MTC Warns Over Potential Cost Of Net Tax Moratorium

by Glen Shapiro, LawAndTax-News.com, New York

26 September 2003

The US Multistate Tax Commission (MTC) has warned that recently passed legislation which permanently extends the moratorium on taxing internet access could mean that telecommunications firms are exempted from all taxes.

Suggesting that the language employed in HR 49, which exempts all types of internet access, is too broad, the MTC predicted that if telecommunications companies begin to use the internet (or related technology) to deliver all of their services, states stand to lose between $4 billion and $9 billion a year by 2006.

"In contrast, if the language of HR 49 were amended to conform to Congress's intent of preempting only sales taxes on solely internet access to customers, including broadband, and extending the preemption to 'grandfathered' sales taxes of certain states, the cost to state and local governments would be limited to approximately $500 million in 2006."

Washington state House Finance Committee chairman, Jim McIntire confirmed this, explaining that:

"We've addressed this legislative question already in Washington state, so I know that the 'fix' that is needed to HR 49 is a simple matter." He continued:

"I see this as a basic question of business fairness. It is inconceivable to me that we would grant a church-like status to the telecommunications industry while insisting that other industries pay their fair share. Internet access is one thing - but stretching a $500 million tax relief measure into a gaping $9 billion hole at a time when cities, counties and states are already struggling is unconscionable."

Recommended