State and Local Groups Send Letter to Congress on Internet Tax Freedom Act Compromise

The GFOA along with its other state and local partners sent a letter to both the House and the Senate supporting compromise Internet tax legislation. The legislation (S. 1453, H.R. 3678) protects essential state and local authority by extending the Internet Tax Freedom Act for another four years, rather than making the Act's moratorium on Internet taxes permanent. The current moratorium is set to expire on November 1, 2007.

The legislation would not only continue the temporary moratorium, but would modernize the definition of Internet access set forth in current law to make clear that just because a product or service is delivered using the Internet does not mean that it becomes tax free. This new definition should help to ensure that the tax base of state and local governments is not completely eroded as more services migrate to the Internet. In addition, the legislation preserves the grandfather clause in current law that protects state and local taxes imposed on Internet access prior to 1998. This provision is essential to protecting existing revenue streams for these states and local governments.

S. 1453 and H.R. 3678 were offered as alternatives to legislation introduced earlier this year, which would make permanent the current moratorium on Internet taxes.

In the letters sent to Congress, the GFOA and the other state and local government associations maintain that the legislation "addresses the principles we believe are necessary to a fair extension of the Internet tax moratorium in a manner that benefits consumers, is fair to industry, and preserves existing state and local authority."

The chairs of both the Senate Energy and Commerce Committee and the House Judiciary Committee have expressed their intention to try and consider and approve the proposed legislation in the coming weeks.