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US Senate Urged To Pass Internet Tax Moratorium

by Mike Godfrey, Tax-News.com, Washington Friday, September 5, 2014

With the United States House of Representatives having already passed the Permanent Internet Tax Freedom Act (PITFA), which would permanently extend a moratorium on internet access taxation, a coalition of 42 state and national organizations have come together to urge the Senate to pass equivalent legislation as soon as possible.

In a letter to all senators, the coalition's members say that failure by the Senate to act before November 1 this year, when the present moratorium expires, will lead to increased taxes for internet consumers, who are currently protected "from increased costs when accessing and using the internet, and from the discriminatory or duplicative taxation of e-commerce."

The letter adds that "taxes on communications services are already punitive and discriminatory. The average sales tax rate on voice services is 17 percent, and 12 percent on video services, while the average general sales tax rate is 7 percent. Excessive taxes will hinder continued growth in the digital space."

It also notes that the Federal Communications Commission FCC's National Broadband Plan already states "that the largest barrier to consumer adoption and expanded use of internet based services is cost."

"Allowing the internet access tax moratorium to lapse would certainly lead to higher tax rates on consumers and thus reduce the rate of adoption and innovation. Higher taxes on internet access undermines American economic competiveness and growth," it continues.

However, prior to the summer recess, the prospect of a "clean" equivalent to the PITFA being passed in the Senate was being complicated by certain lawmakers looking to link it with the more controversial Marketplace Fairness Act (MFA), which would allow states to impose sales taxes on online purchases, and which remains stuck in the House Judiciary Committee.

The MFA has become bogged down in the Republican-led House, where it has encountered a great deal of opposition and delay, mainly due to an aversion to what is considered to be a hike in taxation and an increase in tax compliance burdens on smaller businesses.

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