Photo: Newscom

On October 31, a federal moratorium on Internet service taxes will expire, allowing state and local governments to tax online access and other services that you use and enjoy every day.

In a new report, Heritage Foundation expert James Gattuso explains how this change will affect you. Below are five things you need to know about this issue.

  1. The United States has had a moratorium on state Internet taxation since 1998. This ban includes state surcharges on Internet service and state taxes on specific internet services such as email or instant messaging.  It also bans “bit” taxes based on internet usage.
  2. This Internet tax ban does not cover Internet sales tax. That issue involves the power of state tax collectors to require out-of-state retailers to collect sales taxes on their behalf, which is an entirely separate debate.  As Gattuso notes, “While not prohibited by Congress’s Internet tax moratorium, such mandates have been properly limited by the courts.”
  3. H.R. 3086, the Permanent Internet Tax Freedom Act, would permanently ban these taxes. This bill was approved by the House Judiciary Committee on June 18th and will soon go to the House floor.
  4. 11 of the 25 businesses contributing the most to the U.S. economy are Internet-related.  With Internet taxes, we risk threatening this sector’s growth.  Internet-related business is one of the few sectors thriving today.  With new taxes, subscribership to internet services may fall, especially among low-income consumers.  In fact, Gattuso notes that if state taxes average five percent, these services could lose 10 million to 30 million subscribers.
  5. The tax ban is fully consistent with the principles of federalism. “The Internet, by its nature, is an interstate network,” Gattuso observes. “The effects of Internet tax policy in one state are borne not just by that state’s citizens, but by citizens of other states.”

Read more about how this will affect you here.

Do you think we should permanently ban states from taxing the Internet?  Tell us in the comments.

Comments (71)

Robert Rogers - July 3, 2014

We are already taxed to much.

James DFavidson - July 3, 2014

Internet services should not be taxed.

claudia oliver - July 3, 2014

Taxing the internet would be like taxing “communication” with each!

Alma Oline - July 3, 2014

PLEASE do not tax the Internet. We are almost taxed to oblivion now. Leave something that we can enjoy without a tax!!

Robert Wroble - July 3, 2014

Absolutely ” NOT ” enough is enough !!!!!!!!!

Jesse Doran - July 3, 2014

States should not be allowed to tax internet sales and the Federal Govt. should not be allowed to tax internet sales either. I buy on the internet because of the ease of access and not having to pay tax. I will not buy on the internet if I have to pay taxes on what I buy. Lets put all business out of business. That’s what this govt. is good at.

Rodney Huff - July 3, 2014

This is another absurd method of draining the life blood from the American people. We have more than enough taxes and fees levied against our shrinking incomes. This should be killed and never brought to light again.

Scott - July 3, 2014

Ban taxes- YES! Allowing states to tax the net will result in out of control, unbridled, ever increasing rates as each state sees fit evidenced by those who have state, or other local taxing authority. Govts/ politicians just cannot seem to restrain themselves or be responsible enough to address “spending habits” vs income expansion. Prime examples are cell phone fees & various taxes- everyone from fed, state & city taxes are now added to the bill, in many cases exceeding 13% of the total bill. No, states don’t need that kind of power- too slippery a slope they cannot resist.

angie - July 3, 2014

I think that we should permanently ban states from taxing the internet…as everything is already taxed to the hilt and their will be even less purchasing power than their already is..

Online is the place most people go to get a deal…if you tax that you are cutting the throats of the buyers and the sellers and the small businesses… thereby further destroying the American fragile economy…

Vicki Becker - July 3, 2014

Yes—I think states should be permanently banned from taxing the Internet.

priscilla - July 3, 2014

Just as the gas co taxes us, this will skyrocket costs. I have more taxes of use on my gas bill than the actual use of gas..The same goes for the bill I get from my internet provider. Government demands us to cut back usage of so many things and when we do the see the loss of funds and then punish us with new add ons. I’m done

tim carney - July 3, 2014

Yes, we should ban the states from implementing an internet sales tax. We should also ban the federal government as well from collecting internet taxes in any form! The internet provides us with a vehicle to exercise free speech, property ownership, and to live life, liberty, and the pursuit of happiness. Why should that be taxed?!

Tom Bogetich - July 3, 2014

We are over taxed to pay for big time liberalism by a bunch of liberal yahoos who claim to be working in our interest in DC. The whole lot of them short be put on a slow boat to nowhere with no compass or direction finder. It’s the same kind of help they have been giving us. What’s fair is fair.

Eileen Oswald - July 3, 2014

When will enough be enough? When the government has every last cent of our money? Please keep the tax ban permanent. People who are invested in these companies will suffer.

Allen Simon - July 3, 2014

(1) The power to tax is the power to destroy. (2) Allowing each state to have its own rules on internet taxation disrupts trade patterns between different states, and hence clearly restricts interstate commerce, and is therefore only within the jurisdiction of Federal not State law. (3) Internet access provides a mechanism for amplifying everyone’s free speech rights, and should be no more taxed than say a megaphone. That is the right to free speech is meaningless if the ability for others to listen to or not is impaired by adding the cost of taxation. There is no compelling federal or state interest for such a prior restraint of speech, especially to those least able to afford it.

Dan R. Smith - July 3, 2014

This is a classic example of Dan’s Law of Government, which states,
“Unlike King Midas, whatever the Gummit touches turns to CRAP and not gold.”
Taxing the internet would add to the economic headwinds that our government seeks to burden us with, and hastens the day when our society falls apart.

Douglas Robinson - July 3, 2014

We must look at government taxation in general. I believe the only viable tax should be a usage or sales tax. Income tax should be forever banned. The principle that we are looking at requires a company in Dry Gulch to collect taxes for Ohio. That would require a company like Amazon to have control over all their associate booksellers to ensure that all were paying the correct sales taxes to the cities and states. Amazon would have to be totally restructured. The law that applies to out of state purchases would have to be changed also. I don’t think it can be done without a whole lot of yelling. Sincerely Doug

Dan Leonard - July 3, 2014

Yes! All taxes should be prohibited on the internet. After all, The government didn’t build it.

Jerry Metcalf - July 3, 2014

Support not taxing the internet.

Stephanie Wilson - July 3, 2014

YES, we dont need any more taxes!

Susanne Madala - July 3, 2014

The less taxes on everything, the better for America.

American - July 3, 2014

The Internet should not be taxed, ever. Taxes will inhibit the use of the internet, and it is in the world’s best interest to not inhibit that use. There is no basis for which a tax on the internet is justified.

Billie Roeder - July 3, 2014

I could go on and on but to be quick, we are taxed enough . LEAVE THE INTERNET ALONE Gov would like to tax every keystroke and every breath.

Agnes Thielen - July 3, 2014

The internet should never be taxed. To tax the internet
would be to tax freedom of speech which is guaranteed
by the Bill of Rights.

Roger E Pilie - July 3, 2014

No to taxing the internet! We are already taxed to the point of being slaves to the government. Congress should pass H.R. 3086 — Permanent tax freedom act!

Bill Schlotthauer - July 3, 2014

The power to tax the internet is the power to control and destroy the internet. Governments claims they are losing billion in revenue. How can those governments lose something they have never had? The purpose of government is to provide order and certainty, not conduct an eternal search for revenue. The brick-and-mortar people claim not taxing the internet is unfair to them. Let the consumer decide. Is the brick-and-mortar price plus sales tax better than the internet price plus shipping? Maybe to make things “fair”, the brick-and-mortar folks should only be allowed to place product pictures on their shelves and the customer will have to come back in 5 days to pickup their purchase. Bottom line, let the market decide.

Ted Lauterwasser - July 3, 2014

I have been receiving duplicate mailings at cost to you.

Addresses are identical except one includes the number 62035 and the other 62036

Author Katie Nielsen - July 7, 2014

Thanks for letting us know! We’ll make the correction.

Dale - July 3, 2014

I do not think the internet should be taxed. It’s just about the only thing people have that hasn’t been taxed and it would certainly be a hardship on many with all the other increases in life expenses.

robert mixon - July 3, 2014

We are taxed enough already. Please make this a permananet internet tax freedom act (H.R. 3086)

R . T. Petty - July 3, 2014

I am opposed to any tax on any internet communications by state or federal agencies.

David R. Wytko - July 3, 2014

If they want to tax it, I sign off. They tax everyting that moves or doesn’t move. Let their greedy hands stay off my internet! Da mn the idea!

Richard Weber - July 3, 2014

I’m all for banning internet taxes. There are a few sites that charge sales taxes and do so because a retail store is located in the state. States don’t loose money because of the ban. How can money be lost when it is not the states to begin with? What would they do with the money, spend it efficiently on things that are not needed? They would just cry for more.

Mary A Cole - July 3, 2014

I definitely believe that the Internet should remain tax free. I know that i would have to use it less if I had to pay taxes to use it. My way of life would be altered. Multiply my actions by the number of users, and there would be a huge dampening effect that would alter the economy and society. It would have an effect of limiting freedom of speech, depressing the economy and reducing/killing social interaction via Facebook, email, etc. It would especially hurt seniors and all those with less affluent means.

Chris Reinsfelder - July 4, 2014

Yes! I do agree the ban should remain in place. Our bloated government has become exactly what our Founding Fathers were vehemently against. Over- regulation, over-taxation is infringing upon our freedoms and liberties and killing our economy. The bigger government gets, the more it spends and the more it spends, the more it wants. ENOUGH! NO MORE TAXES!
Leave the internet alone and maybe it will thrive. The government has destroyed enough. It is time for the people to STAND UP AND SAY NO!

Richard Meyer - July 4, 2014

The Internet should not be taxed by anyone, for access or for use. It belongs to no one. It belongs to everyone. It is not a state resource, nor that of a company, a nation, or, for that matter, a planet. Taxing anyone or any entity would be taxing something that the taxing entity did not provide, or contribute to. or give up anything to allow the service to be provided. It would be like taxing the air that we breathe, or swimming in or sailing on international waters, or using the light or warmth of the sun. When any of the above, including taxing the Internet, is proposed by any level of government, it becomes time that any individual sponsor of such tax be publicly identified, exposed to the electorate for the “control freak” that he or she is and impeached before more damage can be done through the legislative or executive order process. The United States of America is too important to Americans who care to allow this kind of government stupidity to occur.

Rev. Duane A. Janssen - July 4, 2014

I am absolutely opposed to any federal, state, or local tax imposed on the internet or online service. This Nation already has far too many taxes as it is. God bless America!

Clyde D Lineback - July 4, 2014

Permanently ban all state and federal taxes of internet services.

Codylee Marcel - July 4, 2014

Folks, many Democrats unlike myself, want to tax everything, so they can spend more and pay less at the expense of the world economy. President Obama’s agenda of dragging down American family’s and their moralities will find ways to tax Americans into poverty. The internet tax will come from the ones whom will benefit the most, Unbelievably it is our own President, Mr. Obama and his new Socialism party politicians will seize this opportunity like vultures on road Kill ! They will say its only to cover the cost of keeping the internet safe and policing the criminals. Exactly who are the criminals here? Who made President Obama King ? Answer: Congress by not doing their Job of keeping the other two departments of government in check.

Conservative Democrats for America
Cody

William Murray - July 4, 2014

Taxation for other than maintaining personal safety and individual freedom is nothing more than theft. There is no justifiable reason tho tax the internet.

Judy Gitchel - July 4, 2014

I feel that taxing my internet use is already being done because I get my service through my local phone company and there are taxes on my total bill. My services include cable and phone in addition to the internet. I am Taxed Enough Already.

A.K.Pedersen - July 4, 2014

Absolutely NO TAX on internet service. I am sure the Feds are eyeing our home computers as a source of more money to give away.

Mike Androlewicz - July 4, 2014

Yes-Yes-Yes–absolutely ban any/all internet taxes, permanently! We definitely don’t need more taxes, especially for one of our last bastions of free expression (except for the federal government’s spying). Once they open this spigot it will become a flood in no time, like every other tax that has ever been initiated. And, if they tax my emails; aren’t they limiting my sending and receiving of “free speech”? The internet was never meant to be money conduit for any level of government. If they need more money, let them cut back on their expenses like families and companies do. Why not do a “needs” and “efficiency” study on all the services offered by federal and state government entities. Also, study comparative pay rates between the private and public sectors. Then, allow the voters to determine the “need”, what “inefficiencies” they want to remedy, and adjust the pay rates to reflect actual, comparative work performed. And, finally put all government employees on a true “performance-expected” program and pay them accordingly, rather than their life-time feeding off the government trough with inflated salaries and little to no work being performed. Discipline/discharge any that don’t/won’t perform (including the supervisors/managers) and allow the supervisors/managers the freedom to actually do their job and fix or terminate (with cause) the non-performers, just like they do in the “real (non-government) world. If any body has the courage to “start this ball rolling”, I’m sure the various government entities would find plenty of money for any NECESSARY expenses.

Orrin Marvin - July 4, 2014

Do not tax the internet. The free market will take care of itself. Besides, we are taxed to much already.

Robert McWain - July 4, 2014

Plain and simple,.IT STINKS!

Barbara Myer - July 4, 2014

No internet tax. I now pay $28.96 on my phone bill for the basic phone, DSL, and TV service State & Federal taxes. This is for a group plan that is cheaper. Enough is enough. A nightmare to control and regulate. Please leave us alone.

ChuckL - July 4, 2014

Gentlemen,
The writers of the Constitution have already prohibited this problem in Article 1, Section 9 of the Constitution which reads in paragraph 5: “No tax or Duty shall be laid on Articles exported from any State.”
As this country was formed as a Federation of independent states joined for unity of international treaties but with their own specific boundaries, and as the definition of “export” is: “That which is exported; a commodity conveyed from one country or State to another in the way of traffic;…”
Therefore this is a moot point. Taxing any commodity shipped between stats is UNCONSTITUTIONAL.

Donald Randall - July 4, 2014

Internet sales tax should be defeated. There is no way internet should be taxed.

Margaret Rosenthal - July 4, 2014

We are taxed to death already.

Gayle Frederick-Boden - July 4, 2014

We need at least one “location” where we can order a product without the state stepping in with their high taxes, as if state roads or police were used to deliver the product.

Jerry Roberts - July 4, 2014

States have nothing to do with the internet. It is just another burden on the citizens. Another silly tax to take our hard earned money. Next they will want to tax the air we breathe.

Carol Bartz - July 4, 2014

Permanent internet tax freedom should be passed.

rick baldwin - July 4, 2014

I would love to see it done.

Robert Dillon - July 4, 2014

I believe a tax on the Internet is a very bad idea, and should be permanently banned. I believe we should pass H.R. 3086, the Permanent Internet Tax Freedom Act

Marsha Anderson - July 4, 2014

I am against any new taxes on the internet!

Diane Woodard - July 4, 2014

Honestly I do not understand why some believe the internet use should be taxed. There are so many ways in which we use the net to gain information, become educated, purchase items not found locally, stay in touch with family, friends, our legislators. I for one am old and crippled thus I cannot move about our country freely. There are millions of us for whom the internet is a blessing. I believe we are taxed far more than necessary. Forgive me if I have misunderstood this subject.

Jacque Ash - July 5, 2014

It’s all about everything being ‘on-line’..all business, all of people’s lives! Not good! I am taxed on the $80/mo I pay for Hughes to even get I-Net; the $150/mo for DTV-repeats, repeats, repeats-would cancel if not for Fox news; my $68/mo in-home phone-refuse to get a cell & be taxed even more to give others free ‘Obamaphones’; my electricity; and more!! I believe everything sold on the I-Net should be taxed-just like everything a store sells. WHY should there be discrimination against a business where a person can actually physically visit, and ‘on-line’ tax be waived. However, tax the hell out of foreign web-sites and businesses!!

Anita Rice - July 5, 2014

I disapprove of the taxation of the internet. The government has overspent and is now taking things that have been in the past our free rights and is taxing us. To me this is an infringement of our freedom. I deplore this action.

Myra Mahoney - July 5, 2014

Yes to a permanent ban on state, local AND federal taxes on the internet. We are taxed enogh already.

Leonard & Sharon & Snavely - July 5, 2014

We believe such proposed taxes would be an infringement on communication which is in violation of the First Amendment to the Constitution. Furthermore, these taxes would have a negative impact on the economy of the United States.

Kim - July 5, 2014

Online taxes are taxation without representation. It’s time for another tea party.

pat fale - July 5, 2014

the government sucks up money anywhere they can regardless of the cost then just pisses away then continually needs more like a drug addict. what a country

Leon Beverly - July 6, 2014

A tax on internet usage should be permanently ban. The government stomps all over private innovation by waiting in the wings to put a tax any new development. Government propagandist continually spew that their number one priority is to grow jobs; while all they do is come up with laws, taxes and regulations that encumber job production.

Waneta - July 6, 2014

It will discourage internet buying and it will create a mass amount of collection control centers to monitor these sales and collect the taxes. More government control and we know how that works!!

JonAnne Stone - July 6, 2014

I oppose Internet Sales Tax but I demand that you try to stop ALL FURTHER ACTIONS BY OBAMA. SUE HIM FOR TREASON (or other) AND DEMAND A STOP/HALT ORDER ON ALL FURTHER ACTIONS/TRANSACTIONS BY OBAMA BE ISSUED BY THE COURT UPON FILING OF THE LAWSUIT, UNTIL THE COURT SCHEDULES A HEARING OR HIS TERM IS OVER. THAT SHOULD ALSO INCLUDE USE OF AIR FORCE ONE FOR ANY REASON!!! WE HAVE TO TIE HIM UP TO PREVENT FURTHER DAMAGE TO OUR COUNTRY! THIS SHOULD BE DONE IMMEDIATELY, WITHOUT DELAY!!!

Michael A Resch - July 7, 2014

I fully support a permanent ban on internet taxes. The government is found too many ways of taxation already and we don’t need one more.

Robert Hall - July 8, 2014

On top of all of the other tax hikes, an internet tax and surcharges would allow the more of the same overspending and budget busting that is occurring daily. Worse, this would be a “Hidden Tax” much like those foisted upon us through our phone and utility bills. The large majority of the public isn’t even aware of them and the various entities raise them on a regular basis, leaving people to believe that utility rates/services have gone up when it is just the various governing entities raising hidden fees/taxes.

Stephan Fleener - July 8, 2014

Internet use/services should not be taxed. It would hurt those with lower incomes the most, limit their use of the Internet and all users would likely cut back thereby reduce any income the states expected. In all probability it would also affect jobs, certainly if sales over the Internet were taxed. Bad Idea!

Bill - July 10, 2014

Internet taxation, as proposed, will be another nightmare. It will kill small business and be way over complicated for big businesses to correlate rules across States.

If there ever is a tax here it should be ONE rate applied equally EVERYWHERE & paid only to the State where the source of the purchase is made.

John Wiener - July 11, 2014

What’s next…a tax when I write a letter? a tax when I make a phone call? Email is communication and I’d hate to pay a tax b/c I wrote this comment.

Iris Stone - July 24, 2014

I strongly oppose the internet tax. The argument that it is not fair to the Brick and Mortar stores, my answer is, then why not eliminate the sales tax in the Brick & Mortars? That would equal the playing field and encourage consumer spending big time. An internet tax would dampen consumer spending and reduce our disposable income, as we would be paying more for goods & services. It would add to inflation (have you been checking out consumer prices lately?) I ask you who are the greedy people here? Answer: the politicians… all they want is more ways to tax the citizens, so they can use the money to spend on programs (& crony capitalism) that keep them in office. They don’t care about America, they only care about themselves.

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