Telecom industry ties Internet tax ban to net neutrality

Telecom industry ties Internet tax ban to net neutrality
© Greg Nash

The broadband Internet industry says a long-term ban on state taxation of Internet access is needed more than ever because of the Federal Communications Commission’s (FCC) net neutrality rules. 

Three major telecom trade groups sent a letter Monday to all U.S. senators warning that the monthly bills customers pay for Internet access are under “imminent threat” of more taxes and fees because of the FCC’s decision to reclassify the service as a common carrier. 

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“Expiration would likely increase the cost of broadband access as it would become vulnerable to new onerous telecommunication taxes and fees, an imminent threat due to the Federal Communications Commission’s recent reclassification of broadband services as a Title II telecommunications service,” the letter reads

The letter was sent by the National Cable and Telecommunications Association, CTIA — The Wireless Association and USTelecom. They represent the largest fixed and mobile broadband providers in the Unites States, such as Comcast and Verizon. 

The lobbying groups urged senators to pass a customs enforcement compromise, which includes a permanent extension of 1998 Internet Tax Freedom Act (ITFA). The House approved the soon-to-expire tax ban last week. 

“We urge a yes vote on the conference report and ask you to oppose any proposal to strip the current language making ITFA permanent,” according to the letter. 

A permanent ban is broadly supported, but critics have wanted to use it as a vehicle for a more controversial bill that would give states more authority to tax online purchases made by their residents.  

The 1998 ban has required a number of extensions over the years. The permanent extension would remove the sunset date and phase out a carveout for a handful of states. 

The tax ban was featured prominently last year in the debate about the FCC’s net neutrality order, which is meant to ensure Internet service providers treat all Web traffic the same. 

Critics argued that reclassifying Internet service would open it up to a number of taxes on Internet access at the state level. 

The FCC rejected those claims pointing to ITFA, but critics still argue the order could open the door to new fees that could eventually be passed along to customers. The ban only applies to state and local governments, meaning the federal government is not prevented from imposing taxes.