To Discriminate Or Eliminate -- That Is The Question: Congress May Again Extend Prohibition Against Internet Tax Discrimination.

Mondaq Business Briefing, July, 2004

Originally enacted in 1998, the Internet Tax Freedom Act placed a three-year moratorium on the taxation of Internet access and other discriminatory taxes on sales of goods and services over the Internet. Essentially it exempted from taxation the fees that consumers pay to Internet service providers like AOL or Earthlink. The moratorium was extended for two years in November 2001 and expired in November 2003.

Since the expiration of the moratorium, Congress has been debating which methods of Internet taxation should be taxed. One of the primary issues is regarding the taxation of services like Digital Subscriber Line ("DSL"), which was introduced after the ban. Under federal law, cable-modem services cannot be taxed but phone lines are taxed and DSL uses phone lines. A...