Alabama closing off Net taxes

Swift action by Alabama legislatures may soon exempt the state's Internet users from a hefty public-utility tax.

Swift action by Alabama legislatures may soon exempt the state's Internet users from a hefty public-utility tax.

Introduced on February 4, the original bill was sweetened for Internet service providers, promising to shield them from state, county, and municipal sales taxes. Still, a tailored-down version was unanimously passed by the Senate Wednesday, and is expected to go before a House vote in about two weeks. Democratic state Sen. Tom Butler introduced the bill the same day the legislature convened in an effort to snuff out rumored threats of a proposed tax on the Net. Soon after, he recruited the help of Democratic Rep. Randy Hinshaw, who is pushing the same bill in the House.

"The Internet is a new and thriving industry. We want to make sure we foster its growth, not inhibit it," Hinshaw said today.

Whether to tax the Net has become a burning question for legislatures and regulatory agencies across the country. States are deciding how they can make money off of the budding industry though a variety of means: taxation, tax incentives to lure new business, or a hands-off approach.

For Alabama in particular, the Net is a hot political ticket.

Butler represents a three-county district in northern Alabama that is rich with high-tech companies, and thousands of his constituents are online. In addition, Gov. Fob James has vocally opposed taxation of the medium, and the state Department of Revenue changed its tune about taxing Netizens.

It was H.E. Monroe, Jr., commissioner of the Revenue Department, that ruled last fall that the four percent state utility tax for services such as electricity, water, and gas could be applied to ISPs. The ruling could have cost users if it was turned into legislation. Now, however, the department backs Butler's bill.

Lobbyists are also putting their weight behind Net-friendly legislatures. The Internet Service Providers and Users Association (ISPUA), which represents 51 ISPs in Alabama, and the state chapter of the AFL-CIO union has come out in favor of the bill.

Butler is behind another digital-savvy bill that calls for a commission to research how Alabama can use the Net to cut costs and provide services and information to the public on a daily basis. "I'm sending a message that we're open for Internet business in this state," he said earlier this month.