Bush Signs Extension To Net Tax Ban

by Mike Godfrey, Tax-News.com, Washington

07 December 2004

US President George W. Bush has signed into law a bill extending the moratorium on internet access taxes for an additional three years.

The new measure revives the federal ban on taxes levied on internet access at state and local level following the expiration of a previous ban in November of last year. It means that the moratorium will be in place until November 1 2007, and will also be retroactive to cover the past year.

Under the new bill, which applies to items not considered under the previous moratorium, broadband and wireless internet services will remain free from taxation. However, sales made over the internet do not fall within the bill’s remit.

The move has been welcomed by internet service providers such as America Online and Time Warner, as well as by representatives of the telecommunications industry.

“With forward-looking policies that encourage real competition, like the Internet tax moratorium, consumers and the nation’s economy will benefit from increased investment and innovation in the telecom sector,” enthused Walter B. McCormick, Jr., President and CEO of the United States Telecom Association, shortly after Mr Bush signed the bill.

However, not everyone is happy with the access tax ban on internet services, especially municipal and state governments which are particularly upset over the expanded provisions covering broadband services. They have claimed that they stand to lose $20 billion in tax revenues as a result of the new legislation.

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