Internet Taxes
Every day we get to work, bring up Internet browser, email our friends, coworkers, may purchase a personal item, may even purchase business items, but we rarely think of the tax implications of doing so. Don’t Mess with taxes has a great blog post on temporary moratorium on Internet taxes.
“A vote is scheduled today in the House on H.R. 3678, the Internet Tax Freedom Act [ITFA] Amendments Act of 2007. This latest extension will forestall Internet access taxes through Oct. 31, 2011. It also narrows the definition of “access” to a consumer’s Internet connection and exempts e-mail and instant messaging from taxation by local and state authorities.”
Most people may not realize that we have not been paying taxes on Internet access. 1998 the first ITFA passed prohibiting taxing Internet access and email taxes, ever since then it has been continued by congress. However, the IFTA prohibition is often confused with why we don’t pay sales taxes on Internet commerce a.k.a. that gadget you bought from a California tech designer. That is government by another set of standards. The debate is heating up concerning sales tax on Internet commerce like that and I will bring you a more in-depth analysis of this debate in the near future.
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Tags: Taxes
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October 18th, 2007 at 12:29 pm
Sales tax is levied by states, not the Feds. Hence it’s really messy to enforce when you have massive cross-state commerce enabled by the interwebs. I believe that this is a case where the law is clear (you must pay sales tax on items purchased online) but not enforced very well.
October 19th, 2007 at 7:42 am
Your close to right. Sales tax is only required to be collected and remitted by stores if they have Nexus with the particular jurisdiction. That is, they have some physical or substantial connections with the state, i.e. a store, employees, property, heavy advertising. If the company does not have that, by law they cannot be required to collect and remit sales tax to the state. However, every state that has a sales tax also has a use tax. A use tax is an equal rate as sales tax but requires the consumer to pay the tax directly to the government on purchases out of state that they did not pay sales tax on. Use tax is not enforced very well on individuals.