Dubbed the Permanent Internet Tax Freedom Act, the bill extends the 17-year moratorium on such taxes. The bill also forbids states from imposing any new levies on online services that have no offline equivalent, such as email and bandwidth.
Although the bill allows US states to compel online merchants to collect sales tax, it will invalidate the grandfather clause, which allows a number of states to levy taxes on internet access.
Some of the ten states that charge such taxes are Ohio, Texas, Wisconsin, and Tennessee. These states could lose a total of $500 million in revenue per year, with the Lone Star State suffering the largest loss.
Despite the huge blow to state earnings, supporters argued that the bill would ban new taxes, which could hold back the growth and adoption of online commerce. Additionally, if the tax moratorium on internet access is permitted to lapse, many Americans would be burdened by it, said Representative Bob Goodlatte of Virginia.
Representative Anna Eshoo of California explained that potential taxes on internet access would negatively affect US consumers, especially the poor.
In fact, internet users can expect new taxes of more than 13 percent if the moratorium expires, and roughly the same rate could be imposed on communications services like mobile voice.
“We want to encourage expanded broadband adoption,” said Representative Eshoo. “If you tax it, you’re going to shrink it,” she added.