Bills
| 3.23.22

Should New Taxes on Internet Access and E-Commerce be Banned? (S. 431)

Do you support or oppose this bill?

What is S. 431?

(Updated April 18, 2019)

This bill would permanently extend the ban on state and local internet access taxes, and the ban on “multiple or discriminatory taxes” on electronic commerce.

If you're buying something on the Internet, an example of “multiple taxes” on electronic commerce would be if the state where you live imposes a sales tax on the transaction  the state where the seller is located also imposes a tax on the transaction because it was made on the internet.

Discriminatory taxes, on the other hand, are taxes that treat electronic commerce differently than mail-order purchases, or going into a real brick-and-mortar store. The discrimination counts if the tax is only imposed on e-commerce, is applied at a different rate, or the tax has different collection requirements.

State and local governments that already have taxes on internet access and e-commerce would be able to keep them in place, as this legislation would only apply to taxes imposed after this bill’s enactment — meaning that existing taxes would remain unchanged.

Argument in favor

Imposing a tax on internet access would impede the ability of individuals to use a tool that has become a vital part of modern life. Keeping the internet tax-free benefits consumers, businesses, and the economy as a whole.

Argument opposed

Governments at the state and local level need to raise revenue somehow, and levying taxes on internet access or e-commerce would provide them with significant streams of tax revenue to fund their budget priorities.

Impact

People who surf the internet, companies and vendors selling things on the internet between states, states with internet taxes, the Internal Revenue Service, and Congress.

Cost of S. 431

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. John Thune (R-SD) introduced this legislation to ensure that individuals and businesses can continue to have tax-free access to the internet:

"For successful 21st century innovators and entrepreneurs, the Internet is their lifeblood. We should be celebrating their success, not taxing the tools they use to achieve it. Our bill, which would permanently ban Internet taxation, would encourage more American innovators and entrepreneurs to use broadband to develop the next big thing, while keeping the Internet open and accessible to consumers across the country."

Currently this bill has 50 bipartisan cosponsors in the Senate, including 11 Democrats and 39 Republicans. The House passed a nearly identical companion bill by voice vote in June 2015.

Of Note: A study done by the Congressional Research Service notes that while 13 states used to have local internet taxes, six have since eliminated those taxes, leaving only Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin.

In a paper published by the Center on Budget and Policy Priorities opposing the permanent extension of the ban on internet taxes, it was projected that tax revenues from these taxes in Ohio, South Dakota, Texas, and Wisconsin could total more than $500 million.

On the other side of the argument, proponents of banning internet taxes point to economic studies that indicate higher taxes discourage economic growth.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user Daniel Rehn)