State Governors Oppose Current Internet Tax Ban Proposals

by Mike Godfrey, Tax-News.com, Washington

27 October 2003

Concerned at the expansion of legislation relating to the banning of taxes on internet access, the National Governors Association is calling for a further temporary moratorium to allow time for certain ambiguities to be ironed out.

Whilst the NGA has expressed support for the notion of a permanent ban on internet access taxes, the association is worried that language in the legislation will exempt certain telecommunications services that are taxed at present. “Not only would the new language exempt certain telecommunications services but it also would expand the preemption beyond sales taxes to include some income, property and other business taxes on this industry,” it observed in a statement released last week.

Naturally, the NGA is also concerned about the potential loss of revenue this will bring, and cites a study by the Multistate Tax Commission released last month which calculated that state authorities could stand to lose up to $9 billion in tax revenues by 2006 as a result of the measure.

In a bid to urge Senators to recognize their concerns, several Governors from the NGA have written to the Senate leadership, including Oklahoma Gov. Brad Henry and South Dakota Gov. Mike Rounds, chair and vice chair of NGA's economic development and commerce committee. They argued that: "With little time to negotiate an appropriate definition of Internet access, we encourage you to support a simple, temporary extension of current law to allow Congress, industry, and state and local governments time to fashion a permanent moratorium that is thoughtful and fair."

In addition, state and local government organizations have also thrown their support behind the NGA’s campaign.

"Unfortunately, the new language is overly broad and may be interpreted to include traditionally taxable telecommunications,” they said in a letter to Senate leaders. "This ambiguity will only add to uncertainty for industry and consumers, encourage litigation, and unnecessarily expose state and local governments to unanticipated revenue losses they cannot afford."

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