In a recent blog, we reported that the Senate joined the House in passing the Internet Tax Freedom Act (“ITFA”), a permanent ban on state and local governments taxing Internet access.  At that time, the White House indicated that President Barack Obama would sign the ITFA into law as part of the Trade Facilitation and Trade Enforcement Act, and he did so in late February, 2016.

This is good news for franchisors who rely heavily on affordable Internet access to build franchise concepts, promote their brand and connect with prospective franchisees.  The ITFA does three important things:

  • Bans state and local governments from taxing Internet access (i.e., the fees businesses and individuals pay to their internet service providers).  This lowers the cost of Internet access for businesses and keeps Internet usage affordable for individuals/consumers.
  • Bans multiple taxes on electronic commerce (i.e., only one state, one county and one city can tax the same electronic transaction).  This helps business and consumers avoid a patchwork of taxation across jurisdictions.
  • Bans discriminatory taxes on electronic commerce (i.e., taxes and tax rates for Internet commerce must be the same as for brick and morter sales).

The ITFA was originally enacted in 1998 for 3 years and was extended 8 times.  The permanent ban brings a level of certainty to taxation of Internet commerce for which stakeholders have been advocating for many years.