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WYDEN, ALLEN BLAST GAO REPORT
ON INTERNET TAXES
January 23, 2006
Washington, DC – U.S. Senators Ron Wyden (D-OR)
and George Allen (R-VA) today criticized the latest General Accountability
Office report on internet taxation, noting that by failing to
consult with the authors of the law, the report’s conclusions
about the impact of suspending taxation of wholesale internet
services were flawed. The report, mandated under the 2004 Internet
Tax Nondiscrimination Act, aimed to examine the effect of the
internet tax moratorium on state and local revenues.
“As the original author of the legislation, I am disappointed
that GAO has issued a report that will be used by some to confuse,
rather than clarify the debate,” said Wyden. “If the
report’s authors chose to consult with the authors of the
legislation, they would have understood the true impact of the
moratorium on states –minimal.”
Senator Allen also condemned the conclusion of the GAO report.
“The plain language of the statute, as well as the relevant
legislative history, reflect a clear legislative intent to ban
Internet access taxes at both the retail and wholesale level.
The legislative language has previously been interpreted this
way by the Congressional Budget Office, the National Governors
Association, the Congressional Research Service as well as a number
of States directly affected. As one of the lead sponsors of the
Internet Tax Nondiscrimination Act, I am certain that it is not
correct for the GAO to assert that this law allows for this type
of taxation. Fortunately, the language of the statute and the
relevant legislative history carry much more legal weight than
the GAO’s flawed interpretation of the law.”
A plain reading of the statute itself indicates that the Internet
Tax Nondiscrimination Act prevents a state from taxing the wholesale
purchase of telecommunications services used to provide Internet
access. The statute reads:
“The term ‘Internet access’ does not include
telecommunications services, except to the extent that such services
are purchased, used or sold by a provider of Internet access to
provide Internet access.”
The committee reports on the bill as well as the recorded statements
by its sponsors support this clear statement that “wholesale”
taxation is not allowed.
Today’s report, the third in a series of reports on this
topic, was mandated under the Internet Tax Nondiscrimination Act
of 2004. The legislation passed the Senate by a vote of 93-3 and
extended the internet tax moratorium until 2007.
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