Internet to Remain Free from Taxation

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The U.S. Senate on Thursday passed a permanent Internet Tax Freedom Act (ITFA) as part of a larger customs bill, and the legislation now goes to President Obama, who has already indicated that he intends to sign it. The ITFA was first enacted in 1998 and has been prolonged by a series of short-term extensions ever since.

The law prohibits state and local governments from imposing taxes for Internet access and email services. Seven states, including Illinois, have been collecting the taxes because they were grandfathered in at the time the ITFA was passed in 1998. Senator Dick Durbin (D-IL) had opposed the bill and was able to keep it from receiving a vote until he received a commitment from Senate Majority Leader Mitch McConnell (R-KY) to allow a stand-alone vote on another Internet taxation proposal, the Marketplace Fairness Act (MFA), legislation that allows the states to collect taxes from online sales.

The larger bill to which the ITFA was attached is the Trade Facilitation and Trade Enforcement Act, more commonly known as the customs bill. The customs bill beefs up copyright enforcement by giving the Customs and Border Protection office the same authority as the Copyright Office to stop imports of goods that infringe on U.S. copyright protections.

On another Internet-related bill, the House communications subcommittee reported out a bill that would prevent the Federal Communications Commission (FCC) from regulating Internet access rates. Subcommittee Democrats had opposed the legislation but lost on a 15 to 11 vote. According to ranking member Anna Eshoo (D-CA), the dispute is based on a definition of rate regulation. The accepted language says only that the FCC “may not regulate the rates” Internet service providers charge, but, Democrats argued, that is simply too broad.