Despite Moratorium, Internet Taxes Still A Reality

The Internet Tax Freedom Act doesn't mean e-commerce will escape already-existing income tax or sales tax laws, as some may think. Instead, the Act -- enacted Oct. 21 -- puts a three-year moratorium on Internet-service-related taxes deemed "multiple or discriminatory", and taxes on Internet access not already imposed by Oct. 1. It also mandates a commission to study this issue of Internet taxation, says Carol Cayo, Information Technology Assn. of America (ITAA) director of government affairs. Examples of the outlawed "multiple tax": Some state tax administrators have ruled customers must pay double telecommunications tax for phone and Internet access. And some Internet providers have been ruled subject to telecommunications service tax -- retroactive for many previous years. A "discriminatory" tax example: In some states, there's no sales tax on publications bought at the newsstand, but you are taxed if you download them on the Internet. The moratorium doesn't cover sales or income tax -- including remove sales tax collection from out-of-state buyers. In November the ITAA and Deloitte & Touche published a book, Taxation of Cyberspace.