The Tax-Free Web: A conversation with U.S. Congressman Christopher Cox

On Dec. 3, President Bush signed an extension to the legislation banning taxation of connections linking people to the Internet....

On Dec. 3, President Bush signed an extension to the legislation banning taxation of connections linking people to the Internet. The legislation is often confused with a ban on sales tax for purchases made over the Web — which this law does not cover.

U.S. Congressman Christopher Cox (R-CA) is the author of the long-running Internet tax ban renewal. Congressman Cox, who is also Chairman of the Committee on Homeland Security and Chairman of the House Policy Committee, took a few minutes to discuss this law.

GREENLEE: You are the author of a new tax ban on the Internet. Explain what that is.

COX: Actually this began several years ago in the 1990s. I noticed that the Internet, which just then was developing, was expanding at a remarkable rate and changing so quickly that people were able to accomplish never before imagined things with it in new ways, seemingly everyday. What I was worried about was that this unprecedented growth, expansion, and success was going to be limited if governments began to look at this as a cash cow and decided to tax it and regulated it to death. So I wrote legislation back then called the Internet Tax Freedom Act. Under this policy, there will be no new special taxes that single out the Internet. So you can’t have an e-mail tax, for example, or a bit tax, or a bandwidth tax or all the ways people were thinking of to plunder the Internet. I was successful and that became law, mostly because we got there before the tax authorities. We weren’t taking bread off of anybody’s table. Unfortunately, because not everyone, particularly the tax collectors, were sure they liked this idea for the long haul, we did it on a temporary basis – called a moratorium – and it expired. We had to fight in Congress to renew it. It expired again and we just finished once again renewing it. The policy that everyone has known since the birth of the Internet – which is no taxes on it – will continue thanks to the legislation I wrote.

GREENLEE: I think there’s a little bit of a misunderstanding when we think of an Internet tax ban – thinking that all taxes relating to the Internet are banned. Is that really what’s going on with this ban?

COX: No. In fact, what we’re doing by keeping the Internet free of discriminatory taxation – Internet-only taxes, as it were – is confused with sales taxes. As you know, if you shop on the Internet, you pay sales tax. That doesn’t have anything to do with the tax ban we’re talking about here that prevents two kinds of taxes – discriminatory taxes and multiple taxes. Discriminatory taxes means those that single out the Internet, that have no comparable existence in the off-line world. The ban on multiple taxes means that even though the architecture of the Internet will send your digital messages and transactions through multiple taxation jurisdictions, they can’t all lay claim to it just for that reason. Just because electronic bits of information just happen to pass through a computer server in their taxing jurisdiction doesn’t mean they can say “Alright, we have what lawyers call nexus and that means we can tax it.” If that happened to be the case, if the ban on this taxation didn’t exist, then some 30,000 taxing jurisdictions would all be laying claim to a piece of your transaction on the Internet.

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Congressman Christopher Cox’s website is at http://cox.house.gov.

The full audio interview with US Congressman Christopher Cox can be heard this Saturday, December 18, on KLAY 1180 AM at 11 a.m. or Tuesday, December 21, on KVTI 90.9 FM at 10 p.m. It will also be available at http://WebTalkRadio.com.

Dana Greenlee is co-host/producer of the WebTalkGuys Radio Show, a Tacoma-based nationally syndicated radio and webcast show featuring technology news and interviews.

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