Washington (Sept. 25, 2003) -- The Internet tax moratorium passed last week by the House would reduce state and local revenue collections by at least $4 billion and as much as $8.75 billion annually by 2006, rather than the earlier estimation of $500 million according to a study by the Multistate Tax Commission.

The MTC said the prospect of unintended billions in potential losses for local and state governments would result from language in the bill that courts could interpret as providing a blanket exemption from non-federal taxes for the telecommunications industry.

“This bill provides a roadmap for the telecommunications industry to sidestep as much as $9 billion annually by 2006 in taxes and succeed in doing what no other industry has done:  Get Congress to relieve it of potentially all local and state taxes,” said Tennessee Revenue Commissioner Loren Chumley.

However, the MTC concluded if the language of the bill were amended to conform to Congress’ intent of preempting just sales taxes on solely Internet access to customers — including broadband — and extending the preemption to ‘grandfathered’ sales taxes of certain states, the cost to state and local governments would be curtailed to roughly $500 million in 2006.

-- WebCPA staff

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