Originally published February 23 2006
Some aspects of internet use may be taxed under law, study finds
by Mike Adams, the Health Ranger, NaturalNews Editor
According to a study by the Government Accountability Office, the Internet Tax Freedom Act -- a law designed to prevent governments from being able to tax "a service that enables users to access content, information, electronic mail or other services offered over the Internet" -- may not apply to equipment like wires, cables, fibers and other hardware used by internet service providers in order to offer those services, but the study has drawn criticism from some of those who helped draft the law and had intended it to offer broader protection.
The comments came in a new Government Accountability Office study (click here for PDF) commissioned by Congress to examine a law known as the Internet Tax Freedom Act.
First passed in 1998 and renewed after some debate in 2004, the law prevents state and local governments from taxing "a service that enables users to access content, information, electronic mail or other services offered over the Internet."
Services like voice over Internet Protocol (VoIP), traditional telephone service and video offerings by Internet service providers remain fair game for taxation under the law, the GAO said.
At issue is the auditors' finding that the tax ban doesn't apply to "acquired services"--in short, the actual wires, cables, fibers and other hardware used to carry Internet traffic to customers.
That means an Internet service provider that leases fiber from a telecommunications company for its network could theoretically be subject to taxes during that "wholesale" transaction.
"We acknowledge that others have different views about the scope of the moratorium," the report said.
"Congress could, of course, deal with this issue by amending the statute to explicitly address the tax status of acquired services."
"The plain language of the statute, as well as the relevant legislative history, reflect a clear legislative intent to ban Internet access taxes at both the retail and wholesale level," said Allen, who, along with Wyden and seven others, has proposed a bill that would make the Internet access tax moratorium permanent.
For now, it is set to expire on Nov. 1, 2007.
They said they worried that allowing such a practice could promote discriminatory practices among those in the business of providing the infrastructure for Net access.
Of the eight states surveyed for the report, California, North Dakota, Texas and Virginia said they aren't currently collecting taxes on "acquired services" anyway, and Kansas, Mississippi, Ohio and Rhode Island stopped collecting such taxes as of Nov. 1, 2005.
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