The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Providing Relief from Internet Taxes

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


On July 15, 2014, the House of Representatives passed the Permanent Internet Tax Freedom Act, which would have made the moratorium on taxes for Internet access permanent.  Unfortunately, because of legislative wrangling in the Senate, the bill failed to become law.

In 1998, the Internet Tax Freedom Act placed a moratorium on discriminatory taxes on the Internet and taxes on Internet access.  With wide bipartisan support, the Internet tax ban has been extended a total of five times, including twice in 2014.  For 17 years, the ban on these inequitable taxes has benefited millions of Americans by enabling them to conduct transactions on the Internet free from worry about additional tax burdens.  The latest extension of the moratorium expires on September 30, 2015. 

The Internet has become a driving force in the economy, as Americans increasingly go online to shop, communicate with one another, access educational resources, watch videos and play music.  While desktop personal computers were the first devices used to access the Internet, Smartphones, tablets, and other mobile devices are also available for that purpose.  In many lower-income families, mobile devices are often their only connection to the Internet.  Tax returns and job applications are now submitted online, and as noted by Federal Communications Commission (FCC) Commissioner Jessica Rosenworcel at a March 18, 2015 Senate Commerce, Science, and Transportation Committee Hearing on “Oversight of the Federal Communications Commission,” an increasing number of teachers assign students homework that requires the use of the Internet. 

At the same hearing, Sen. Edward Markey (D-Mass.) reminded the FCC panel that the Internet Tax Freedom Act prohibits states from taxing Internet access and commerce.  As the end of the current ban approaches, the threat of new taxes on the Internet looms overhead.  When something becomes more costly, people will use it less often.  The American Action Forum has estimated that if the ban is not made permanent, Internet users in the U.S. could be subjected to nearly $14.7 billion annually in new taxes if access was taxed at the same rate of taxation that is imposed on wireless consumers.

Any new taxes on Internet access would affect job seekers who may not be able to pay for these additional taxes, as most employers now require prospective employees to fill in their job applications online; households with children who are increasingly required to perform schoolwork online; those who prefer shopping online; and, individuals who connect with friends electronically.

Legislation has been reintroduced in both the House of Representatives and the Senate that would make the ban on Internet access taxes permanent.  With the economics of the Internet already coming under threat from the Open Internet Order passed by the FCC on February 26, 2015, every effort should be made to provide consumers with a safe haven from excessive taxes and fees on the Internet. 

The Permanent Internet Tax Freedom Act (H.R. 235) was introduced by Representatives Bob Goodlatte (R-Va.) and Anna Eshoo (D-Calif.) on January 9, 2015, and has 97 cosponsors, The Internet Tax Freedom Forever Act (S. 431) was introduced by Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.) on February 10, 2015 with 41 original co-sponsors; there are currently 47 co-sponsors.

With broad bicameral, bipartisan support of this legislative initiative, there is no reason why Congress can’t give taxpayers a gift in April by passing a permanent ban on taxation of Internet access long before the latest moratorium expires on September 30, 2015. 

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