Information Technology and Innovation Foundation are urging Congress to ban forever Internet access taxes by passing the Permanent Internet Tax Freedom Act.