For over a decade now (two decades for a select few), common people like you and me have been using a conglomerate inter-networked set of systems that is commonly referred to as internet. We all know that the complex series of networks grew (and keeps growing) today as the opportunities are infinitely bound. It is full of information. It is a medium and a virtue of communication. To many, it is a goldmine of opportunity waiting to happen. And most importantly, it is a free medium of information and information exchange.
While the history of the internet is certainly one to look at, that is far from where I want to go here. And many of you certainly know what the internet is today without my telling you. More importantly, however, many people are arguing that they are witnessing the end of the internet’s "golden age" as the real-life reality blends in with it. The United States Congress is in a fury of debates as whether or not the international medium, the internet, should be taxed. Local and state governing entities, specifically, are looking to force the national body to channel revenue from it. What does this mean? What exactly is meant by "internet tax?" And what could we expect as its implications?
Before I start off here, I would like to make it very clear that this article is not meant to debate the rights and wrongs of taxation. That is far too political and a subject that would derail us from the real topic at hand — what are its implications?
Not surprisingly, this isn’t the first time that the topic of internet taxation has garnered national attention. In fact, the topic crept up only a few years after the introduction of the internet to the mainstream public. In a way, the topic was deferred and not addressed properly in its first public appearance. The Internet Tax Freedom Act was instituted in 1998. In short, it barred all levels of government from collecting any sort of tax based on general usage of any sort of online commerce. The ITFA, as a result, systematically barred e-mail taxes, bit-taxes, as well as general bandwidth tax. This, however, did not bar taxation of consumer sales accomplished through the internet. As was the accepted policy, the ITFA was twice extended from its expiration. The most current version, enacted in 2004, was entitled the Internet Tax Nondiscrimination Act. It is set to expire in November 2007 unless an extension is in place.
When the most recent extension, the ITNA, was signed into law, the general consensus was positive. A spokesman from the Computer Technology Industry Association (CompTIA) released a statement which seemed to echo the general sentiment at the time. "With today’s signing of the Internet Tax Moratorium by George Bush, Americans can remain confident that the Internet will flourish as a powerful consumer and business tool," CompTIA group director of US Public Policy said in a statement published in PC World, "Though temporary, the moratorium’s benefits are clear. Internet access will not, for the most part, face taxes." The internet was seen as a valuable tool for consumerism and businesses. As a result of this law, consumers could use the internet as much as they wanted for as long as they wanted for as fast an internet speed as they could afford through the provider.
If we look specifically into sales, any sort of tax on the internet would likely result in internet sales being treated differently than normal physical sale of items. Today, under the ITNA, any normally taxable items (consumer electronics, household items, etc.) are taxed through internet purchase. However, as defined in the legislation, both points of sale, the seller and the buyer, must be located in the same state. That is the main reason why many of you enjoy buying on popular online stores as Newegg or Amazon. Newegg holds is main offices in The City of Industry, California as well as shipping branches in New Jersey and Tennessee. If you are from, say, Massachusetts, you are not asked to pay the county and state sales tax resulting from the purchase. However, if you live in California, you are charged the regular tax amount. Likewise, Amazon, with its main offices in Washington, will not tax you in California (though you are required to voluntarily submit tax through annual state tax returns).
My Take: What Would Taxing The Internet Do?
If there were internet taxing, what would change? Perhaps internet would grow much less than its explosive pace today as a fluid medium for business and opportunity? I would assume, perhaps, that the internet would then be used much more like we used our celluar phone minutes — in moderation. We are in an age of high-speed access to the internet and that has channeled a number of us towards unlimited and unrestrained use, day in and day out. But noting that it would cost you per time no matter what package you subscribe to through your provider, you would be more conscious of your usage. If anything, and if bandwidth taxation is substantial enough, I’d say that we would see surfing habit resembling 56k internet surfers. And as a result, it could seriously impede the tremendous growth we experience in e-commerce.
Taking it a step further, a typical internet surfer may purchase numerous products online — of which he/she may or may not be taxed for depending on where the points of sale are. However, the internet is not limited to direct purchases of products. Remember that on a very basic level, the internet is a medium for information. If a person, say, were researching a product today to buy something in person, that person is using the internet to indirectly purchase a product. If information flow is limited as a result of low usage of the internet, this could certainly impeded real-life economies as well.
In a different, but completely relevant topic, by very nature, the internet is hard, if not impossible, to control. With wireless access points everywhere today, with seemingly anonymous internet surfing we enjoy today, perhaps internet taxing is easier said than done? And since the internet is, by nature, non-geographic, would that not further make problems in uniformly taxing it? One thing, however, is for sure — if this bill were to pass, it would be a major project in terms of simply implementing it. Is it worth all the trouble or is it the absolute evil that many have spoken out against? Perhaps it’s a mix of both — but surely, how things unfold as the November expiration date approaches would be of great interest to a great number of people as its implications may be felt not only in the United States, but throughout the world.
The PCMech.com weekly newsletter has been running strong for over 8 years. Sign up to get tech news, updates and exclusive content - right in your inbox. Also get (several) free gifts.
