Oppose
the Carper-Alexander Amendment
All Consumers, even schools, libraries & hospitals, will have
to pay more for Internet access under the Carper-Alexander amendment.
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ITFA was intended to ensure
that access to the Internet is not encumbered with the burden of state and
local taxes. Access to the Internet, in
reality, begins with the telecommunications facilities providing high-speed
capability and ends with the customer's access to the Internet. However, this amendment would only exempt
the telecommunications services between the end-user consumer and the Internet
access provider's initial point of presence on the Internet.
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The proposed language
ignores, and therefore would tax, the portion of Internet access that involves
providing high-speed and backbone capability from the telecommunications
facilities to the Internet access provider or the end-user customer, as well as
the telecommunications that make up the Internet itself. These higher costs will be passed on to all
users without regard to their tax status.
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Since the proposed language
does not exempt all components of Internet access, consumers will continue to
pay tax on their Internet access through higher costs charged for Internet
access services.
The
Carper-Alexander amendment thwarts broadband competition and investment.
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The amendment would
exacerbate the current disparate tax treatment of certain of the steps involved
when an end-user accesses the Internet via high-speed access because
‘wholesale’ purchases of DSL may continue to be taxed. ISPs purchasing ‘wholesale’ DSL from
telephone companies that they in turn use to connect their customers to the
Internet will have to pay a tax. In
addition, virtually all wireless Internet access is the result of a ‘wholesale’
purchase meaning those users would be subject to tax.
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The Internet Tax
Non-Discrimination Act is intended to eliminate this disparity and create a
level playing field no matter who the provider is or what technology a consumer
uses to access the Internet, and this amendment eliminates this important goal
and perpetuates the status quo disparity that exists today.
Litigation,
Litigation, Litigation! Two year
grandfathering of current broadband taxes allows tax disparity to continue.
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States that have been most aggressive
in defying the intent of the Internet access tax moratorium by imposing taxes
on DSL would be financially rewarded and allowed to tax DSL for two more years.
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Whether or not a state taxes DSL
depends on numerous factors, including how the DSL is provided. Which states would be included in the
grandfather? Telecom companies,
ISPs and states are not in agreement on
where DSL is taxable now. The
amendment’s sponsors need to state for the RECORD which states will be permitted
to tax broadband, so consumers in those states know that their broadband access
will be taxed.
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Under ITFA it was unclear which states
were grandfathered and litigation exists on this issue today. There are several states where the taxation
of DSL is currently in dispute and grandfathering of broadband taxes would
create an administrative and legal nightmare.
Many states have issued private letter rulings to specific companies,
not binding regulations on whether DSL is taxable. The status of taxation of DSL would be thrown into legal limbo
for years to come.
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Telecommunications companies would face
a highly uncertain tax climate that could have a chilling effect on investment
in rural and underserved areas.
Hidden taxes will encourage more taxation of the Internet, not
less.
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Because ISPs will not be
allowed to ‘pass-through’ to consumers the taxes they have to pay when they
purchase high-speed transmission, the ISP will be forced to absorb the tax or
raise the price they charge the consumer for Internet access services. Therefore the cost of these government
impositions will simply be ‘hidden.’
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Consumers will have to pay
higher prices, but will not know why since the tax cost will be
buried in customer bills. Providers will take the brunt of the blame for the high
cost, not the government.
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The result will be that
state and local governments will find it extremely easy and profitable to raise
taxes on this key new technology, further thwarting Americans’ desire for
technological advances, discouraging the roll out of broadband and punishing
low income consumers.
New Internet taxes will be extremely high without political
accountability.
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State and local tax authorities will
issue administrative rulings that will extend discriminatory telecom tax
treatment to Internet services, including
DSL, wireless and Internet
backbone carriers. These tax rates are
comparable to ‘sin’ taxes, with the top ten rates ranging from about 20% in
Georgia to almost 30% in Virginia.