Many Texas residents and business owners may not realize that internet taxation is a possibility. That’s because during the past 16 years, Congress has banned an Internet access tax temporarily on three separate occasions. The tax law repeatedly came up for a vote, though, so there was a chance the vote could go another direction.
Recently, however, the U.S. House of Representatives voted on a permanent ban of the tax. The House passed the Permanent Internet Tax Freedom Act on Tuesday, July 15. Reportedly, the bill is aimed at Internet access taxes, but it would also ban any other internet-only tax issued by a state or local government.
One area of Internet-based taxes that the bill does not address is sales tax associated with Internet sales. That has been an issue debated at multiple government levels for several years. In May 2013, the Senate passed a bill that would give states the power to collect sales tax on items sold online, but the House has yet to act on that bill.
The current ban on the Internet access tax will expire on Nov. 1. To prevent the expiration, the Senate will need to vote to pass the House’s Permanent Internet Tax Freedom Act or both branches will need to vote to extend the moratorium once more.
If the Senate passes the House’s bill, it means major tax law changes for some states. The previous moratoriums contained a grandfather clause for seven states that already had Internet access taxes in place. Texas is one of those states. The bill, however, eliminates the taxes even in those states, which is good for the taxpayer but could cost the state of Texas $350 million in annual tax revenue.
Businesses and individuals should understand all taxes they are subject to and should also seek expert understanding regarding changes in tax law. A single tax law change could result in drastic cost reduction or increase for a business.
Source: PCWorld, “U.S. House approves permanent ban on Internet access taxes” Grant Gross, Jul. 15, 2014