Action Alert on Permanent Internet Tax Freedom Act

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    Action Alert on Permanent Internet Tax Freedom Act

    Urge Your Senators to Oppose a Permanent Extension of the Internet Tax Freedom Act (ITFA)

    This week, the U.S. Senate is expected to consider a measure (H.R. 644, the Trade Facilitation and Trade Enforcement Act) that includes a provision to extend the Internet Tax Freedom Act (ITFA) indefintely.

    The National Association of Counties (NACo) opposes this provision because it would permanently prohibit state and local governments from collecting taxes on Internet access services—and preempt us from setting our own tax policies.

    There are seven “grandfathered” states that can currently collect tax on Internet access services:

    • Hawaii
    • New Mexico
    • North Dakota
    • Ohio
    • South Dakota
    • Texas
    • Wisconsin

    The ITFA extension would eliminate — after a four-year period — the authority of the grandfathered states to collect taxes on Internet access services. The Congressional Budget Office (CBO) estimates that this would cost them several hundred million dollars annually.

    NACo is also concerned that Congress is not willing to take up a long-standing priority for counties: remote sales tax legislation, such as the Marketplace Fairness Act or the Remote Transactions Parity Act.

    Immediate Action Needed

    1. Urge your Senators to oppose efforts to permanently extend the Internet Tax Freedom Act.
    2. Urge your Senators to support remote sales tax legislation, like the Marketplace Fairness Act or the Remote Transactions Parity Act.


    State and county governments generally have the ability to establish local tax policies to address the needs of our local communities. NACo opposes any attempt to preempt that authority.

    ITFA was originally designed to foster the then fledgling Internet in 1998 by temporarily suspending new taxes on Internet access and – out of respect for state and local government authority – it was set to expire after two years.

    Subsequent extensions of ITFA were temporary as the original intent of the law was to compel Congress to periodically revisit whether the benefit of providing preferential treatment to one particular industry outweighed the cost of preempting state and local government authority. The Internet in 2016 is far more advanced than in 1998 and does not warrant the same level of protection it may have over a decade ago.

    NACo is not advocating that Internet access should be taxed, but rather, that the decision should be left up to state and local governments.

    Counties have also struggled over the past two decades with the explosive growth of the Internet and its impact on the local retail marketplace. NACo – along with other state and local government groups and members from the retail community – has long advocated for the authority to enforce existing sales tax on remote sales.  State and local governments have lost billions of dollars in uncollected sales taxes and Main Street businesses are at a significant disadvantage compared to online retailers that do not have to collect any tax.

    Enacting remote sales tax collection legislation would restore budget autonomy to state and local governments and would ensure that competition, not a tax loophole, determines who succeeds in the marketplace. This legislation is not a new tax, but would require states to simplify their sales taxes and ease compliance in return for the authority to collect the billions of dollars in taxes that are already owed.


    • NACo Senate letter opposing permanent Internet Tax Freedom Act
    • NACo action center on Marketplace Fairness Act
    • NACo policy brief on remote sales tax collection
    • NACo policy brief on the Internet Tax Freedom Act
    • Letter template for communicating with your Senator

    If you have questions or need assistance, contact Mike Belarmino at or 202.942.4254 or Jacob Terrell at or 202-942-4236

    Urge Your Senators to Oppose a Permanent Extension of the Internet Tax Freedom Act (ITFA)

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