US consumers dodge internet tax for another year

Most Americans’ broadband bills will be free of state taxes until October of 2015 or later, thanks to a decision by Congress to use a major budget bill as a means to extend a current moratorium on internet access taxes.

The move reflects an ongoing policy decision by lawmakers to bar states from imposing broadband taxes similar to the ones that consumers see on their phone bill bills. While the tax ban is broadly popular, its future was up in the air for most of 2014 as a result of lawmakers’ attempts to tie it to an unrelated internet tax issue: whether online retailers should have to collect out-of-state sales taxes.

A proposed law to require online sales tax collection, which brick-and-mortar retailers say is necessary to create a level playing field, collapsed in November. As a result, it was for a while unclear if Senate Democrats would agree to extend the internet access tax ban — now, as National Journal and others have reported, the passage of the spending bill makes clear that they will.

While internet tax policy is not the most glamorous tech topic, it’s growing in importance as more and more commerce is conducted online. While outlets like the Wall Street Journal have urged lawmakers not to burden the internet with new taxes and burdensome collection requirements, state governments say they need to make up sales tax revenue as more shoppers migrate to the internet.

The issue is more complicated still since some states have no sales tax at all, while a handful of others benefit from grandfather clauses that let them collect broadband taxes despite the federal ban.

The upshot is that, for now, the issue of internet taxes will be kicked to 2015. It remains to be seen if the Republican Congress will try to make the broadband tax ban permanent, and if the issue will remain tied to the debate over online sales taxes, which is expected to resurface next year.