Recently in Internet Taxes Category
President Bush has signed into law HR 3678, the "Internet Tax Freedom Act Amendments Act of 2007," which extends the moratorium on State and local government Internet access taxes and multiple and discriminatory taxes on electronic commerce for seven years, through November 1, 2014.
Both sides are claiming victory - local tax authorities for fending off a permanent ban on the taxes, Internet companies for winning a major extension of seven years. In reality, both sides have lost since we will once again have to spend millions of dollars seven years from now to battle this all over again.
On the surface, this should be an easy call. After all, multiple and discriminatory taxes on the same service should not be allowed. And we shouldn't put a tax on Internet access while at the same time claiming we want to make Internet use more affordable for working families. To top it all off, the Internet is clearly a global medium that local governments have no right to regulate or tax under the Commerce Clause of the US Constitution.
Local governments and their allies in Congress don't see it that way. They believe that they are entitled to take revenue from where ever they may find it, and that the federal government shouldn't have the right to interfere. For them, Internet service is no different from telephone service in the last century, which they taxed at rates of up to 30 percent or more.
I tend to side with the Constitutionalists - not only because the Constitution is brutally clear on this point and shouldn't be meddled with, but because of the inherent purpose of taxes. In the notes of the Supreme Court judges who decided this question in 1992 for mail-order businesses (Quill vs. North Dakota), one of the judges stated with much clarity that taxes are not just tribute that governments may demand at their whimsy. Taxes are a payment for services rendered. For businesses and individuals within a given locale, the government provides services such as police and fire protection, zoning and other laws. Taxes pay for that.
But I am hard pressed to see what service the state provides when individuals receive signals by wireless or satellite. Or when they receive Internet connectivity over wires on which taxes and fees are already paid for other services, such as telephony or cable tv. No service, no taxes. Ought to be that simple.
