A Permanent Ban on Internet Access Taxation Risks Serious Erosion of State and Local Telephone Tax Revenue as Phone Calls Migrate to the Internet

Publication Date: February 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Michael Mazerov

Research Area: Media, telecommunications, and information

Keywords: State budgets; City budgets; Information technology; Economic projections

Type: Report


The “Internet Tax Nondiscrimination Act of 2003,” S. 150, could be brought to the Senate floor for a vote at any time. If enacted into law, this bill would reinstate, broaden, and make permanent a federally-imposed “moratorium” on state and local taxation of “Internet access” services. State and local governments would be permanently barred from charging sales taxes on the $10-$50 monthly charge that households and businesses pay to an Internet service provider like America Online, or to the local phone or cable TV company, to be able to access the World Wide Web and send and receive e-mail. The original moratorium had been established by the “Internet Tax Freedom Act” (ITFA) enacted in 1998 and later renewed through November 1, 2003. The House has already approved its version of a permanent ban on Internet access taxation, H.R. 49.