Internet tax-ban bill draws USTA’s ire

A bill being proposed in the U.S. Senate to extend by two years the ban on taxing Internet access technologies claims to be technology neutral, but a grandfather clause in the legislation unfairly penalizes DSL providers, according to the United States Telecom Association.

Sponsored by Sens. Lamar Alexander (R-Tenn.) and Tom Carper (D-Del.), the bill calls for a two-year extension of the moratorium against taxes on Internet access that has applied for cable modems. In an attempt to be technology neutral, the bill also prohibits new taxes for DSL during the moratorium, a spokeswoman for Alexander said.

This is a change in previous moratorium extensions, which still allowed for taxation of telecommunications services like DSL--something that more than 20 states chose to do, said David Quam, director of the office of the office of state-federal relations for the National Governors Association. If taxed as of Nov. 1, 2003, DSL still could be to be taxed in these states in the future, so states would not be forced to lose money from their budgets if the bill becomes law.

However, in these states, the bill continues to discriminate against DSL providers, according to a prepared statement from Walter McCormick, president and CEO of USTA.

“This piece of legislation forces consumers of one technology to pay taxes other consumers don’t have to pay,” McCormick said. “It’s blatantly unfair and limits consumer choice. This bill lets the government pick winners and losers in the race to offer broadband, instead of establishing a framework that encourages investment, innovation and real competition from all companies.”