URGING SUPPORT FOR REINSTATING A TEMPORARY
MORATORIUM ON TAXES ON INTERNET ACCESS FEES
WHEREAS, in order to ensure the growth of electronic
commerce and examine how state and local taxes should be applied to the market
place on the world wide web, Congress in 1998 enacted the Internet Tax Freedom
Act (ITFA), which imposed a temporary moratorium on state and local taxes on
Internet access fees, as well as banned multiple and discriminatory taxes; and
WHEREAS, temporary legislation was adopted to allow
electronic commerce as well as telecommunications technology time to develop
and establish trends before determining how state and local taxes should be
applied; and
WHEREAS, a sea of change is still occurring with many
technologies migrating to the Internet that state and local governments have
traditionally taxed such as phone service (or Voice over Internet
Protocol--VoIP), music, games, movies and magazines; and
WHEREAS, the Internet Tax Freedom Act expired last
November amid disagreement in Congress over two key issues: whether or not it
is time to make the moratorium permanent and whether or not the definition of
Internet access should be expanded; and
WHEREAS, the House passed legislation, H.R. 49, last
year that would make the moratorium permanent and expand the definition of
Internet access to include telecommunications services, which under the
original act were excluded; and
WHEREAS, under the House bill, telecommunications
services used to provide Internet access would not be subject to state and
local taxes, which could be interpreted to mean state and local governments
would not be permitted to tax traditional telephone services used to provide
Internet access, or collect taxes on music, games movies or other items bundled
with Internet access and sold as a package; and
WHEREAS, the language used to define Internet access
in the House bill is so vague that the Congressional Budget Office could not
fully estimate the financial impact it would have on state and local
governments, although state and local groups believe it could cause them to
lose billions on an annual basis; and
WHEREAS, similar legislation was introduced in the
Senate on behalf of the telecommunications industry by Senators George Allen
(VA) and Ron Wyden (OR) but the Conference and other state and local groups
prevailed in convincing members of the Senate that it would have a severe
adverse impact on state and local revenues; and
WHEREAS, Senators Lamar Alexander (TN) and Thomas
Carper (DE) sponsored legislation (S. 2084) on behalf of state and local
governments that would have extended the moratorium for two additional years
and adopted a definition of Internet access more in line with current law, (it
merely clarified that Internet access provided over digital subscriber lines,
DSL, as well as other forms of Internet access--wireless, cable and etc...would
be treated the same); and
WHEREAS, as a compromise Senator John McCain (AZ)
offered legislation, S. 150, which was approved by the Senate on April 29, and
it calls for a four-year extension of the moratorium, language ensuring that
state and local governments may continue to collect taxes on music, games and
other items bundled with Internet access, a grandfather clause that would allow
state and local governments with taxes on Internet access in effect when the
original act was adopted in 1998 to continue collecting such taxes for the next
four years, and those with taxes on DSL to continue to collect them for the
next two years,
NOW, THEREFORE, BE IT RESOLVED that The United States Conference of Mayors
urges all members of the House and Senate to support the Senate bill, S. 150,
as final legislation without any changes, and avoid the need for a House-Senate
conference; and
BE IT FURTHER RESOLVED that The United States Conference of Mayors
urges all members of the House and Senate to oppose any compromise that
embraces the permanent moratorium or the definition of Internet access outlined
in H.R. 49.
©2004 U.S. Conference of Mayors 