Over the weekend, a Federal moritorium on Internet access taxes expired; this opens the door for revenue-strapped states to levy new taxes on dial-up, wireless, and broadband connections to the Net.
Sen. Ron Wyden, D-OR, and Sen. George Allen, R-VA, have co-authored an amendment to the 1998 law, the Internet Tax Freedom Act, to reflect broadband access (DSL, cable). Opponents contend the exemption is broader and could cost states and local governments as much as $9 billion in revenue.
The battle is playing out in Tennessee, where the state has recently appealed a Tennessee Court of Appeals ruling that sided with Internet Service Provider Prodigy’s claim that it should not have to collect sales tax on its service. Tennessee, nine other states, and the District of Columbia collect sales tax on Internet access charges; they were grandfathered into the 1998 Federal law because their taxes existed at the time the law was written.