Bush Bans Internet Access Fees
WASHINGTON 12/3/04-President George W. Bush signed a bill Friday banning taxes on Internet access fees, but a grandfather clause in the bill allows New Hampshire to continue for two years to tax access fees on high-speed DSL lines.
The clause allows states that taxed Internet access fees, including high-speed Internet access fees, prior to an Internet access fee tax ban enacted in 1998 and renewed in October 2001 to continue doing so.
New Hampshire taxes DSL, or high speed Internet, at a rate of 7 percent under the Communications Services Tax, which dubs DSL a two-way communication service provider. DSL lines are digital internet connections provided by telephone companies to their local subscribers that carry information at high-speeds. The new bill, sponsored by Sen. Ron Wyden (D-Ore.) and Sen. George Allen (R-Va.), bans taxation on all access fees for three years and clarifies the definition of Internet access to include DSL, dial-up, cable modem and wireless service. According to a Wyden press release, it also bans double taxation, by two or more states, of a product or service bought over the Internet and discriminatory taxes that treat Internet purchases differently from other purchases, for another three years.
The legislation does not ban taxes on voice over Internet protocol, since the Federal Communications Commission recently ruled that it is an Internet service that is not subject to state public utility regulation.
Voice over Internet protocol is using a computer network to make a telephone call.
Sen. John Sununu (R-N.H.), who helped draft the bill, said the ban provides small businesses around the country the certainty they need to expand their information networks.
“The Internet provides great leverage for small firms. It enables small firms or entrepreneurs to access the national market and the international market,” Sununu said.
He also said it would spur the development of new products and services that can be purchased through the Internet.
Sununu said in a press release that he supports a permanent ban on taxation of Internet access fees and that the Internet should not be a source of revenue for states.
It is uncertain how many states currently tax Internet access fees. But according to Michael Mazerov of the Center on Budget and Policy Priorities, a Washington, D.C.-based think tank, Hawaii, New Hampshire, New Mexico, North Dakota, South Dakota, Ohio, Texas, Washington and Wisconsin tax Internet access fees in some way. Mazerov cited an Oct. 30, 2003 letter from the Congressional Budget Office as the source of this information.
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