House Passes Permanent Ban On Tax For Internet Service

In 1998, Congress passed a temporary moratorium on state taxes collected for Internet access (though a number of states were still allowed to collect them). The ban has been extended numerous times in the 17 years since, but is set to expire again this fall. Rather than merely kick the can down the road with another extension, the House of Representatives has voted (again) to make the moratorium permanent.

The Permanent Internet Tax Freedom Act would simply remove the current end date of Oct. 1, 2015 from the Internet Tax Freedom Act.

Supporters of the bill say that if the moratorium were allowed to expire, American consumers would be hit with a “substantial” potential tax burden from states that choose to start taxing your broadband access.

Where things get complicated is for the handful of states that had been collecting taxes before the 1998 Act and were grandfathered in. The permanent ban would allow those exceptions to expire, meaning those states would be out hundreds of millions of dollars in tax revenue.

The permanent ban does nothing to limit states from collecting sales tax on e-commerce. While many states now collect taxes on purchases from Amazon and other e-tailers, there is still no single federal regulation that clarifies the issue.

This isn’t the first time the House has passed a permanent ban on Internet access taxes. In 2014, a similar piece of legislation was approved by Congress but failed to make it through the Senate. It remains to be seen if the same fate awaits the 2015 version of the legislation.

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