New York State has taken a stand by promising Internet service providers (ISPs) that it will impose no new taxes on them. US state and local government bodies regard the Net market as a source of untapped revenue, with proposed access taxes being added to existing telecommunications taxes already paid by ISPs. But this week the State of New York announced that it would follow the recommendations of its internal tax department that there should be no additional Net-specific taxes.
There are over 70 ISPs in New York State, including Prodigy, which employs over 600 people. New York governor George Pataki said: ?New York must encourage the new media industry. This report should send a clear signal to ISPs that New York welcomes this growing industry and the jobs it provides.?
The New York decision comes less than a week after a cross-party plan to ban states from introducing new Net taxes was proposed in Washington by California?s Republican representative Chris Cox and Oregon?s Democratic senator Ron Wyden. Wyden said: ?The absence of cyber-tax legislation risks development of a hodge-podge of overlapping, conflicting and burdensome taxes that will hurt American business and consumers.?
Next month, Wyden and Cox hope to present a bill to Congress. If accepted, their proposals will represent the first attempt to impose a uniform Net-related tax regime and may set a national and an international precedent. At present, 40 US states have a sales tax on electronic transmissions with 10 of them going a stage further and taxing different categories of electronic information. Last year, Florida introduced proposals to levy a seven per cent telecoms sales tax and a 2.5 per cent gross receipts tax on ISPs. That sparked a revolt from technology firms.
Suppliers have come up with an alternative tax option. Last year, the Interactive Services Association (ISA) commissioned a white paper on the whole Net taxation issue. The report concluded that Net-related taxes were inevitable. But it argued they should not be levied as sales tax on suppliers, but as transaction taxes on subscribers. Since the report is intended to help the ISA in lobbying Congress, this argument is likely to be raised when the Cox-Wyden bill appears next month.
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