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Tacoma rejects ISP tax

While municipalities across the country are looking for ways to start taxing Internet service providers, the Tacoma, Washington, City Council quite possibly made history tonight by dumping their ISP tax.

While municipalities across the country are looking for ways to start taxing Internet service providers, the Tacoma, Washington, City Council quite possibly made history tonight by dumping its controversial ISP tax.

With the eyes of the Internet community upon it, the council voted 8 to 1 to rescind the tax, which a city staff member had unilaterally established after including ISPs in a new interpretation of the local code in March.

Mayor Brian Ebersole had led the charge to dump the tax, saying that the money it was expected to generate--$250,000 a year--would be offset by the chill it would impose on the burgeoning high-technology business in Tacoma.

Most council members apparently agreed. "We want to send a strong, clear message," Councilman Paul Miller said in a written statement. "No one in Tacoma wants to stand in the way of or inhibit the use of the Internet."

The controversy began when Duston Jensen, manager of the city's tax and license division, began sending out notices in March to ISPs across the country, telling them that they would be liable for a 6 percent tax on every Tacoma customer under the city's telephone business tax.

When Ebersole found out about the tax, he called for the council to rescind it. Already, the mayor said he's concerned about the affect the tax has had on Tacoma's image.

"I'm concerned what this tax interpretation has done to Tacoma's image," he said. "It's detrimental to Tacoma's economic growth and business."

The Association of Online Professionals, a trade organization, has opposed taxes on ISPs and has been watching cases like Tacoma's with increasing interest.

About half a dozen states and about four municipalities have either proposed or instituted taxes on ISPs, said Dave McClure, executive director of AOP.