Tax News

CCH (cch.taxgroup.com) reports:

The U.S. Senate has passed legislation that would extend for seven years the existing moratorium on state and local Internet access taxes, which is currently set to expire on November 1, 2007. The U.S. House of Representatives previously passed a four-year extension. (TAXDAY, 2007/10/17, S.2) The houses must now reconcile their differences before the legislation can go to the President for his expected signature.
The Senate passed the legislation it had received from the House after amending it in the following manner.
-- The moratorium on state and local taxes on Internet access and multiple or discriminatory taxes on electronic commerce that was originally enacted in October 1998 would be extended until November 1, 2014 (rather than until November 1, 2011, as in the House version). The grandfather clause for taxes in existence prior to October 1, 1998, would also be extended until 2014 (rather than 2011).
-- A state or local government that has imposed a tax on telecommunications service purchased, used, or sold by a provider of Internet access would be held harmless until June 30, 2008 (rather than until November 1, 2007, as in the House version). Similarly to the House version, the hold harmless provision would only operate if a public ruling applying such a tax was issued prior to July 1, 2007, or such a tax is the subject of litigation that was begun prior to July 1, 2007.
-- The definition of "Internet access" would be amended to shield from taxation a home page, electronic mail, instant messaging, video clips, and personal electronic storage capacity that are provided independently or not packaged with Internet access. The House version would only protect these services from tax when they are furnished as part of a service to connect to the Internet.
-- The grandfather clause that permits Internet access taxes in force prior to October 1, 1998, would not apply to any state that has, more than 24 months prior to the enactment of this legislation, repealed its tax on Internet access or issued a rule that it no longer applies such a tax. The House version does not contain a similar provision.
Subscribers to CCH Tax Research NetWork can view the text of the legislation passed by the Senate.
H.R. 3678, as amended and passed by the U.S. Senate, October 25, 2007.