Massachusetts legislators could
vote to exempt Internet
service providers from a sales tax by early next week, adding muscle to the
Rep. Dan Bosley's (D-North Adams) bill would prohibit the state from
charging ISPs a 5 percent telecommunications sales tax. Opponents of the
tax say it will be passed down to customers, who already pay the fee on
their regular phone service.
Backers of the tax repeal, including Massachusetts Gov. William Weld, say
flooding the online industry with new costs will only kill the
market place's potential. The Clinton administration's global electronic
commerce policy, released last week, calls for no new local or state
taxes on the Net for the same reason.
Bosley's position may be growing in popularity, but the state House Ways
and Means Committee must approve the bill for a floor vote before July 15--the last day of the legislative session.
"This charge is a tremendous burden on small ISPs, and would essentially
double tax customers." Bosley said today.
But the bill won't pass without a hitch. Local government officials across
the country are fighting such measures, fearing they'll lose their right
to harness revenue from the budding industry.
Already hundreds of mayors have come out against Clinton's plan and federal
legislation such as the Internet Tax Freedom
Act, which aims to temporarily block municipalities from applying new
taxes to the Net.
Bosley acknowledged that some officials in his state also worry they will
lose tax revenue.
"We will more than make up the tax revenues by the increased business
activity in this sector here in Massachusetts," he added.
Other states have tried without success to safeguard ISPs from taxes.
In May, an Alabama Senate bill to shield Internet service providers from
additional taxes died before the House could vote on the proposal. The
legislation excused ISPs from paying state, county, and municipal sales, as well as
public utility taxes.
Tacoma, Washington, also dropped its plan last fall to tax all ISPs that
offer access within the city limits, including national providers.
Some plans, however, take Massachusetts' hands-off approach.
The Florida Department of Revenue proposed extending its sales tax to ISPs
last April. But the Florida Telecommunications Task Force said "no way,"
and the governor agreed. In January, New
York Gov. George E.
Pataki directed the State
Department of Taxation and Finance to follow a state report that
recommends sales-tax exemptions for Internet access providers.