CANNON SUGGESTS REPLACING VoIP LEVY WITH STREAMLINED SALES TAX
States might have to begin thinking about replacing revenue from telecom services with another revenue stream, perhaps the streamlined sales tax, House Judiciary Commercial & Administrative Law Subcommittee Chmn. Cannon (R-Utah) suggested Fri. During Fri.’s hearing on VoIP regulation, Cannon asked many questions about state taxation of VoIP specifically and telecom and Internet taxation generally. In a broad discussion that also touched on the Internet tax moratorium and wireline access regulations, Cannon said VoIP will likely reduce state revenue, even if states get authority to tax it.
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Cannon directed much of his questioning to Stephen Cordi, Md. deputy comptroller, testifying on behalf of the Federation of Tax Administrators. Cordi argued states should be allowed to collect taxes on VoIP because it offers telecom service. But after persistent questioning, Cordi also said states would likely see revenue fall from telephony. “Isn’t there a reason for the states to back off and let it grow?” asked Cannon, who supported a permanent Internet tax moratorium.
Cannon said states might need to compromise -- backing off on objections to the Internet tax moratorium and instead arguing for streamlined sales tax authority. A streamlined sales tax, backed by groups such as the National Conference of State Legislatures and the National Governors Assn., is intended to enable collection of sales tax on goods bought over the Internet. Cordi questioned whether there was “enough there” to compensate state loss of revenue from telecom.
Cannon and panelists also asked about the regressiveness of telecom taxes. Cordi said tax breaks for VoIP would go mainly to computer owners with broadband. “Who’s holding the bag?” Cordi asked, suggesting it would be landline telephone users -- many of them poor and unlikely to adopt advanced technology. But Cannon said VoIP would eventually develop to the point where no computer was needed and would seem to the average user identical to standard phone service. Meantime, Cannon said the technology should be allowed to develop.
James Kirkland, Covad gen. counsel, compared VoIP to a Web browser in that it doesn’t own or maintain the facilities to provide the service. He emphasized the importance of maintaining regulations that ensure competitive entry into the telecom marketplace. Langhauser said VoIP presented AT&T’s only remaining chance to compete in telecom.
John Langhauser, AT&T vp-law, used the discussion to tout AT&T’s proposal for changing universal service fund (USF) collection to a numbers-based approach. Robert Pepper, FCC chief-policy development, said since USF collection relies on long distance, the fee appears to have some regressive qualities. He said immigrants are particularly hard hit because they are heavy users of long distance and “pay very high fees” for the service.