[IP] The facts on ' Congress says new tax on all Internet connections is an "option" '
Title: The facts on ' Congress says new tax on all Internet connections is an "option" '
------ Forwarded Message
From: Hank Levine <HLevine@xxxxxxxxxx>
Date: Sat, 29 Jan 2005 10:06:06 -0500
To: <dave@xxxxxxxxxx>
Cc: "'Rosen, Stephen'" <SRosen@xxxxxxxxxx>
Subject: The facts on ' Congress says new tax on all Internet connections is an "option" '
As always on telecom/technology tax issues, there is enormous misinformation floating around about this one. Here are the facts on this one, from the lawyer who has been litigating (and winning) most of the cases seeking to strike down the excise tax on long distance services:
- Since early 2004, one Federal Court has upheld and (as of this count) four have struck down application of the federal excise tax on telecommunications to long distance service. The one case upholding the tax was appealed; a decision is expected shortly (no predictions, but the judges hearing the appeal were hostile to the government’s arguments). The basis for the suits is the fact that the statute defines taxable toll service as service where the charge for individual calls varies by elapsed time and distance, and as everyone knows LD charges no longer vary with distance.
- The Joint Committee on Taxation is not really a committee (the tax-writing committee in the House is Ways & Means; in the Senate it’s Finance). It’s actually a “holding company” for Congress’s staff experts on tax matters. Influential, but not an operating legislative group, if you see what I mean.
- In light of the growing deficit, etc., the Joint Committee was asked (as it often is) to come up with (to quote the title of its report) “Options to Improve Tax Compliance and Reform Tax Expenditures.” The Committee’s staff report, released on January 27th, generated a lot of headlines, mostly concerning “big dollar” moves to crack down on tax shelters, limit the deductibility of interest on home equity loans that are not first mortgages, etc.
- Buried deep in the Report – pages 368-378, to be exact -- are a series of Options to “Modify the Federal Excise Tax on Communications Services.” Three options are identified.
- Under Option 1, the definitions in the tax would be changed to make it clear that all long distance and local service is to be taxed regardless of whether charges are fixed or vary by distance, time, or both. No view is expressed on whether VOIP, et al, is taxable (though this change would make it more likely that such services would be found taxable.).
- Under Option 2, voice communications service would be taxable “regardless of its technical form.” This would make private networks (currently exempt) taxable, and would also tax VOIP. Interestingly, under Option 2 the Joint Committee report recommends broadening the current exemptions for certain industries (the press, radio and TV networks, and common carriers like trucking and railroad companies, etc).
- Under Option 3, the tax base would be expanded to cover all data communications services to end users.
- Interestingly, the Joint Committee Report makes it clear that the staff of the Joint Committee views the telecom excise tax with what can best be described as a jaundiced eye. The first section in the discussion section of the Report states, for example, that “[t]here is no compelling reason for imposing taxes on communications services.”
Please consider circulating this to clean up the misinformation/rumor/innuendo that is floating around out there. I’d be happy to give more details, or forward the relevant section of the Joint Committee report.
Hank Levine
Levine, Blaszak, Block & Boothby, LLP
2001 L Street NW Suite 900
Washington, DC 20036
Ph. -- 202-857-2540
Fax -- 202-223-0833
email -- hlevine@xxxxxxxxxx
-----Original Message-----
From: David Farber [mailto:dave@xxxxxxxxxx]
Sent: Saturday, January 29, 2005 6:05 AM
To: Ip
Subject: [IP] Congress says new tax on all Internet connections is an "option"
------ Forwarded Message
From: Declan McCullagh <declan@xxxxxxxx>
Date: Fri, 28 Jan 2005 17:26:10 -0600
To: <politech@xxxxxxxxxxxxxxx>
Subject: [Politech] Congress says new tax on all Internet connections is an
"option"
http://news.com.com/2100-1028_3-5555385.html
Congress proposes tax on all data
Published: January 28, 2005, 3:50 PM PST
By Declan McCullagh
An influential congressional committee has dropped a political
bombshell by suggesting that a tax originally created to pay for the
Spanish American War could be extended to all Internet and data
connections this year.
The committee, which is deeply involved with writing U.S. tax laws,
unexpectedly said in a report on Thursday that the 3 percent
telecommunications tax could be revised to cover "all data
communications services to end users," including broadband, dial-up,
fiber, cable modems, cellular and DSL (digital subscriber line) links.
Currently the 3 percent excise tax applies only to traditional
telephone service. But because of technological convergence and the
dropping popularity of landlines, the Joint Committee on Taxation
concluded in its review of tax law reforms, it may make sense to
extend the 100-year old levy to new technologies. The committee did
not take a position on whether Congress should approve such an
extension and simply listed it as an "option."
[...]
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