Congress May Block Local Tax Authority
Opposition to Internet Tax Freedom Act Extension Urged
Congress is poised to take action on legislation that would permanently extend the Internet Tax Freedom Act (ITFA) – a law that preempts local taxing authority. The ITFA provision, which would ban local governments from collecting taxes on Internet access services in perpetuity, has been “air-dropped” into an unrelated customs bill – the Trade Facilitation and Trade Enforcement Act of 2015 (HR 644). The language, which was not included in any previous version of the legislation, is non-germane to the underlying bill and should be considered on its own merits.
ACTION NEEDED: Counties are encouraged to contact Senator Feinstein and Senator Boxer to urge their opposition to the ITFA provision. As an alternative, CSAC would strongly support a shorter-term bill – one that includes a clear sunset date and grandfathers all relevant existing state and local taxes. This issue should be periodically revisited to determine whether the need for an access-tax ban still exists. CSAC also believes that an extension of ITFA should be considered in conjunction with Internet sales tax legislation – like the Marketplace Fairness Act or the Remote Transactions Parity Act – that would provide states with the authority to require remote sellers to collect and remit sales and use taxes. CSAC’s most recent letter on ITFA is available here and the NACo issue brief can be found here.
BACKGROUND: ITFA was first enacted in 1998 as a temporary moratorium on taxes for Internet access service and was meant to protect and shield the developing technology in its early years. However, the temporary tax has been extended repeatedly and is still in effect to this day, despite the massive advancements in technology. The permanent prohibition means further restrictions on counties’ ability to raise revenues appropriate to provide services in their jurisdiction. CSAC supports providing counties with flexibility and local control to make decisions based on local needs and service capacity.