October 25, 2007

CRS Says E-Mail and Other Web Services Could be Taxed Under House-Passed Internet Tax Extension

WASHINGTON - According to the Congressional Research Service (CRS), language included in the House-passed Internet Tax Freedom Act Amendments Act of 2007 (H.R. 3678) could allow for the taxation of e-mail and other web-based services. Under the current Internet tax moratorium, originally authored in 2001 by U.S. Senator Ron Wyden (D-OR) and now SEC Chairman, Christopher Cox, any service that enables users to access content can not be taxed.

"I am not going to quietly sit by and let millions of consumers be exposed to huge new taxes on their Internet usage," said Wyden. "Innovation is the key to our economy. We need to be opening doors, not closing them."

The CRS assessment came in a memo addressed to Wyden (full report at: http://wyden.senate.gov/CRS_Report.pdf). It indicates that by limiting the Internet tax moratorium to "a service that enables users to connect to the Internet," services that connect users to the Internet could not be taxed; however services accessed once connected to the Internet could be.

As the memo explains "if an Internet user utilized one provider to connect to the Internet and another paid provider of, for instance, email services, the connection provider would be covered by the moratorium but not the paid email provider. Under the current moratorium, each would be covered." The full report is available at: http://wyden.senate.gov/CRS_Report.pdf.

Congresswoman Anna Eshoo (CA-14), the House leader on making a strong Internet tax moratorium permanent, was one of two members to vote against H.R. 3678.

"The report of the CRS that the recent House legislation with a limited moratorium falls short is deeply troubling," said Rep. Eshoo. "That's why I voted against it and that's why there's a continuing, permanent case to be made for a comprehensive, permanent ban on Internet taxes."

Earlier this year, Wyden and Eshoo introduced identical Senate and House legislation, the "Permanent Internet Tax Freedom Act of 2007" (S.156 and H. 743) which would make permanent the current Internet tax moratorium, which is schedule to expire on November 1.