{ "id": "R43772", "type": "CRS Report", "typeId": "REPORTS", "number": "R43772", "active": true, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 451988, "date": "2016-04-13", "retrieved": "2016-11-28T22:21:55.343382", "title": "The Internet Tax Freedom Act: In Brief ", "summary": "The Internet Tax Freedom Act (ITFA; P.L. 105-277), enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce. Under the moratorium, state and local governments cannot impose their sales tax on the monthly payments that consumers make to their Internet service provider in exchange for access to the Internet. In addition to the moratorium, a grandfather clause was included in ITFA that allowed states which had already imposed and collected a tax on Internet access before October 1, 1998, to continue implementing those taxes. \nPreviously under ITFA, the moratorium on Internet access taxes and the grandfather clause were temporary provisions. With the passage of the Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125), the moratorium on taxing Internet access was extended permanently, while the grandfather clause was extended temporarily through June 30, 2020. \nThe original three-year moratorium had been extended eight times before being converted to a permanent statute. As the original moratorium was extended, changes were made to the definition of Internet access to include and exclude different services and technology. Notable changes include the inclusion of digital subscriber lines under the moratorium and the exclusion of Voice over Internet Protocol services from the moratorium.\nOver time the grandfather clause has protected a decreasing number of states\u2019 abilities to tax Internet access. While 13 states previously taxed Internet access and were protected under the grandfather clause, 7 states now tax Internet access. In addition, changes made to ITFA in 2007 rendered the grandfather provision inapplicable for states that repealed or nullified their taxes on Internet access before the enactment of these changes.\nAs a public policy, the moratorium on taxing Internet access has economic and fairness implications. The policy likely improves lower income individuals\u2019 ability to purchase Internet access, which has economic benefits, but the blanket nature of the moratorium likely results in some economic waste. Additionally, the moratorium results in unequal application of state and local taxes to the provision of services depending upon how the services are delivered. \nUnder the moratorium, state and local governments are prevented from taxing Internet access. This may have implications for state and local government revenues and provision of services. \nThe Internet Tax Freedom Act and its subsequent extensions are often conflated with issues related to the taxation of electronic commerce across state borders. ITFA is largely unrelated to these issues. For a discussion of interstate electronic commerce and taxation issues, refer to CRS Report R41853, State Taxation of Internet Transactions, by Steven Maguire, and CRS Report R42629, \u201cAmazon Laws\u201d and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43772", "sha1": "23ffa2441d3223165411f0d2d4c0c5fd2f9aa27c", "filename": "files/20160413_R43772_23ffa2441d3223165411f0d2d4c0c5fd2f9aa27c.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43772", "sha1": "bf233e4fe951034e86a93bd76afdf4527e2ef476", "filename": "files/20160413_R43772_bf233e4fe951034e86a93bd76afdf4527e2ef476.pdf", "images": null } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 448369, "date": "2015-12-28", "retrieved": "2016-04-06T17:38:42.012039", "title": "The Internet Tax Freedom Act: In Brief ", "summary": "The Internet Tax Freedom Act (ITFA; P.L. 105-277), enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce. Under the moratorium, state and local governments cannot impose their sales tax on the monthly payments that consumers make to their Internet service provider in exchange for access to the Internet. ITFA has been extended a number of times. As of the end of the 113th Congress, ITFA was scheduled to expire on October 1, 2015. \nIn the 114th Congress, ITFA has been extended three times. ITFA was first extended through December 11, 2015, as part of the 2016 Continuing Appropriations Act (P.L. 114-53). An 11-day extension of ITFA was then passed as part of P.L. 114-100 through December 22, 2015. Shortly thereafter, ITFA was extended through October 1, 2016, as part of the 2016 Consolidated Appropriations Act (P.L. 114-113). \nIn addition to these temporary extensions, legislative proposals to permanently extend parts of ITFA have been introduced in both houses of Congress. The Permanent Internet Tax Freedom Act (H.R. 235), which would permanently extend the moratorium on Internet access taxes while allowing the grandfather clause to expire, was passed by the House on June 9, 2015. Companion legislation has been introduced in the Senate (S. 431), but has yet to receive a vote. \nThe original three-year moratorium has been extended eight times. As the original moratorium was extended, changes were made to the definition of Internet access to include and exclude different services and technology. Notable changes include the inclusion of digital subscriber lines under the moratorium and the exclusion of Voice over Internet Protocol services.\nITFA includes a grandfather clause allowing state and local governments to continue taxing Internet access, provided the tax had been imposed and enforced before October 1, 1998. Over time the grandfather clause has protected a decreasing number of states\u2019 abilities to tax Internet access. While 13 states previously taxed Internet access and were protected under the grandfather clause, 7 states now tax Internet access. In addition, changes made to ITFA in 2007 rendered the grandfather provision inapplicable for states that repealed or nullified their tax laws on Internet access before the enactment of these changes.\nPolicy options, including allowing the moratorium to expire, extending the moratorium either permanently or temporarily, and eliminating the grandfather clause, have been continually debated. Proponents of the moratorium argue that it provides a subsidy to consumers, increasing the number of individuals that have access to the Internet. Additionally, proponents cite the reduced administrative burden for businesses under the moratorium. Opponents of the moratorium cite unequal tax treatment of similar services, impacts on state revenues, and an encroachment on states\u2019 autonomy over their tax laws as reasons to allow the moratorium to expire.\nThe Internet Tax Freedom Act and its subsequent extensions are often conflated with issues related to the taxation of electronic commerce across state borders. ITFA is largely unrelated to these issues. For a discussion of interstate electronic commerce and taxation issues, refer to CRS Report R41853, State Taxation of Internet Transactions, by Steven Maguire, and CRS Report R42629, \u201cAmazon Laws\u201d and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43772", "sha1": "eb6ed55d9eadd0f5e3658dfb017a93ffa233a939", "filename": "files/20151228_R43772_eb6ed55d9eadd0f5e3658dfb017a93ffa233a939.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43772", "sha1": "21f594f50d0012405a7bcf5de8a56a3edde1717d", "filename": "files/20151228_R43772_21f594f50d0012405a7bcf5de8a56a3edde1717d.pdf", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc795758/", "id": "R43772_2015Oct05", "date": "2015-10-05", "retrieved": "2016-01-13T14:26:20", "title": "The Internet Tax Freedom Act: In Brief", "summary": "This report discusses the Internet Tax Freedom Act (ITFA; P.L. 105-277), which enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20151005_R43772_f8cc7261d3ade128aacc01f98901332d48b7efdb.pdf" }, { "format": "HTML", "filename": "files/20151005_R43772_f8cc7261d3ade128aacc01f98901332d48b7efdb.html" } ], "topics": [ { "source": "LIV", "id": "Technology", "name": "Technology" }, { "source": "LIV", "id": "Internet", "name": "Internet" }, { "source": "LIV", "id": "Taxation", "name": "Taxation" }, { "source": "LIV", "id": "Business", "name": "Business" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc689445/", "id": "R43772_2015Jun11", "date": "2015-06-11", "retrieved": "2015-08-03T15:06:47", "title": "The Internet Tax Freedom Act: In Brief", "summary": "This report discusses the Internet Tax Freedom Act (ITFA; P.L. 105-277), which enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20150611_R43772_77681194ec04fdf8b8e63d693835334b5e6ad74b.pdf" }, { "format": "HTML", "filename": "files/20150611_R43772_77681194ec04fdf8b8e63d693835334b5e6ad74b.html" } ], "topics": [ { "source": "LIV", "id": "Technology", "name": "Technology" }, { "source": "LIV", "id": "Internet", "name": "Internet" }, { "source": "LIV", "id": "Taxation", "name": "Taxation" }, { "source": "LIV", "id": "Business", "name": "Business" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc815439/", "id": "R43772_2014Dec22", "date": "2014-12-22", "retrieved": "2016-03-19T13:57:26", "title": "The Internet Tax Freedom Act: In Brief", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20141222_R43772_7fa94cb754a087b3eb26ac4f42937ed983e62934.pdf" }, { "format": "HTML", "filename": "files/20141222_R43772_7fa94cb754a087b3eb26ac4f42937ed983e62934.html" } ], "topics": [] } ], "topics": [ "Constitutional Questions", "Economic Policy" ] }