January 28, 2004

Tennessee Ends Illegal ISP Tax

Tennessee's illegal sales tax on Internet access has been suspended, and you may be due a refund if you've paid for Internet access in Tennessee in the last three years. However, the state doesn't really want to give the money back, so they're making it difficult for you to get it. You have to ask your Internet service provider for the money, and then they have to ask the state. Additionally, some ISPs did not pass the tax on to their subscribers. Check your Internet service provider bills.

The state had argued that Internet service was a taxable telecommunications service. That required the ISPs to collect a 7.5% state sales tax on business customers, and state and local taxes totaling 8.5% from residential customers. The ISPs said they were providing an information service and thus were not subject to the tax.

That'll save a dial-up user about $1.70 a month, and a broadband user about $3.75 a month. It'll cost the government ... oh, who cares how much it will cost the government. They have been collecting the tax illegally since 1996, but state law - a law they wrote - provides a three-year statute of limitations on tax refunds. If you live in Tennessee, you've paid the illegal tax for nine years, but will only get three years of it back. The government is not losing revenue. It is being allowed to keep tens of millions of dollars it illegally took from you.

Here's what I want to see: Some pro-taxpayer legislators in the state House and state Senate file legislation ordering the Department of Revenue to automatically refund every dime of the illegal tax collected since 1996 to the Internet service providers, and requiring the ISPs to refund the money to the consumers that paid it. If our government is truly of the people, by the people, and for the people, such legislation ought to pass without opposition. If such legislation did not pass, at least we'd know, then, which legislators favors government more than the people, and opposes returning money to people from whom it was illegally taken. We'd know who our friends are.