Latest from Next TV in Internet-tax-freedom-act

ISP Tax Break Could Come With New Cost

john.eggerton@futurenet.com (John Eggerton) — Mon, 15 Jun 2020 12:00:00 +0000

Internet-service providers in seven states are about to get a collective $500 million tax cut, but cash-strapped states could shift their gaze to streaming services to try and recoup the lost revenues, particularly with pandemic-hammered budgets to contend with.

July 1 is when the seven remaining states allowed to tax internet access service must close down that revenue stream. They were the states grandfathered (since 1998) from the temporary, then permanent, Internet Tax Freedom Act.

Steve Lacoff, formerly with The Walt Disney Co. and Comcast, is general manager, communications at Avalara, which provides cloud-based SAAS (software as a service) tax compliance, including for some of those affected by the July 1 cutoff. He spoke with Multichannel News about the demise of internet access taxes but the potential rise of streaming taxes to help fill those state coffers.

As internet taxes sunset, states and localities could look to streaming as a new revenue source, says Avalara’s Steve Lacoff..

MCN: What is happening on July 1?

Steve Lacoff: What’s happening is that the Permanent Internet Tax Freedom Act is going to apply to seven [grandfathered] states that were still collecting taxes on broadband services.

MCN: Which ones are they?

SL: Hawaii, New Mexico, North and South Dakota, Ohio, Texas and Wisconsin. So, now there will be no incremental taxes in any states.

MCN: Any sense of how much money these states collect annually?

SL: Yes. It is roughly $550 million, which is not insignificant, particularly in the current environment as states are extending deficit spending and budget gaps are widening.

MCN: So is this a good thing for ISPs in these states since it is one less line item fee on their customers’ bills?

SL: Yes. Look, it is a good thing for the ISPs and a good thing for the consumer. But there are two sides of the coin. The reality is that if you look at a whole range of legacy telecom services, the whole basis [of the law] was to spur adoption of internet access and promote rural penetration. The counter to that argument is that, ‘Hey, given that we are at 82% broadband adoption today, does this type of policy still make sense?’ And we are not advocating policy or picking sides here.

MCN: By which you mean Avalara? What is your dog in this fight?

SL: Avalara writ large is a leading tax calculation company. We calculate, file and remit returns for businesses, anything from a sole proprietorship to a Fortune 500 company.

MCN: Are any of the ISPs having to pay these taxes your clients?

SL: Yes, and those clients include ISPs, CLECs [competitive local exchange carriers], streaming media providers and others.

MCN: So you could lose a little business when the moratorium ends?

SL: Yes.

MCN: Have you gotten any sense that anyone on the Hill may push to delay the moratorium given the economic climate and the potential loss of revenue to states?

SL: I don’t think we have seen anything from specific states looking to push this.

MCN: You have said that ‘some communications companies that are more heavily focused on providing traditionally taxable services question whether the internet tax moratorium comes at the expense of increased share of tax burden on their services.’

SL: It means that you have more traditional, point-to-point connectivity services that have always been subject to communications taxes and continue to be, and you have internet-based services where no taxes apply.

MCN: Are they concerned the taxes may shift to them?

SL: Yes, for the last seven states. And as we exit this chapter, I think it is going to be interesting, from a midterm horizon perspective, as these states start looking for ways to increase revenues. You are seeing that on the streaming media side.

MCN: Talk a little about that.

SL: You are starting to see jurisdictions impose streaming-specific taxes on things like Netflix and Disney Plus subscriptions. Roughly half the states [in the country] are applying sales and use taxes, and seven or eight of them are applying streaming ‘comm style’ taxes.

Again, you are seeing a transition from traditional TV, regulated service comm taxes. And you are seeing a shift in buying patterns to streaming services in that revenue mix.

MCN: So ISPs in those states that have to drop those access taxes might expect them to start trying to impose taxes on their streaming services?

SL: Yes, I think that is absolutely an issue that states are actively considering as the tax revenue base continues to decline. Some of these [taxes] are statewide, some are in specific municipalities. For example, Chicago has an amusement tax whose origins, I think, go back to fairs and they have used this as a means to tax streaming service.

MCN: For the ISPs in the seven grandfathered states, the advice should be to watch out for new taxes, perhaps on streaming services, particularly given pandemic-decimated budgets and the fact that the FCC is disallowing in-kind equipment and service exactions in franchise agreements?

SL: Exactly, and franchise fees are a big component of that. λ

Media Riders In Mix as House Prepares CR Vote

john.eggerton@futurenet.com (John Eggerton) — Fri, 11 Dec 2015 12:45:00 +0000

The House will vote today on a five-day continuing resolution (CR), which will extend the wrangling over potential riders on the omnibus spending bill that include on media ownership and network neutrality.

The Senate approved the stop-gap measure by voice vote Thursday (Dec. 10). The White House has said ideological riders, like the one defunding or limiting the Open Internet rules, are unacceptable and could lead to a government shutdown.

The government runs out of money today--Dec. 11--but no agreement on that omnibus bill has yet been struck, so the CR is needed to avoid a government shutdown. The CR extends to Dec. 16.

The media riders still in play include one that would grandfather joint sales agreements that would otherwise be treated as attributable ownership interests in a March 2014 FCC decision, block funding of new network neutrality rule implementation until legal challenges were resolved and not allow those new net neutrality rules to result in rate regulation.

Also on the docket in the House is a vote on a bipartisan trade bill, the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644), that includes a permanent moratorium on taxing Internet access service.

The House and Senate passed different versions of the trade bill, and have resolved those differences, in the process adding a provision making the Internet Tax Freedom Act (ITFA) permanent, rather than having to be periodically renewed.

The Senate is also expected to approve the conferenced bill early next week. (ITFA was to have sunset Dec. 11, but was extetended as part of the previous CR that is getting a five-day renewal Friday).

Michael Needham, CEO of Heritage Action, urged final passage.

“On very rare occasions genuine conservative policy victories emerge from a conference committee. A permanent ban on taxing Internet access is one such victory," he said. "The permanent ban also deprives proponents of an Internet sales tax from using it as leverage to achieve their unpopular and destructive policy. That is a double win for taxpayers. Heritage Action reserves the right to key vote against any effort to strip this important provision from the bill.”

That"destructive policy"reference is to those who were trying to link the permanent moratorium with the Marketplace Fairness Act, a bill that would apply a sales tax to online retailers.

Sen. Thune Stumps for Internet Tax Freedom Act

john.eggerton@futurenet.com (John Eggerton) — Thu, 22 May 2014 19:45:00 +0000

Sen. John Thune (R-S.D.), ranking member of the Senate Commerce Committee took to the Senate floor Thursday to call for passage of the Internet Tax Freedom Forever Act.

Co-sponsored by Sen. Ron Wyden (D-Ore.) and introduced last August, the bill would make permanent the moratorium on Internet access taxes passed back in 1998.

It would also remove the grandfather clause that has allowed six states, including his home state, to tax Internet access. The bill has 46 co-sponsors.

That moratorium prevents state and local governments from levying taxes on Internet access. It has been extended three times already, Thune pointed out.

Cash-strapped states and local governments are always looking for new revenue sources, but the bill would make sure that would not include taxes on access to the Internet. That would make sense given that the government has made a priority of promoting Internet access and adoption and keeping the cost down.

Thune extolled the virtues and power that is almost taken for granted. "But we can't take for granted that the moratorium on Internet access taxes has contributed to the Internet now being access by hundreds of millions of Americans every day.

Thune, who is co-chair of the Congressional Internet Caucus, pointed out they are talking a lot these days about how to spur broadband adoption (as is the FCC and the White House) and promote the Internet as an engine of growth. One of the ways to do that is making broadband more affordable, he said, and one of the ways to do that is a tax-free net. He points out that the bill would also prevent multiple, discriminatory taxes by different states on the same sale.

He said many ISPs are beginning to warn customers they may have to assess an Internet tax if Congress fails to act.

Thune said passing extensions year after year was a waste of time. The bill is not slated for Senate action, but Thune said the Senate should take it up after it returns from the Memorial Day break, to "make sure that American don't wake up on Nov. 2 with new, unexpected taxes."

The Internet Tax Freedom Act is currently scheduled to expire Nov. 1, 2014, so this new bill would make that deadline moot.