New Hampshire Pondering Extending Internet Taxes; A Trend to Watch

New Hampshire tax officials are considering a new 7 percent tax on many Internet services, including chat rooms and voice mail, the Associated Press reported.

The state’s Department of Revenue Administration is holding a hearing on the matter, which would need legislative approval. One of only a handful of states now taxing some Internet service, New Hampshire had the taxes in place before a federal moratorium was enacted in 1998.

The federal Internet Tax Freedom Act imposed a temporary moratorium on taxing Internet access services, the AP reported, adding that Congress has not yet decided whether to extend the moratorium.

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 The tax applies to two-way communication and tax officials say they are only updating rules outdated by advances in technology, the AP reported.

"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, department spokesman Val Berghaus told the AP.

Changing the tax law would mean that voice mail, chat rooms, Web mail and instant messaging would be added to services subject to the tax, which now includes fee-based services ranging from unpublished telephone numbers to dial-a-prayer services, the AP reported.

Carol Miller, president of the New Hampshire Internet Service Providers Association, told the AP that 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 they 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."

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