On June 9, the House passed the Permanent Internet Tax Freedom Act (PITFA) (H.R. 235) by voice vote. PITFA would permanently extend the Internet Tax Freedom Act, which was enacted in 1998 and extended several times thereafter, to outlaw state and local taxation of Internet access and prohibit multiple or discriminatory taxes on electronic commerce. NACo opposes the measure because it preempts state and local tax authority, and along with several local government groups, sent a letter to House members to voice opposition. Senate prospects for the bill are uncertain.

ITFA was designed to prevent state and local governments from adding taxes to the monthly charge that subscribers pay for access to the Internet through an Internet Service Provider. Its intent was to encourage development of the Internet, which, in 1998, was a relatively new technology. This justification is no longer applicable given the substantial advancements in technology that have occurred since.

Additionally, because of the broad definition of "Internet access" currently in the law, many things, such as the ever-increasing number of goods and services being delivered over broadband, will be exempt from state and local taxation even though they have little to do with Internet access. This will result in increasing amounts of lost revenue that state and local governments rely on to fund essential services in their communities, like firefighters and police officers, schools, parks, libraries and continued investments to address aging infrastructure.

Attention now turns to the Senate, where the bill's path remains uncertain. Soon after the House passed the bill, the Senate sponsors of the Marketplace Fairness Act - Sens. Enzi (R-Wyo.), Durbin (D-Ill.), Alexander (R-Tenn.) and Heitkamp (D-N.D.) - issued statements expressing support for consideration of extending the Internet Tax Freedom Act only if it were coupled with the Marketplace Fairness Act (MFA).

MFA is a long-standing priority for NACo that would grant state and local governments with the ability to enforce existing sales tax laws on online purchases.  Late in the 113th Congress, the Senate MFA sponsors introduced legislation that combined a 10-year extension of the Internet Tax Freedom Act with the MFA.  However, the bill did not receive consideration before the end of the session. NACo will continue to monitor and report developments as they occur.