Congress Puts an End to Internet Tax

Nick Tomasovic In the News

The internet just got a little freer. If only by price.

That is because Congress just passed a bill that will permanently end internet tax.

They passed a similar law in 1998 called the Internet Tax Freedom Act, but that one was set to expire on December 10th. Fortunately, both parties were able to come together long enough to re-up.

Of course, only seven states currently tax residents for internet access. Those are North Dakota, South Dakota, Texas, Ohio, Wisconsin, New Mexico, and Hawaii. The 1998 bill prevented new states from instituting Internet taxes of their own and mandated that the states that already did would have to stop the practice by 2020.

However, without this new bill, more and more states would have been free to get in on the mix and apply their own internet tax. They could – and probably would – choose to fill out any deficits in their budgets with hundreds of millions per year in taxes.

How Internet Tax Affects You

Between state and federal taxes, wireless consumers pay around 18% of their bill in taxes per month.

Meanwhile, most other goods and services are taxed at about 7%. That means you pay more than twice as much in taxes to use your cell phone than you do on almost anything else.

Without a ban on internet taxes, it is almost certain this same practice would migrate over to your service provider.

Imagine paying a few hundred dollars extra per year on your already expensive internet service.

Of course, just because they say it is a permanent ban on Internet tax does not mean it is. Future Congress members can vote to repeal bills like this one later down the road.

The Sales Tax Debate

Also, on the docket for Congress, these days is the debate over whether states should be able to enforce local taxes on the things you buy online.

Usually, when you buy something from a site like Amazon.com, you only have to pay a sales tax if you live in the same state as the company’s base of operations.

Technically, residents from other states are supposed to self-report those purchases when they file their taxes and pay the sales tax directly to the government. However, most people do not do that.

What some politicians want to do is allow the state you live in to tax you on the purchases directly, which will make sure they get their money and don’t have to rely on taxpayers’ honesty.

Michigan just started this practice themselves a few months ago. Companies like Amazon and Overstock, which operate out of Michigan, are now forced to charge Michigan residents taxes upfront. However, with only a few states doing this, it is still easy for companies to maneuver around.

The discussion has been raging over the issue for quite some time, but it is looking like a decision will be made soon. Political analysts expect this bill to go before the Senate and Congress in the very near future – and pass.

Considering the volume of online shopping people do these days, this could be a huge shift. Of course, it may not be enough to deter most people, but it will certainly make buying things online less advantageous.

Controlling the Internet

The theme here is the government’s ever-increasing involvement in the internet. It is looking more and more every day like we’ll be having a significantly different online experience in the future.

Governments around the world are eager to control what you do online, whether it is internet tax or limiting access to the websites you visit.

The Trans-Pacific Partnership, in particular, looks to be very damaging.

Of course, tech-savvy internet users will continue to adapt and stay ahead of the game. In some cases, a VPN like LiquidVPN is all you need to bypass many internet restrictions. Moreover, we’ll see that technology evolve as needed.

The world wide web has always been about freedom of information, and most people are not willing to give that up just yet.