The House has approved by voice vote legislation permanently banning states from taxing Internet access or imposing multiple or discriminatory taxes on e-commerce.

H.R. 3086, the Permanent Internet Tax Freedom Act, makes permanent earlier legislation banning Internet access taxes, the Internet Tax Freedom Act, which was first enacted in 1998 and extended three times with enormous bipartisan support. In the history of the bill’s extensions, only five “no” votes were ever cast in the House and Senate. The most recent extension of ITFA expires on Nov. 1, 2014. By striking the 2014 expiration date, PITFA makes the ban on Internet access taxes permanent instead of requiring reauthorization every few years.

House Judiciary Committee chairman Bob Goodlatte, R-Va., Rep. Anna Eshoo, D-Calif., Subcommittee on Regulatory Reform, Commercial and Antitrust Law chairman Spencer Bachus, R-Ala., Rep. Steve Chabot, R-Ohio, and Rep. Steve Cohen, D-Tenn., praised the House passage of PITFA in a joint statement:

“We applaud the passage of the Permanent Internet Tax Freedom Act today in the House,” they said. “PITFA is a necessary measure to keep Internet access free of taxation. This permanent ban is crucial for protecting access and opportunity for Americans in our growing digital economy. We hope that the Senate promptly acts on this vital legislation before the November 1st deadline.”

Goodlatte had argued in a speech Tuesday on the floor of the House for passage of the bill, which he had introduced and shepherded through his committee last month (see House Committee Passes Bill Permanently Banning State Taxes on Internet Access). “If the moratorium is not renewed, the potential tax burden on consumers will be substantial,” he said.  “The average tax rate on communications services in 2007 was 13.5%, more than twice the average rate on all other goods and services.  To make matters worse, this tax is regressive:  low income households pay ten times as much in communications taxes as high income households, as a share of income.”

Senate Finance Committee chairman Ron Wyden, D-Ore., pledged to work on passing legislation permanently banning Internet access taxes before the current deadline expires on November 1. He also expressed his opposition to the Marketplace Fairness Act, which passed the Senate last year and would establish uniform federal rules for taxing Internet sales.

“The Internet Tax Freedom Act enabled the growth of a flourishing digital economy and hundreds of thousands of new, good-paying jobs,” Wyden said in a statement. “In my view, when you have something that works, that has stood the test of time, you ought to make it permanent. The principle that no one can discriminate against businesses just because they’re on the Internet is one that benefits consumers, employers and start-ups and should be enshrined in our tax code. That is why it is so important to reject approaches like the Marketplace Fairness Act that passed the Senate last year, which would fundamentally discriminate against states that do not levy a sales tax and against U.S. companies versus their foreign competitors. It would amount to a body blow to online retailers and services across the country.”

In the early days of the Internet, he noted, state and local jurisdictions sought to impose multiple and discriminatory taxes on the new medium. This practice threatened to stifle innovation and economic growth of this economic platform. The legislation would make ITFA’s protections permanent, giving online innovators and entrepreneurs the stability they need to grow their businesses.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access