Governor Inslee opposed to new taxes on internet access

August 21, 2014

What seemed almost impossible a few months ago is becoming more probable with each passing day; taxes being charged for internet access. The return of taxes on internet access may occur due to the failure of Congress to either extend temporarily or permanently the Internet Tax Freedom Act (ITFA). The current ban on internet access taxes expires on November 1.

While there is general agreement in Congress to extend the ban the question is whether to make it permanent or temporary. Further complicating a relatively easy decision is an effort to tie the ITFA ban to authorizing states to collect sales tax on online purchases with approval of the Marketplace Fairness Act. The Wall Street Journal has this summary of the controversy.

What does this mean for Washingtonians if November 1 comes with no action by Congress? According to the Department of Revenue (DOR), if the ITFA were to expire:

  • No sales tax would apply to internet access for those that receive their service bundled with other telecom (phone, cable, etc).

  • Sales tax would apply to those that purchase internet service separately from an ISP (AOL as example) but that tax would only apply to the DSL/telecom delivery of the internet.

  • Sales tax would apply to individual ISPs that purchase telecom for their bandwidth (etc).

With the possibility that taxes could soon be charged for certain type of internet access in Washington I asked the Governor's office yesterday what is the best way to describe Inslee's stance on this issue. Here is the answer I received:

Governor Inslee does not support increasing or levy any new taxes on internet access.

This statement appears to indicate the Governor would work to undo the sales tax being charged for internet access as described by DOR should Congress fail to act but Inslee's prior definition of what is or isn't a tax increase causes some pause since these taxes would automatically take effect unless stopped with new legislation.

Based on this August 4th letter the Governor sent to Congress, Inslee would prefer a temporary extension of ITFA versus permanent ban:

State and local governments and many stakeholders have long opposed ITFA for the restrictions that it places on their authority. This bill was first passed as a temporary measure, in 1998, when the internet was a nascent and growing industry in need of special tax treatment, and has been extended several times since. We join other state and local leaders around the country in their wariness of a permanent extension of ITFA. However, we strongly believe that a temporary extension of this measure is a worthy compromise in exchange for passage of Marketplace Fairness, and therefore we request your support for S. 2609.

For those wanting to keep a close eye on this issue the ITFA Coalition has posted this countdown clock showing by the second how much time is left before taxes are charged for internet access.

Additional Information
Will the Washingtons keep access to the internet tax free?