Americans from all sectors of society use the Internet for social and economic reasons. Many use it as a means of climbing the economic ladder. That’s why every American has a vested interest in the debate in Washington over the Internet Tax Freedom Act (ITFA) and the Internet sales tax (IST).
ITFA, a moratorium on discriminatory state and local taxes on the Internet (i.e. “email taxes”), is something Americans on both sides of the aisle and opposite ends of the political spectrum support.
Some lawmakers are trying to hold the moratorium hostage until they can attach to it a very unpopular tax on Internet sales, the so-called Marketplace Fairness Act (MFA). The MFA would allow states to require out-of-state retailers to collect and remit their sales taxes, regardless of whether they have a physical presence in the state.
Before ITFA’s passage in 1998, 10 states had imposed taxes on Internet usage. Over the past 16 years, Congress has renewed the moratorium four times, most recently in 2007, which means the moratorium is constantly under threat of not being continued should revenue-hungry lawmakers get their way. This year, the House passed a bill by unanimous voice vote extending the moratorium indefinitely, but the Senate failed to do the same, instead extending ITFA only until Dec. 11, 2014.
When the House passed the Permanent Internet Tax Freedom Act (H.R. 3086) earlier this week by voice vote, there was reason to hope (yes, hope!) that the Senate would do the same. Nothing is ever easy in Harry Reid’s Senate, though. CQ (sub. req’d) is reporting Reid is unlikely to take up the uncontroversial House-passed measure:
Senate Majority Leader Harry Reid of Nevada is supporting plans in a new bipartisan proposal that would package authorization for states to enforce online sales taxes together with another proposal to provide a 10-year extension of the ban on Internet access taxes that expires Nov. 1.
The measure (S 2609) by Michael B. Enzi, R-Wyo., combines a continuation for 10 years of the soon-to-expire temporary ban (PL 110-108) on Internet service levies with provisions of a Senate-passed Enzi proposal (S 743) to authorize states to collect sales taxes from out-of-state online vendors.
Enzi said in an interview that Reid made the case behind the scenes for including an extension for 10 years, instead of a permanent extension of the Internet service tax moratorium. “That’s what Sen. Reid put in,” Enzi said.
Reid told reporters Wednesday, “We’ve had a number of meetings on that today, and … we’re trying to figure out a way to go forward. I think it’s fair to say that the two of them are going to be together. They’re not going to be separated.”
Rather than pass a permanent ban on taxing Internet access, Reid wants to enact a temporary ban PAIRED with massive new taxing authority for state and local governments.
On Tuesday, Heritage Action’s Michael A. Needham warned against that strategy, saying, “The Permanent Internet Tax Freedom Act should not be held hostage to Washington special interests seeking to advance unpopular proposals such as an Internet sales tax.”
Reid’s approach is a non-starter in the House and likely with many of his Senate colleagues. If Americans suddenly find their Internet access taxed later this year, they’ll know who to blame.
Several New Hampshire based small online business owners say that an internet sales tax would be “devastating” to their business. New Hampshire is one of five states that does not currently impose a sales tax on its residents, which may be why Sen. Jeanne Shaheen (D-NH) 0% and Sen. Kelly Ayotte (R-NH) 24%, to of the lawmakers that heard from the group, have opposed internet sales tax legislation.
The business owners also spoke with Rep. Ann Kuster (D-NH) 13% and Rep. Carol Shea-Porter (D-NH) and about a quarter of Congress.
Remember when we told you 10 awful things about the Internet Sales Tax? It’s a good time to think about the issue again.
Last year, some lawmakers were pushing for the so-called Marketplace Fairness Act. It anything but fair, and though the issue died down in 2013, it’s trying to rear its ugly head again this year.
On March 4, the House Judiciary Committee will hold a hearing to explore alternative solutions to the Internet sales tax issue.