State may lose revenue in Internet tax moratorium

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(Host) The Douglas administration says a proposed extension of the federal moratorium on the taxation of Internet providers is too broad and needs to be changed. If the bill passes in its current form, Administration Secretary Michael Smith says the state could lose up to $25 million a year in revenue.

VPR’s Bob Kinzel reports.

(Kinzel) Ten days ago, a temporary ban on the taxation of Internet providers expired and backers of the proposal felt confident that they would be able to enact a permanent ban in a matter of days. Supporters of a permanent ban, like Senator Patrick Leahy, argue that allowing states to tax Internet providers, like AOL or MSN, will discourage the expansion of the Internet in the future.

But a number of states, including Vermont have raised serious concerns about the scope of the new law. Administration Secretary Michael Smith says the governor strongly supports a ban on the taxation of Internet providers. But Smith says the legislation is written so broadly that it could apply to all of the services provided by a telecommunications company that also happens to offer Internet access. That’s a move that would result in the loss of as much as $25 million to the state treasury:

(Smith) “What could be read into this bill – and that’s what we’re worried about – is that it broadens it, it broadens it to all telecommunications providers. And I think we’re all in agreement of what the objective of this bill is, is to put a permanent moratorium where there may be just some confusion. How do we tweak the language to make sure that this doesn’t broaden the purpose of the bill for unintended purposes?”

(Kinzel) The proposed legislation would also ban the taxation of high speed digital telephone lines that are used to connect consumers to the Internet. The Senate is expected to continue its debate over this plan next week.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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