Government auditors this week said state and local governments could tax certain parts of Internet use under existing federal law that prohibits taxing on Internet transmissions. The federal government wants to take a light-handed approach to regulating VoIP services to grow the market. Existing law prevents state and local government from taxing services that allow users to "access content, information, electronic mail or other services offered over the Internet." Services such as VoIP, traditional telephone service and video could theoretically be taxed because the actual wires, cable and other hardware used to carry Internet traffic could be taxed. Certainly, the report is drawing criticism from some legislators and telecom companies who interpret the statute to mean that there is intent to ban Internet access taxes at both the retail and wholesale level. Article
