Seven states to lose millions from Internet access tax ban

Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin are expected to lose hundreds of millions of dollars in revenue when a permanent tax ban on Internet access closes off a loophole they have relied upon for more than a decade. The Center on Budget and Policy Priorities estimates that cutting off the loophole would amount to $561 million in aggregate lost revenue for those states a year.

A temporary ban that prevents states and local governments from taxing the monthly bills that customers pay for Internet service has been around since 1998. But a handful of states have been able to get around that because of a grandfather clause that allows any tax in place before 1998 to continue. But the temporary ban is soon expected to become permanent, and it will also cut off the grandfathered clause after 2020. The National Governors Association and the National Conference of State Legislatures expressed disappointment and called on Congress “to honor state authority and preserve the revenues of those states grandfathered under the bill.” Their long-held position had been that the revenue lost from a permanent ban and the end to the grandfather clause should be made up by tying it to a more controversial proposal that would give states increased authority to tax purchases made online.