Without congressional action, the Internet Tax Freedom Act (ITFA) will expire this week (October 1, 2015). Since its initial enactment in 1998, the ITFA has banned federal, state and local governments from taxing Internet access charges, as well as from assessing multiple taxes on electronic commerce.
On June 9, 2015, the House passed the Permanent Internet Tax Freedom Act, but so far, the Senate has failed to act. If the ITFA does lapse this week, some states could move to impose sales taxes on Internet access under existing laws, while other states could adopt laws or regulations that interpret Internet access as being taxable.
What to expect? As of this writing, many anticipate the ITFA will be temporarily extended under a continuing resolution that would fund the government through December 11. Senate consideration of the House-passed legislation has been affected by a faction that would seek to tack a more controversial amendment onto ITFA, allowing states to require out of state sellers to collect sales taxes on sales made into the collecting state (Marketplace Fairness Act).
While the ITFA has broad bi-partisan support, extension of this ban is now in serious jeopardy, dependent on the outcome of the more politically-charged issue of government funding.
