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Washington city taxes Internet access

Tacoma, Washington, is the latest city to tax Net access providers.

Another city is seeing dollar signs in Internet access, reinterpreting its tax laws to apply to online service providers.

While at least one Colorado municipality has succeeded in taxing local ISPs based within city limits, Tacoma, Washington, is taking its efforts a step further: taxing all ISPs that offer access within the city limits, even national providers that may not have any local employees.

According to a report by the Scipps-McClatchy Western news service, Tacoma is applying a 6 percent gross receipts tax on all ISPs, including national online services such as America Online and CompuServe. Seattle and Spokane are also considering applying similar taxes in Washington state.

An increasing number of other local and state governments are pondering sales taxes on Net access as an opportunity to raise much-needed revenue, but companies complain that such proposals would stymie growth on the Net and possibly lead to other costly tariffs--which, they add, may have to be passed along to consumers.

Earlier this year, Florida proposed extending its sales tax to ISPs but was met with vocal protests from businesses and organizations who managed to postpone the tax. Outside the United States, a European Community commission on telecommunications has proposed a similar "bit tax" on Net traffic.

Fort Collins, Colorado, is charging local ISPs municipal sales tax, alarming the handful of small providers there because it will make it even harder to compete with national heavyweights such as NetCom and AT&T, which the local providers say are not subject to the levy.

Furthermore, several ISPs argue, they are now being taxed twice for offering Internet services, once by the city and once by the telecommunications company from which they lease phone lines. At least one Fort Collins ISP is prepared to fight the city in court on the grounds that it is already paying for a sales tax passed along by a regional telephone company.

Fort Collins officials say all network service providers are subject to the tax and always have been.

Related stories:
New taxes threaten local ISPs
Florida high-tech tax war heats up
Universal Net access policy proposed
Huge protest greets Florida Net tax
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