President Bush Signs Internet Tax Nondiscrimination Act into Law

Dec 6, 2004

On Dec. 3, President George W. Bush signed S.150 (the Internet Tax Nondiscrimination Act) into law, reinstating the ban on Internet access taxes. While access taxes already in place will be exempt from the new legislation, all other new, multiple, and discretionary Internet access taxes are prohibited. The ban will remain in place until November 2007.

A White House spokesperson explained that Bush was eager to sign the act because it helps “ensure that America stays on the cutting edge of innovation.” The bill signed by the president is nearly identical to the compromise, S.Con. Res. 146, passed by the Senate (93-3) in April 2004. Until the bill could reach the president’s desk, Congress passed a continuing resolution extending the provisions of the Internet Tax Freedom Act (ITFA) passed in 1998.

S.150 spells out an exemption for a cutting-edge area of Internet technology: Voice over Internet Protocol (VoIP). State tax policy for VoIP is unaffected by the new bill. This issue continues to raise controversy, and is only beginning the early stages of debate and analysis.

The moratorium on taxation of Internet access was originally intended to promote increased use of the Internet. This legislation does not deal with tax issues arising from Internet purchases. Members of both the House and Senate are dedicated to enacting a permanent Internet tax ban.

This is a politically-popular issue because it provides a greater percentage of the population with affordable options for Internet access. Opponents to the legislation contend that a permanent ban would deprive states of tax revenue. Also, opponents to the bill take issue with the definition of Internet access.

NSBA supports the extension of ITFA but also recognizes the need for clarification within the Internal Revenue Code as technology continues to improve.