Pros And Cons Of Internet Taxation

Internet Taxation – A Dual Issue For Both Sides

Internet Taxation is a hot button issue that has hit all sides of the spectrum in heated debates since the late nineteen nineties. This is an issue that covers many grounds. The common misconception is that Internet taxation is simply the taxing of purchases bought on the Internet either through consumer-to-consumer e-commerce or business-to-consumer e-commerce. But, while this does remain one of the issues, the most worrisome to those behind the scenes is the second half of this complex issue - the use of the Internet in lieu of a telephone line. Both of these issues could affect consumers & businesses alike, but in different ways. Some of these ways can be temporarily damaging to local

Since this is still a new & upcoming technology little is known about its power, but it yields a lot of it. This was addressed last year in HR Bill 49’s counterpart S Bill 150. This was a bill that held up largely by state concerns over revenues, particularly as Internet telephony (referred to as voice over Internet protocol, or VOIP) begins to replace traditional - and heavily taxed - telephone service (Atkinson 1). There is much controversy, as one can imagine, over what this new technology would mean to the telephone industry and all that is tied to. Many fear the loss of revenue would be detrimental to local & state economies as well as cause the loss of jobs. This loss of revenue is also feared to cause a cut in services, such as emergency or police response, which are funded by such taxes. To address this issue further the Multi-State Tax Commission issued a report claiming that H.R. 49 will reduce state and local taxes by up to $22 billion annually. This result is based on the erroneous assumption that the law changes will exempt all telecommunications services from all state and local taxes. The actual impact comes from two separate pieces. The first impact comes from the elimination of the grandfather clause in ITFA that currently allows up to 10 states to continue to impose state and local taxes on Internet access. The Congressional Budget Office has estimated this cost to range from

19 June 2000. The Illinois Tax Foundation. 17 July 2004 http://www.taxpayfedil.org/aview.htm

Atkinson, Robert “To Tax Or Not To Tax? That Is The Question” 4 February 2004. The Consumer Internet Access Coalition 17 July 2004 http://www.noemailtax.com/news/thequestion.html

Cline, Robert; Ernst & Young. “Critique Of Multistate Tax Commission’s State & Local Revenue Impact Estimates Of H.R. 49.” 1 October 2003 The Consumer Internet Access Coalition. 17 July 2004 http://www.noemailtax.com/about_s150/mtc_rebuttal.html

“Internet Taxation.” Citizens Against Government Waste. Posting Date Not Available. Council For Citizens Against Government Waste. 17 July 2004