Legislators try to tax home networks and chat rooms.

Dumb: Trying to enact a tax on home networks. Dumber: Trying to enact a tax on voice mail, chat rooms, Web mail and instant messaging.

The first item comes to us from out of Florida and deals with a 1985 law that was expanded in 2001 in an overly broad way:

Wired News: Florida to Tax Home Networks

Florida state officials are considering taxing home networks that have more than one computer, under a modified 1985 state law that was intended to tax the few businesses that used internal communication networks instead of the local telephone company.

Officials from Florida’s Department of Revenue held a meeting on Tuesday to see whether the law would apply to wired households, and exactly who would be taxed. About 200 people attended, including community and business representatives.

In 1985 the state passed a law to tax businesses using their own communications networks, because otherwise the state could not collect tax revenue on the businesses’ local telephone service. In 2001, that law was expanded to make “any system that is used for voice or data that connects multiple users with the use of switching or routing technology” taxable up to 16 percent.

The law is so broad that it would apply to networked computers, wireless services, two-way radios and even fax machines—or “substitute communications systems,” as the state calls them. The tax would be applicable to the costs of operating such a substitute communications system, not to the purchase of the system’s components.

The second item is from the fine folks in New Hampshire’s tax collecting agency and again is supposedly an old tax law being expanded to cover modern technologies:

N.H. proposal would tax chat rooms – Foster’s Online

The proposal would add specific references to Internet services under the state’s telecommunications tax. The tax applies to two-way communication and tax officials say they are only updating rules outdated by advances in technology.

“It’s not the position of the department that it’s applying the law to new things. It’s rather that it’s clarifying that the law did apply to these things even though they were not expressly stated in 1990” when the tax was enacted, said department spokesman Val Berghaus.

The change would add voice mail, chat rooms, Web mail and instant messaging to a list of services subject to the tax. The current list includes fee-based services ranging from unpublished telephone numbers to dial-a-prayer services.

Carol Miller, president of the New Hampshire Internet Service Providers Association, said the rule would force Internet providers to somehow break out those services from the basic Internet connection. She said that would be a huge burden to providers.

“They have traditionally taxed the phone line service, the actual line. Now thy are looking at taxing Web mail, chat, instant messaging, wireless Internet,” she said. “We think this is far beyond the scope of what the tax was meant for.”

With the growing trend toward home networks and the continuing deficit issues many states are facing this is likely to be an increasing trend as different states try to find ways to increase their revenue without actually enacting “new taxes.” There are enough overly broad laws on the books of most state legislators that these may not be isolated incidents for very long.

Here in Michigan most folks probably aren’t aware that there is already a state law requiring folks to declare any mail order purchases they’ve made during the year when filing their taxes. This isn’t a new law, it’s been in place since 1937, but it wasn’t really enforced in the past mainly because mail order shopping was relatively limited and the losses considered minimal. The rapid growth of online shopping combined with the state’s budget crisis has changed all of that and the folks in Lansing have been trying to spread awareness of the law in the hopes of getting folks to comply with it. It’s estimated that Michigan will lose $349 million in 2005 to uncollected sales tax on Internet purchases so you can see why it’s suddenly become a hot topic with the state government. I expect that we’ll be hearing of other states digging through existing laws looking for new sources of revenue as time goes on.

5 thoughts on “Legislators try to tax home networks and chat rooms.

  1. A question or two here: How do they propose to enforce these laws, and exactly what do they plan on doing if people refuse to pay these taxes?

    How is it their supposed right to tax me on something in my own home, that I own, that I paid for, that is none of their business if I have to begin with???

    I refuse to -ever- comply with such a law.

  2. Every state that I am aware of has some sort of ‘use’ tax which is basically a tax that you are supposed to pay on items that were purchased outside of the state.  The problem I forsee won’t be in lawmakers ability to locate such laws but to enforce them and to assign the definitions of ‘usage’ and ‘consumption’ to non-traditional items.  (i.e. a non-transferrable e-book purchased for $10 from a website by a traveller in airport to read while fying to London.)

    These taxes plague those of us who are consultants on a regular basis.  If one works for more than 100 hours in any state in a given year you have to file state taxes within that state.  You can see where the nightmares arise. Fortunately I worked for an accounting and tax firm but I still ended up with a cramp from signing about 80 tax forms.

    As deficits become larger and belts keep getting tightened, local governements are going to find more and more creative ways to get into your wallet.  It would take way to much effort to close the loopholes at the top so let’s squeeze from the bottom.

    captcha = ‘system’  It’s broke.

  3. Well, sooner or later people are just going to get fed up and recycle the old War on Drugs theme and “Just Say No.”

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