Tech Law Journal logo

Sen. Ayotte and Rep. Chabot Introduce Bills to Make the Internet Tax Freedom Act Permanent

February 4, 2013. Sen. Kelly Ayotte (R-NH) and Sen. Dean Heller (R-NV) introduced S 31 [LOC | WW], the "Permanent Internet Tax Freedom Act of 2013", on January 22, 2013. This bill would make permanent the current partial ban on state internet access taxes and multiple and discriminatory taxes on electronic commerce.

The current moratorium, which is codified at 47 U.S.C. 151 note, is scheduled to expire on November 1, 2014.

The Congress enacted the original Internet Tax Freedom Act (ITFA) in late 1998. The original ban was for three years. The Congress enacted three temporary extensions, in 2001, 2004 and 2007. The Congress has also added to the definitions, and exemptions.

The current ban provides that "No State or political subdivision thereof may impose ... Taxes on Internet access" or "Multiple or discriminatory taxes on electronic commerce". There are, however, grandfathered taxes, and numerous exceptions.

The statute currently provides that "No State or political subdivision thereof may impose any of the following taxes during the period beginning November 1, 2003, and ending November 1, 2014: (1) Taxes on Internet access. (2) Multiple or discriminatory taxes on electronic commerce." The statute then sets forth at length the grandfathered taxes, and exemptions.

S 31 has two substantive clauses. First, it states that "Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by striking `taxes during the period beginning November 1, 2003, and ending November 1, 2014: and inserting `taxes:." (Parentheses in original.) That is, it makes the current ban permanent.

Second, it states that "The amendment made by this section shall apply to taxes imposed after the date of the enactment of this Act."

Sen. Kelly AyotteSen. Ayotte (at right) stated in a release that "E-commerce is thriving largely because the Internet is free from burdensome tax restrictions. Unfortunately, tax collectors see it as a new revenue source, and they must be stopped ... This legislation will provide certainty to the marketplace, helping the Internet continue to be a driving force for jobs and growth."

Sen. Heller stated in this release that "Nevadans and every American should be able to access the Internet without penalties from the federal government. The Internet Tax Freedom Act will ensure a long-standing federal policy that prevents the government from raising taxes, and preserves the Internet as a tool for education and innovation. I am pleased to work with Senator Ayotte on this issue and encourage Congress to work together to extend this act permanently".

This bill was referred to the Senate Finance Committee (SFC). Neither Sen. Ayotte nor Sen. Heller are members.

Also, on January 29, 2013, Rep. Steve Chabot (R-IN) introduced HR 434 [LOC | WW]. A member of his staff told TLJ that it is identical to S 31. It was referred to the House Judiciary Committee (HJC). Rep. Chabot is a senior member.

When the HJC considered the bill that last extended the ITFA, Republicans and Rep. Zoe Lofgren (D-CA) sought a permanent ban. However, Democrats were the majority party in the House in 2007, and the HJC instead approved a four year extension, which the full House then passed. The Senate then passed a bill with a seven year extension, and the House agreed to the Senate amendment.

That bill was HR 3678 [LOC | WW], the "Internet Tax Freedom Act Amendments Act of 2007", in the 110th Congress. See also, stories titled "Summary of HR 3678" and "House to Consider Extension of Act Limiting Internet Taxes" in TLJ Daily E-Mail Alert No. 1,655, October 16, 2007, "Senate Approves 7 Year Extension of Internet Tax Ban" in TLJ Daily E-Mail Alert No. 1,663, October 26, 2007, and "House Passes Senate Version of Internet Tax Ban Bill" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007.

See also, related story in this issue titled "Other ICT Tax Issues for the 113th Congress".

(Published in TLJ Daily E-Mail Alert No. 2,519, February 5, 2013.)