Uncle Sam wants to tax the Internet.
Republican Congressman, Bob Goodlatte, is currently introducing a bill enabling sales taxation on the Internet.
In 1997, the federal government decided to limit taxation of Internet activity for a period of time.
According to Wikipedia:
The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers.
The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods.
The statute has been amended three times since its enactment to extend this prohibition.
The proposed bill would allegedly limit the complexity of sales tax in various US states, replacing them with a simpler method of collecting sales tax.
For example:
An Ohio company shipping a pair of pants to Maryland would use Ohio’s rules for taxing clothing and Maryland’s tax rate. Currently, that seller only collects taxes on the sale if it has a presence in Maryland.
But what about digital assets such as domain names?
Digital goods are software programs, music, videos or other electronic files that users download exclusively from the Internet.
Some digital goods are free, others are available for a fee. The taxation of digital goods is partially governed by a federal statute and has been the area of significant state legislative and rule-making activity.
Are domain investors prepared for an Internet Sales Tax to be levied on every domain registration or transfer?
Every domain registration, renewal or transfer incurs an ICANN fee, currently set at $0.18 dollars, which is not a tax.
In fact, ICANN itself is a tax exempt corporation!
So domainers should be concerned about an additional, Internet Sales Tax, imposed onto domains, separate from the cents that ICANN collects with every transaction.
It’s a tumultuous year in domain investing so far, with the US relinquishing control over the core management of the Internet on October 1st.
Adding an Internet Sales Tax has the potential of derailing the businesses of thousands of domain investors across the globe, and Americans in particular.
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