States call to strip Internet tax ban out of customs bill

State governors and legislatures want Congress to strip out a tax ban on Internet access from a trade enforcement compromise expected to reach President Obama’s desk. 

The National Governors Association and the National Conference of State Legislatures said the addition was unrelated to the bill and asked Congress to respect state authority. 

{mosads}“Governors and state legislators have repeatedly called on Congress to keep IFTA [the Internet Tax Freedom Act] temporary to honor state authority and preserve the revenues of those states grandfathered under the bill,” the groups wrote in a statement Friday. 

“We have also urged Congress to first address the sales tax collection disparity between online and Main Street retailers before extending ITFA.”

Since 1998, states and local governments have been banned from taxing customers who pay for Internet access. 

This week, a proposal to make that ban indefinite and slowly phase out a loophole made its way into the conference report on trade enforcement legislation.

Like retailers, the state groups are pushing Congress to instead to pass legislation that would give them the power to collect online sales tax from businesses that don’t have physical locations in their states.

Both groups have been unsuccessfully pushing for years to tie the two proposals together. 

“The conference committee’s inclusion of permanent ITFA in a non-germane conference report ignores both regular order and the calls of businesses, states and local governments to level the playing field for all retailers,” the groups said in the statement. “NGA and NCSL call on Congress to reject the inclusion of ITFA in the conference report and to instead take up legislation to improve competition and restore fair commerce.”