Taxing the Internet

The U.S. tax moratorium on Internet access services that expired last November is back in the news again, as Congress prepares to vote this week on whether and how to reinstate the moratorium. What does that mean to the average Internet user? The original moratorium prohibited states and localities from taxing ISP fees - well, at least some states were prohibited.

What? You say you've been paying taxes on your ISP bills all along? Maybe you live in a state that was “grandfathered in.“ Those states that were already taxing Internet access before the moratorium was passed were exempt from the law; the exempt states include Texas, Colorado, South Dakota, Ohio, Washington and Wisconsin.

The purpose of that original Internet Tax Freedom Act, which was enacted in 1998, was to encourage the growth of the Internet. Apparently it did its job! :) Of course, that law only applied to dialup services, since broadband was only a glint in the telcos' and cable companies' eyes back then.

One of the new bills that Congress is considering, sponsored by Senator George Allen (R-VA) and Senator Ron Wyden (D-OR), makes the moratorium permanent. It prohibits taxation on DSL and “future telecommunications” services, and requires that states with Internet taxes already in place have to phase them out.

As you can imagine, state governments are not in favor of the moratorium, as they see a nice chunk of potential revenue slipping out of their grasp. A “compromise” bill is also under consideration, which only extends the moratorium for two years and allows states that are already taxing Internet access to continue doing so. The new bill also allows taxes that would be paid by the ISP rather than the consumer -- although of course the consumer will indirectly pay when the ISPs raise their rates in order to pay the taxes.

What does all this have to do with security? Not a lot, at least directly. On the other hand, the security of the “Home LAN” - as well as the business LAN - becomes a bit of a moot point if we can't afford to connect our networks to the Internet in the first place. Granted, we would see far fewer intrusions, attacks and viruses that way.

As always when lawmakers decide to try to take the Internet into their own hands, we'll be watching this one with interest, from deep in the heart of Taxes - er, Texas.