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Congress

Panel Moves Wireless Tax bill

July 14, 2011

The House Judiciary Committee backed legislation Thursday that would impose a five-year ban on new taxes and fees targeting only wireless services and not imposed on other goods and services.

The Wireless Tax Fairness Act, approved by voice vote, would only apply to new taxes imposed on wireless services and does not affect to those already in place. Supporters say wireless services are being unfairly taxed by states and localities compared with other services. They note that wireless customers pay an average of 16.3 percent in taxes and fees compared with the 7.4 percent average rate imposed on other goods and services.

"In many places, the taxation of wireless approaches or even exceeds the rates of sin taxes on goods like alcohol and tobacco," Rep. Zoe Lofgren, D-Calif., the bill's sponsor, said in a statement. "This legislation simply freezes existing discriminatory wireless taxes to help foster wireless networks as a platform for innovation and jobs growth."

Some state and local government groups, however, have voiced strong concerns with the measure, saying it would hamper their ability to raise revenues at a time when they are facing massive budget shortfalls.

" This legislation represents an unwarranted federal intrusion, as it carves out one sector of the communications industry for favorable tax treatment," according to a letter sent earlier this week to the committee from the National Association of Counties, U.S. Conference of Mayors and others.

The committee did adopt an amendment aimed at addressing some of these concerns by allowing a state or city to impose a new wireless tax if it is approved by the affected voters.

Meanwhile, in the Senate, Majority Whip Dick Durbin, D-Ill., is aiming to finally introduce his online sales tax bill before the August recess. A spokeswoman said he has been working to attract Democratic and GOP co-sponsors. The legislation is aimed at closing a loophole stemming from a 1992 Supreme Court decision that exempts retailers from having to collect sales taxes from customers in states where those companies do not have a physical presence. The decision initially applied only to catalog retailers but has since been extended to online sales. States say they are losing billions of dollars in revenues from uncollected online sales taxes.

Durbin's proposed bill would allow states that have signed on to a project known as the Streamlined Sales and Use Tax Agreement to require online retailers to collect sales taxes from customers even in states where those companies do not have a physical presence. The streamlined sales tax project was established by several states to try and simplify the differing sales tax regimes used across the country.

Some online retail groups have criticized the streamlined sales tax project, saying they have not gone far enough and that requiring online retailers to collect taxes on remote sales would impose a major burden particularly on small businesses.

Sen. Mike Enzi, R-Wyo., who has sponsored similar versions of Durbin's proposed bill in the past, told Tech Daily Dose earlier this week that he would like to see state and local governments do more to help attract support for the measure. Despite critics' claims, Enzi insisted that "it's not a new tax" but instead would allow states to collect sales taxes they are already owed.

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