New Bill Aims To Prevent Imposition Of 19th Century Tax On Internet Communications

by Mike Godfrey, Tax-News.com, Washington

13 April 2005

Republican Senator George Allen has unveiled a new bill which he hopes will prevent the Internal Revenue Service and Treasury Department from extending a century-old tax to cover electronic communications.

In a report published in January by the Congressional Joint Committee on Taxation entitled 'Options To Improve Tax Compliance And Reform Tax Expenditures', proposals were advanced which would extend the 3% excise tax on telephone calls (initially introduced in 1898 at a rate of 1 cent per call to fund the Spanish-American War) to "all data communications services to end users".

This would cover broadband and dialup services, cable modems, cellular services, Voice over Internet Protocol (VoIP) products, and DSL links.

Allen’s bill, known as the Federal Internet Tax Prohibition Act, would amend the Internal Revenue Code to state that any “internet access service” which allows users to "access content, information, electronic mail, or other services offered over the internet", would be immune from the 1898 tax.

According to a New York Times report, commenting on the new measure, Allen, a Virginian Republican, remarked that: "We didn't win the Spanish-American War to have our own government 'federales' burdening Americans with taxes on innovation over 100 years later."

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