Interesting Twist in the Internet Tax Moratorium

By October 25, 2007Communications, Taxation

The House last week passed a four-year extension of the federal Internet tax moratorium, H.R. 3678, by a vote of 405-2. The current moratorium on taxing Internet access expires November 1. A permanent moratorium makes more policy sense in that creates a permanent, predictable environment for investment and encourages expansion of high-speed communications networks. But better an extension than an expiration.

Now Representative Anna Eshoo (D-CA) — a strong proponent of a permanent ban on Internet access taxes — is citing a Congressional Research Service memo to say the temporary extension is intrinsically flawed. From Eshoo’s news release:

“The memo indicates that by limiting the Internet tax moratorium to “a service that enables users to connect to the Internet,” services that connect users to the Internet could not be taxed; however services accessed once connected to the Internet could be.

As the memo explains “if an Internet user utilized one provider to connect to the Internet and another paid provider of, for instance, email services, the connection provider would be covered by the moratorium but not the paid email provider. Under the current moratorium, each would be covered.”

Oh, no! Now we have to suffer from another batch of those conspiracy messages about Bill 602P and a nickel per e-mail tax.

More seriously, with November 1 fast approaching, the Senate has yet to act on the Internet tax moratorium. The latest CRS analysis provides a good reason for Senators not to default to the “easy out” temporary extension and instead pass a permanent ban, giving the House another shot at the legislation.

Eshoo, by the way, will be on “America’s Business with Mike Hambrick” — radio program and vodcast — talking about her support for a permanent ban. You can get to the programs from here at on Friday.

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