On December 9, the Permanent Internet Tax Freedom Act (PITFA), which NACo opposes as a preemption of state and local taxing authority, was included in the compromise legislation negotiated between the House and Senate on an unrelated trade customs and enforcement bill.
PITFA was not part of the underlying customs legislation passed by either the Senate or the House. PITFA’s sudden inclusion is notable because the underlying legislation only relates to foreign trade and national security. As a result, Senators who have worked to support us on issues like Marketplace Fairness and temporary extensions of the Internet Tax Freedom Act are seeking to raise a point of order when the report comes up for consideration.
Enacted in 1998, the Internet Tax Freedom Act (ITFA) preempts state and local government authority to tax internet access services. Seven states (Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin) were grandfathered under ITFA and currently are able to collect over $500 million a year in taxes. When first enacted, ITFA was only intended to be temporary in order to allow the internet to “grow.”
NACo has called for any extensions of ITFA to only be temporary, forcing Congress to revisit the preemption of state and local authority.
If the PITFA provision remains in the conference report, the grandfathered states would lose this current revenue stream and the remaining state and local governments stand to permanently lose the ability to tax internet access services. NACo has also argued that any consideration of ITFA should be made in conjunction with consideration of the Marketplace Fairness Act (MFA) or the Remote Transactions Parity Act (RTPA), which would allow state and local governments to collect existing taxes on remote sales, such as those conducted online.
MFA and RTPA would provide a certain level of protection for counties, allowing them to collect existing taxes from online and remote sales that could help offset the significant losses resulting from any extension of the ITFA.
NACo asks that you contact your Senators and urge them to oppose the inclusion of PITFA language in the Customs Conference Report, particularly without including MFA or RTPA.
Click here for the NACo Policy Brief on the Internet Tax Freedom Act.
Click here to access NACo’s Marketplace Fairness Act Action Center.