States Fight Internet Tax Ban, Cite VoIP Concern

PetiePooo writes "From an article at PCWorld: The Multistate Tax Commission is fighting a bill which makes the moratorium on internet taxes permanent. Their complaint is that it could be interpreted to include VoIP telephony such as Packet8 and Vonage, and they would lose that lucrative tax base as people switch from incumbent providers. The House has already approved the bill. When will the politicians figure out that VoIP is a going to end up as a product, not a service? Voice will be just another form of data. Here's another related article."

Comments

the answer

[jonwil]

Change the tax system.
Change it so that the companies providing the physical links are the ones that pay the tax.
This will solve all the issues with VOIP

Re:the answer

[Short Circuit]

That doesn't work, since one company normally provides the line, while several different companies attempt to provide the service. The company providing the line would get really pissed, since they're not the ones that have any control over usage.

Just because my T1 circuit goes through SBC doesn't mean I'm not getting the service itself from another company.

I might be way off here but...

[Max Romantschuk]

When will the politicians figure out that VoIP is a going to end up as a product, not a service?

When will people in general figure out that data transfer is going to end up as a service, not a product?

Now then, bring on the bashing...

VOIP may be data...

[mOoZik]

...but so is a regular telephone line. sure, it's analog "data," as opposed to digital for VOIP. If we follow that argument, then we shouldn't have to pay for telephone usage, either.

So the only thing that sets them apart is being analog or digital? I think if it is used for communication, they are going to see it as a threat.

Re:VOIP may be data...

[swordboy]

So the only thing that sets them apart is being analog or digital?

No...

I pay taxes on my broadband connection already. If I run VoIP through that connection, I shouldn't have to pay taxes for telecom infrastructure that I don't use.

Telecom tax is not insignificant. This is because PSTN is bulky. If I chose to move to the more efficient packet-switched service, then there is no reason that I should have to support PSTN anymore. It will only keep it alive that much longer.

Re:VOIP may be data...

[Bios_Hakr]

This explains the difference from baud and bit:
http://www.totse.com/en/technology/telecommu nicati ons/bitsbaud.html

And this explains how phase and level can combine to form a pattern of bits:
http://www.airlinx.com/details/QAMAirlinx.h tml

There is also some printed material I have that talks about modem "chirping". Basicly, the only interesting part of a wave is the peak or trough. Someone came up with a technique that allows you to send the part of the wave just before and after the peak or trough. This allows faster transmission by not waiting for the carrier to complete a cycle.

Comment removed

[account_deleted]

Comment removed based on user account deletion

All down to mismanagement

[hajejan]

VoIP is hardly the problem in this case - I think the main problem is that the states are so incredibly strapped for cash after Bush' gross mismanagement that they are basically are on the path to bankrupcy...

Hence, they would do anything for some extra cash, rather than realising that "yes, VoIP would be quite cool, and people should pay just as little tax on it as they do on the Internet itself"

Re:All down to mismanagement

[Motherfucking Shit]

Please explain how the federal deficit has anything to do with state budgets. (Hint: It doesn't, really)

Oh, is that right? You're saying that when the federal government is in the red, and can't give money to state governments because it can't even cover its own operating costs, that situation has no effect on states' budgets?

http://www.eagletribune.com/news/stories/20030211/ NH_001.htm

"Federal funding is nearly equal to the amount raised by general state taxes. In 2003, New Hampshire received $1,058,104,021 in federal funds, 26.83 percent of the $3,944,374,848 in total appropriations. Some agency or division budgets are more than 50 percent dependent on federal sources, but New Hampshire is not alone in its reliance on Washington, D.C. The national average is 26 percent, according to the Center on Budget and Policy Priorities."

http://www.lsj.com/news/local/030210_budget_1a-6a. html

"U.S. Sen. Carl Levin, D-Detroit, said the tax cut is the reason Michigan won't get more. "The president's fiscal year 2004 budget request contains misplaced domestic and economic priorities," Levin said. He called Bush's tax cut "a huge deficit creator" that "makes it impossible as a result to assist states like Michigan." Some state budgets are in their worst fiscal crises since World War II."

http://www.indystar.com/print/articles/4/008402-65 14-090.html

"For more than 25 years, the federal government has mandated special programs for students with disabilities, but it never has kept its promise to cover nearly half the cost. As a result, Indiana has been forced to pay millions of dollars each year to meet the federal requirements."

"The federal government should pay Indiana $2,622 for each student in special education -- $420.4 million total. This year, Indiana received only about $171 million -- a contribution that falls about $250 million short of the 40 percent promise. To make up for the loss, the state spent $371 million, and districts spent countless classroom dollars."

Before you state the obvious (one of the sources quoted is a Democrat, another article notes that the federal funding problem has been going on for 25 years) I should point out that this is not an anti-Bush post. I'm just trying to clarify that, yes, the federal budget (and deficit) does affect the state budgets.

This always happens when...

[Anonymous Coward]

new technology developments allow getting for less something that people was forced to pay much more in the past.
What would happen (warning: tinfoil-hat example here) if somebody discovered a way to produce cheap energy or a way to transmit data at long distances without using radio waves?
Would the rulers push the use of these technologies by anyone, or rather immediately find a way to tax whatever material/media/principle thay're based on after being lobbied (bought) by the already estabilished industries?

Note to the States

[droleary]

Not bilking your citizens of their money does not constitute a "cost" or "loss" on your part.

Taxes at all government levels will be affected

[dacap]

Utilities such as telephones are taxed by several levels of government, not just the states. The shift of the telephone service to a permanently untaxable form will have a corresponding multi-level effect. Here in Fairfax County, VA we really get soaked - 22% levied against local service - see Fairfax County Tax Rates for details.

Take the bigger picture. This matter is really one of revenue shaping. It takes so many dollars to run the governments (that we hope are acting for the common good). They can get tax revenue from many places. The government sets various tax levels on different goods and services, and by so doing decides which industries and activities it wishes to encourage by giving them a break. This principle is applied at all levels of government. Losing the telephone tax base is not the end of the world - governments will increase the revenue stream elsewhere. Income, personal property, and real estate are perennial favorites here in the US.

That said, Congress should think carefully before reducing the choices that subordinate government levels have.

Re:Taxes at all government levels will be affected

[Wylfing]

Losing the telephone tax base is not the end of the world - governments will increase the revenue stream elsewhere.

This is a Good Thing(tm). The fewer tax streams, the better. It is vastly preferable to be taxed once (say, on income and capital gains, because it needs to be progressive) and be done with it. Taxing citizens 2-5 times on the same money only creates government incentives that are hard to manage. This is a prime example -- government effectively working against the people because of a too-complex tax picture.

on what basis will they collect the tax?

[jlemmerer]

will they tax the online time or data that is transmitted. and will i get a refund for unwanted data (like spam) or what? and what if you get you data from another country? or another countryman gets data from you? how come that you should pay for something that is wanted by another guy in a country that doesn't tax data? do i also have to pay for the data sent by a malicious worm?
questions over question...

Re:The award for the most naive question goes to

[LostCluster]

When was the last time you carried a box of VoIP out of a store or had it shipped by UPS... seems more like a service to me...

Re:"Today is a historic day"

[Motherfucking Shit]

How many of your democrats thought you would be agreeing with a republican today?

Me.

I'm a registered democrat, but only because I lean slightly left of center as opposed to right of center.

I'm pro-gun (typically a conservative trait), but I'm also pro-choice (that disqualifies me from being a true conservative, I suppose). I don't favor taxes (I must be an evil republican), but I don't favor the death penalty either (wait, I must be a bleeding heart). I support the idea of gay marriage (now the neocons surely won't accept me!) but I don't care much for welfare (so maybe I'm conservative after all...).

Goddamnit, it's time that people stop seeing things in black and white!

I'm a democrat but I agree with republicans every day. And republicans agree with me. Not on everything, mind you, but nobody is required to vote a straight ticket. You should vote for the candidate you feel represents your stance on the issues, regardless of which party they're aligned with. If you're a registered republican that doesn't mean that you can't vote for a democrat when he makes sense, and vice versa.

The fact that I'm pro-choice doesn't make me a left-wing nutcase. The fact that I don't like the idea of subsidizing people who are too lazy to find a job and too careless to bother with birth control and wind up with 6 kids whose lives are paid for with my tax dollars doesn't mean I hang out with Rush Limbaugh. The fact is, I can take a liberal stance on one issue and a conservative stance on another. And regardless of how I'm registered, I can and will vote for any damned person I please.

I've voted for republicans and I'll do it again, despite the fact that I'm a registered democrat. There are a fair share of politicians from both parties who "get it." (Arguably there aren't enough from either camp who "get it," especially when it comes to technology, but such is life.) There are also a fair share of politicians from both parties who clearly don't "get it." The ones who don't "get it" - for my own personal value of "getting it" - will not be getting my vote. I don't care what their party affiliation is.

Just because Chris Cannon is a republican doesn't mean that he and I can't see eye to eye on something. Today, we do see eye to eye on the issue of internet commerce. Tomorrow, on some other issue, who knows.

In America, voting is not only a right, it's a duty. Just remember to vote for the candidate, not for the party.

Re:VoIP in place of phone service

[RevMike]

It's still phone service. Phone service that's delivered over airwaves, and often is digital these days, is called cellular and that's been taxed since the day it started. Why does VoIP's phone service deserve an exemption?

If you read the articles more closely, you'll see that internet based VoIP is not really their worry.

MTC officials say the change could easily be interpreted to mean voice or other telecommunications services offered through packet switching technology. With telecommunications companies expected to move much of their voice services from land-line to voice over IP services, the impact to state and local governments could grow significantly, says Loren Chumley, Tennessee's revenue commissioner.

States don't object to a narrow ban on Internet access taxes, Chumley adds. "The new, multibillion losses for state and local governments would result from language in the House bill as courts interpret it as providing a blanket exemption for non-federal taxes for the telecommunications industry, granting that industry an unprecedented church-like exemption status," Chumley says.

As more and more telephone companies switch their internal networks to VoIP, they begin to look more like "internet" companies. The states are (wrongly, IMO) concerned that they'll lose the ability to charge sales/income/proprty taxes on telcos the way they could tax any other business.

What the moratorium does is block internet s[ecific taxes. Fot instance, you can't be charged more taxes for a phone line that is used for internet access than for a regular voice line. You can't be charged a higher sales tax rate because you purchased an item over the internet rather than on the phone. Internet oriented businesses can't be discriminated against.

What other charges will there be?

[LorneReams]

On my phone bill, I pay almost 30% to fees and taxes. On VOIP, will they try to add FCC and associated infrastructure charges when the infrastructure is now irrelevant? I can understand paying a 911 tax (somewhat) but paying a charge that is supposed to cover the cost of the wires seems a bit ridiculous. I can't see them letting go of this money, both in taxes and in fees.

Re:The award for the most naive question goes to

[SpinyNorman]

When was the last time you carried a box of VoIP out of a store or had it shipped by UPS... seems more like a service to me...

Nope.

Your ISP provides a service (internet connectivity).

VoIP is nothing more than the VoIP phone that you carry out of the store that enables you to use it for voice.

What you are saying is equivalent to proposing to tax people who buy fax machines or answering machines to get added value out of their (current) phone service, because "fax is a service" and "automated call answering" is a service.

An analogy....

[wowbagger]

Believing that giving more money to the government will reduce deficits is like believing that buying an alcoholic another drink will slake his thirst.

The only real way to solve this problem is to put measureable, non-revokable penalties on government officials who overspend - for example, by saying that Congress shall not be paid, nor accrue retirement benefits, during any year in which the government runs a deficit (and a deficit shall be defined simply as "spending more money than you took in", no more funny accounting tricks).

We must be able to run a deficit during times of crisis (think World War II), but there needs to be a strong disincentive to prevent perpetual crisis.