The Internet Taxman’s Mouth Is Watering

Taxes on all of the great new tech we just got? I was a guest on the Fox News show “Your World with Neil Cavuto” on Monday, and Brian Sullivan asked me about all the new taxes we better get ready for on all of our new holiday gifts. That’s right. We better get ready for taxes galore.

In fact, it’s worse than we think. Instead of just one set of taxes, if you download a program from one state and you live in another state, both states may tax you for the same thing. That’s right, soon we may be paying enormous taxes.

That’s right. Double jeopardy. Could it get worse? It could. If they can think of a way to do it, even more states may jump into each sale.

Maybe if you live in New York and you download something from Florida, you will have to pay taxes on every state in between since the signal traveled over lines through states. Maybe they could call it a “pass-through” tax. Doesn’t anyone see we are getting carried away here?

Maybe you got an iPad, one of those cool new tablet computers, or maybe a smartphone, or one of those cool new e-readers. You were happy to just sit there and try to figure out how the darn thing worked. Log on and look through all the cool new programs you could download. Thoughts of how much it was going to cost you going forward weren’t even dancing in your head yet.

All Things Bright and Taxable

Before you think the government is getting carried away, think about the changing industry. The lawmakers may have a point… to a point, anyway. They always charged taxes on phone lines. So many people bought so many phone lines in the 1990s, the government loved it.

Then, as high-speed DSL lines came, people canceled the extra lines they used to dial in on the computer. The number of local phone lines has been decreasing. People are using cellphones, VoIP and cable television phone service.

Not only do the phone companies hate this trend — so do government officials. Fewer phone lines mean less in taxes. This is a trend that is growing, so they need to figure out how to solve the problem.

We have been fighting taxation on the Internet for a decade or longer. Today, we pay more taxes on it than ever, but we’re still not where the government wants us to be. Lawmakers want to tax everything that is new and exciting. Not just the Internet, but all the new technology that we just love.

Enough Already

That means every time you buy something over the Internet, the federal and state and local governments want a piece of the action. Same with devices. That means new taxes on everything we buy will start popping up.

Not only that, but every state and local government is thinking about taxing. That means multiple taxes. I have read that means we could be paying 20 percent or more in taxes. That’s incredible.

Taxing the Internet is bad enough. Double taxing from multiple states and local governments is worse. And taxing everything else that is new — like iPads, smartphones and e-books — is over the top.

I think we all understand the government needs to update itself and stay with the times. OK, maybe it needs to make up for lost phone lines, but it shouldn’t cross over the line and get so greedy that it chokes off commerce. That could happen, if we are not careful.

The question we discussed on Fox News was right on target. Taxing is part of our society. We need police, firefighters, roads paved, military ready and many other tax-supported services as well. But at some point we have to ask, when is enough, enough? Someone has to say “stop.”

Jeff Kagan is an E-Commerce Times columnist and a wireless, telecom and technology analyst, author, speaker and consultant. Email him at [email protected].


  • Taxes suck. So Lets call it something else. I would love to buy something from a catalog, but when I see the processing and handling charges which cost almost half of what it is I ordered. I lose interest and go to the store. Stores now will actually charge you when you look up something at say Wal Mart for the item to be shipped to the store for you to pick up. Yet if you spend over $100 dollars shipping is free. Shipping companies suck too. Fed Ex actually called my house and asked me to meet them because the after 5:00 drop off I had requested was not convienient for the driver. Call me? Leave it and I will come get it. The best thing about ordering on the internet is reading customer opinions about what you are about to purchase. Sifting through them you can get a real sense of what the real issues people have about what you are about to buy and you can make a better decision unlike at a department store where some idiot doesn’t know crap about anything they are pushing out the door.

  • Someone has to say stop to the spreading of speculation as fact like this article does.

    Of course, there will be taxes on the internet but not in the fantasy world this article states.

    This article is very short on facts and long on improbable scenarios.

    It is technologically impossible to set up a system that will make one pay taxes on every state in which a signal passes as the path is different with every connection.

    It is pure speculation to state that multiple states may tax you for the same thing. No one except this writer is talking about double taxing from multiple states and local governments.

    The states are thinking about a single tax paid to one jurisdiction (probably based on point of sale or point of delivery like mail order purchases) not multiple taxes paid every jurisdiction.

    Mail order taxes are paid to one jurisdiction so why would the Internet be so different?

    This article was not well thought out and quotes no authorities.

  • In order to better tackle the issue, we must clearly break down these taxes, existing and proposed, into two categories:

    (1) Taxes on communications services. As was stated in the article, these have been around since the early days of telephony. This is not a new problem in and of itself, but new ways of taxing – and double taxing – are the threat. For instance, if my Internet access is carried via a phone line (i.e. DSL) or via cable, I may already be paying tax on the basic phone or cable service, but should I pay a special tax just for accessing the Internet?

    (2) Taxes on goods and services purchased via the Internet. The problem here usually presents itself in the form of an interjurisdictional taxation issue. A product or service is purchased from a vendor in one taxing jurisdiction and delivered, either physically or over the wire, to a customer in another jurisdiction. This, too, is not a completely new problem, but rather one that dates back to the days of the Sears Catalog. Whatever rules are applied here regarding sales and use tax can only be fair if they are medium-neutral. That is, the same rules should apply regardless of whether the purchase is made over the Internet, over the phone, or via an order form sent via US Mail. In the case of interstate commerce, there is clearly Federal jurisdiction to impose uniform taxation standards.

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