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California Takes A Last Swing At VoIP 182

Posted by timothy
from the bits-move-therefore-tax-them dept.
JamesB writes "News.com's Ben Charny reports that two California cities want to tax Internet telephony. This news comes on the eve of the FCC ruling on whether federal regulations will preempt local ones."
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California Takes A Last Swing At VoIP

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  • by Anonymous Coward on Monday November 08, 2004 @10:47PM (#10762366)
    I Hate to say this, but the great thing about VoIP is that it doesn't need to be located in any particular city or state, Outsource it to India.
  • Good luck, Arnold! (Score:5, Insightful)

    by Anonymous Cowdog (154277) on Monday November 08, 2004 @10:48PM (#10762369) Journal
    I buy my Skype credits from a site in Europe. Not sure how they are going to be convinced to share my private personal data with the State of California.

    Besides, the minutes are so cheap, the government tax seekers may be in for a rude awakening when it dawns on them that even a tax as high as ten percent of one penny is still less than one penny.

    It may have been a good idea if VOIP minutely rates compared to real phone rates. But the days of $80 phone calls are gone.

    • Oops, and -now- I notice it's not Arnold doing it, but city governments. Well just because you're paranoid, doesn't mean they're not after you!
    • by Lehk228 (705449) on Monday November 08, 2004 @11:01PM (#10762459) Journal
      nah they will just add a flat tax of $0.15/minute
    • I buy my Skype credits from a site in Europe. Not sure how they are going to be convinced to share my private personal data with the State of California.

      What is the VAT (value-added tax) on a sale of Skype credits? Last I checked you could take a 25% hit on some purchases in the EU. Does it really make sense to purchase credits abroad? What is to prevent the state of California from entering into reciprocal tax agreements with foreign governments to exchange the data?

      • What is to prevent the state of California from entering into reciprocal tax agreements with foreign governments to exchange the data?

        Nothing, but what if they tax based on where the web-server is located (e.g. if I as an Australian living in Australia locate my web-server in India and my customers get out of any Australian VOIP taxes) then they won't be able to engage in an agreement with EVERY single country that the web-server could be hosted on.
        • Nothing, but what if they tax based on where the web-server is located (e.g. if I as an Australian living in Australia locate my web-server in India and my customers get out of any Australian VOIP taxes) then they won't be able to engage in an agreement with EVERY single country that the web-server could be hosted on.

          If you are an Australian marketing to Australians from within Australia itself, why the hell should it matter where you web server is housed? The scheme you suggest seems to me transparently fr

      • What is to prevent the state of California from entering into reciprocal tax agreements with foreign governments to exchange the data?
        I am pretty sure that only the federal governemtn can make deals with foreign countries.
    • "Besides, the minutes are so cheap, the government tax seekers may be in for a rude awakening when it dawns on them that even a tax as high as ten percent of one penny is still less than one penny.

      It may have been a good idea if VOIP minutely rates compared to real phone rates.
      "

      TFA:
      "The cities, Burbank and El Monte, have asked dozens of Internet phone service providers to collect a monthly fee of about $1.40 from each subscriber"
  • by Anonymous Coward on Monday November 08, 2004 @10:51PM (#10762392)
    "News.com's Ben Charny reports that two California cities want to tax Internet telephony. This news comes on the eve of the FCC ruling on whether federal regulations will preempt local ones."

    Let's cut to the chase. What will we get out of being taxed? Will the service be more reliable? Will I get service guarentees? Will my bill be even lower? What's in it for me, if you start taxing Internet Telephony?
    • by RLiegh (247921) * on Monday November 08, 2004 @10:57PM (#10762425) Homepage Journal
      What's in it for me, if you start taxing Internet Telephony?
      You'll be allowed to continue using it.
      • So this tax will make it illegal to send voice transmissions over the web unless you pay the tax? I guess all those online games that allow voice-chat better get ready to pay this tax then.
      • I didn't realize transmitting packet data was under government regulation. So are they going to tax torrents, online games, etc? I already pay a tax on the line itself. Why am I being charged and ADDITIONAL tax on how I choose to use that line?
    • by Anonymous Coward
      Nothing govt. wants to put their grubby paws in there .. even if the govt. isn't adding value to it .. they still want a cut .. that's called robbery in my book. At least with regular taxes you're being given shoved some sort of service (highways, police etc). But by taxing Voip or internet .. the city govt. is basically making money off something they had no part in providing and if somehow they did (DARPA contributions? LOL) then they still have the prob of not announcing it beforehand when they were fund
    • It's not what is in it for you, but what is in it for dependants of the state.
    • One thing that's often overlooked when the "all taxes are bad" arguments surface is this: governments provide a (sort of) stable infrastructure within which to do business. Your tax dollars give you the following:

      -a currency that (hopefully) won't fluctuate wildly
      -a justice system that deters and attempts to correct bad business practices.
      -physical infrastructure (roads, etc)

      there are of course others, but the main point I'm trying to make is that governments provide a little more than we give them cred
    • What's in it for me, if you start taxing Internet Telephony?

      Bigger government. We all want bigger government, right? If government isn't the solution to your problems, what is?

  • An alternative view (Score:5, Interesting)

    by bunyip (17018) on Monday November 08, 2004 @10:53PM (#10762401)
    While it's easy to say that we shouldn't tax this or tax that, I'm reminded of Ron Kirk, when he was mayor of Dallas, who quipped, "when you are sitting at home in your virtual world and you have a short circuit and a fire breaks out, do you want us to send a virtual fire truck or a real big red fire truck?" My house was hit by lightning last year and the city of Southlake was kind enough to send a real fire engine, not just email a JPG or something.

    IMHO - we need an overhaul of the tax system, I don't believe that it can be efficient to have dozens of different entities with the power to levy taxes. There's a cost to society, although it does keep all those lawyers and accountants employed.
    • by Jeff DeMaagd (2015) on Monday November 08, 2004 @11:22PM (#10762592) Homepage Journal
      How is fire funded in your area?

      In my area, it is paid out of property taxes, and that makes a good amount of sense. The more your property is worth, the more it is worth protecting it. Funding fire protection from sales tax, phone tax or internet taxes don't seemm quite fair.
    • Ron Kirk must be related to Rush Limbaugh, since that's his type of logic. Any city government that uses telephone taxes to pay for essential services has its head up its ass.
  • a little strange (Score:3, Informative)

    by dns_server (696283) on Monday November 08, 2004 @10:56PM (#10762419)
    Ihis is one thing i find strange about america (i'm an aussie) is the seperation of powers between the national government and the state government. In australia the government collects the taxes, which is distributed through to the states. The states are responsible for the running of the state, and can collect taxes on state based services (such as plane tickets), the local council can collect money in it's own area (parking etc). There is a clear hirarcy of power, the national government sets all national laws, the state sets it's state based laws, the councils set thair own laws.
    • by treke (62626)

      Well in theory almost all power lies with the state. The Federal government is mostly limited to foreign policy, maintaining the defense of the nation, and regulating interactions between the different states. Of course that's just the theory that was layed out in the Constitution. The federal government has slowly expanded it's powers into other areas, which at one point ended up in a civil war as a number of states tries leaving the union. The 10th ammendment pretty clearly sums up the intentions pretty w

      • Re:a little strange (Score:3, Informative)

        by Elizabeth007 (829402)
        Ah, yes, but you also forgot to mention the following:

        Article 1, Section 8.3:
        To regulate commerce with foreign nations, and among the several States, and with the Indian tribes;

        This tiny little section was used (and still is used) by the federal grovernment to get their grubby little paws into just above everything.

      • Re:a little strange (Score:4, Informative)

        by yuriismaster (776296) <tubaswimmer.gmail@com> on Monday November 08, 2004 @11:39PM (#10762711) Homepage
        It's called "Marble Cake Federalism" Basically, the federal government handles federal stuff like international affairs and stuff that states really have no handle over. The states handle the really local stuff, like municipal policing, etc. Anything inbetween the two is essentially state-run, with some federal supervision or perhaps some slight involvement. Of course, the easiest way for the federal government to influence states is with a big chunk of money tied to a policy. Basically, they say "OK, any state that DOESN'T have a legal drinking age of 21 or over gets 5% of highway funding cut". Now if I was a state, I would certainly bump up my drinking age to meet those standards, even though the federal govt really has no buisness in drinking age. That's called fiscal federalism (its what makes the world go 'round)
    • Re:a little strange (Score:3, Interesting)

      by mister_tim (653773)
      Even in Australia, it is only relatively recently that the Commonwealth became the main collector of taxes. Like the US, Australia's constitution was primarily intended to protect the authority/power of the State's and limit the powers of the Federal Government. However, as time progressed, the power of the Federal Government grew and that of the state's diminshed, particularly when the Federal Government took responsibility for income tax from the States post-WW2.

      Overall, the hierarchy of power is not as
    • The other neat trick [where voter approval is needed] is to ask for a tax for, then when that passes, simply use the other money for whatever semi-socialist spending plan the legislators had in mind.

      Combine that with the fact that most people in the USA dont pay very much in taxes and you have the situation we are in now. Eventually you will reach the ideal state where Bill Gates and his buddies pay all the taxes. That is real cool until those folks say [in Cartman fashion] "screw you, I'm going [home/so

    • Ihis is one thing i find strange about america (i'm an aussie) is the seperation of powers between the national government and the state government.

      Well, in theory, we have a very clear distinction between federal powers and state powers. The states do whatever they want until the federal government finds a way to tax it or regulate it, and somehow fits it into the "commerce clause" of the US Constitution

      In australia the government collects the taxes, which is distributed through to the states. The st

    • Ihis is one thing i find strange about america (i'm an aussie) is the seperation of powers between the national government and the state government.

      Well, in theory, we have a very clear distinction between federal powers and state powers. The states do whatever they want until the federal government finds a way to tax it or regulate it, and somehow fits it into the "commerce clause" of the US Constitution.

      Given that the original framers of the Constitution designed the government to react slowly (henc

  • not surprising (Score:4, Insightful)

    by LupusUF (512364) on Monday November 08, 2004 @10:56PM (#10762422)
    It is not surprising that they are pushing for more taxes, though my guess is if they brought this to the courts it would be a tough sell.

    Right now people get twitchy about taxing internet technology for fear that they will look 'anti progress.' What we need is for the VOIP companies to fight the cities, and see where things go from there.

    Of course, being in california will make things tough for those trying to fight the tax.
  • by mc6809e (214243) on Monday November 08, 2004 @10:58PM (#10762439)
    NOT.

    What justifies this sort of taxation?

    Taxes are fine win me, as long as it's to pay for legitimate services. But I have a hard time seeing what additional government serives VoIP users need to pay for.

    I think this is just a case of government seeing another opportunity to use people.

    • But I have a hard time seeing what additional government serives VoIP users need to pay for.

      Let's assume you're VoIP only -- you long ago got rid of your landline phone, and with VoIP, since you sit at home all the time, you got rid of your cell phone, too. So now you're sitting there reading Slashdot and chatting with some other nerd over Skype, and you realize the grease from your frying pan flared up and your kitchen is on fire. You call 911, and.... but wait, you can't...

    • **I think this is just a case of government seeing another opportunity to use people.**

      yes, surely. but you see, when their taxes go down as you stop using a taxed service, they need to find extra income. they could tax the electricity more I suppose since that's used when you use voip or whatever, or they could tax you breathing, or tax you parking. it's just a political decision on who you tax the most(and as such 'luxury taxes' are popular, on alcohol, tobacco, etc, voip tax on businesses can be a way
      • personally I prefer the 'big taxes, least corruption in the world' method.


        I prefer the "less corruption in the world, no need for big taxes" method.

        Honestly I don't think that feeding the government more money will make them feel satiated. And as a matter of fact I would rather pay the same tax directly to whatever service they provide needs more money. That way at least it would be much clearer if the tax is actually required.

        Diego Rey
    • additional government ser[vic]es

      That's not the point of taxes on imports, and it's not the point of VoIP controls, either. The point is to influence the economy and make money in the process. Perhaps they have a reason to slow the adoption of VoIP.
  • I voted against... (Score:4, Insightful)

    by Anonymous Coward on Monday November 08, 2004 @11:00PM (#10762454)
    I voted against the recent CA proposition to tack a telephone surcharge on to pay for a health program. I'm obviously not against health programs, or even against taxes generally (within reason, of course). But slapping a million small taxes on each service (with a million pieces of paperwork to keep track of it all) is hopelessly inefficient and borderline dishonest. Hey gov't: if you're going to spend, then tax and admit to taxing. Stop trying to be sneaky about it.
    • A few years ago, I lived and worked in the South of France (I highly recommend doing this if you can...). But, taxes on my income amounted to a long list of sometimes tiny deductions most of which went to separate organizations. I asked the accountant why couldn't they do the same as in the UK, just have one organization collect tax on income. She said that would be a good idea as all these separate organizations consumed nearly 50% of the revenue collected!! It is not efficient.

      But why tax VOIP, isn't
  • Get a clue (Score:5, Insightful)

    by comwiz56 (447651) <comwiz&gmail,com> on Monday November 08, 2004 @11:12PM (#10762536) Homepage
    VoIP is not going to be easy to regulate. This makes only slightly more sense then regulating something like... say, IRC. The only reason government has a need to intervene with VoIP in any way is to provide 911 services and possibly wiretapping.
    • Do they want to be able to wiretap ALL voice communications on the 'net? Including short teleconferences, audio streams, and the Push-To-Talk connection to my parent's house? Because there are a lot grey fuzzy areas between these.

      The funny thing is, the FCC could increase taxes and regulation of internet services more generally, if they really want. They chose not to do this [consumersunion.org]. Instead, they're choosing to single out one category of internet service that is poorly defined and certain to be redefined as

    • Re:Get a clue (Score:5, Informative)

      by anethema (99553) on Tuesday November 09, 2004 @02:22AM (#10763576) Homepage
      The most popular voip seems to be skype..which is encrypted with aes-256..good luck wiretapping that.
      • This isn't really about computer based services like Skype, they're pretty much just for nerds. Your (for example) mom is pretty unlikely to want anything to do with them.

        This is about stand alone VoIP like Vonage, which your mom could use without even knowing it.

        If/when they get IP to IP cross network VoIP going, the POTS may be doomed and local governments will just have to find something else to tax, like say internet access, unless WiMAX makes that almost impossible too.

        Still, left or right, you pret
      • Is there a verifiably secure method for exchanging the session key? If not, then the encryption[0] is worthless. This is what happens when you have around "AES-256" as a marketing feature instead of a security feature.

        [0] if it even works, since we don't have the source, we can't tell. :)
    • Can I seriously ask why they need to wiretap VOIP conversations? Now I'm not sure but I'm reasonably sure that this "Interweb" thing makes a number of nonvocal ways to communicate between computers. If only there was a way to somehow use these communications to transmit say... text... to another person who could then read them... Imagine the possiblilitys for terrorism!!!

      I think that the world would definitly be a safer place if they wiretapped all internet connections... everywhere!
  • by Kenja (541830) on Monday November 08, 2004 @11:13PM (#10762541)
    Come on now, we just passed the stem cell research bond messure that we have to pay for some how. Where did you think all the money was gona come from?
  • by syousef (465911) on Monday November 08, 2004 @11:22PM (#10762594) Journal
    ....on a tax on air. Better yet separate taxes on Nitrogen and Oxygen.
    • by Duhavid (677874)
      If I want to separate Nitrogen from Oxygen, just pay the oxygen tax, dont pay the Nitrogen tax!

      So simple!
    • I guess a tax on Oxygen would be fair since I use that, but what I object to is the planet wide conspiracy of forcing me to take Nitrogen along with it, inflating air usage taxes by an unfair 400%
  • by RealProgrammer (723725) on Monday November 08, 2004 @11:23PM (#10762600) Homepage Journal
    Derek Hanway, Burbank financial services director, said the city was motivated to act for fear of funding for things like police services drying up. Last year, Burbank collected $3.7 million in utilities taxes on phone calls, half of which went to pay for emergency services.

    Funny how they always mention funding for police services, or the fire department, and never their own salary or the rest of the other unpopular half. For instance, the Burbank budget (pdf) [burbank.ca.us] for the next year forecasts

    • $32,606,324 Police
    • $24,418,541 Fire
    • $14,230,311 Park, Rec & Comm Svcs,
    • $5,969,207 Community Development
    • $5,675,216 General Administration
    • $5,043,634 Library
    • $4,175,351 Management Services
    • $3,645,424 Information Technology
    • $2,956,435 Financial Services
    • $2,405,510 Non-Departmental

    But they need a VoIP tax to pay for their police services. Right.

    Oh, by the way, they're hiring [burbank.ca.us].

  • I'm not entirely sure.... does this qualify?
    • Not quite, "Taxation without Representation" is what citizens of the District of Columbia have. They pay federal income tax, but don't have any representation in Congress. Just like the original 13 colonies were taxed for everything, but had no voice in Parliment.
  • Sure, they can tax the big players, but what are they going to do about those of us who build our own voip networks via asterisk and the like?

    And if they do managed to tax the big players, who's to say they don't go offshore somewhere?

    This started life as a bad idea, and it can only get worse. Time to let it die.
  • by Doc Ruby (173196) on Monday November 08, 2004 @11:42PM (#10762726) Homepage Journal
    Sure, VoIP calls originating in, terminating in, and passing through California don't require the state to spend any money protecting consumers, infrastructure, or corporations. All that legal, public safety, and education work that makes California exist in the VoIP world is FREE! Hahahahaha! Why should the government collect any money from the service users to spend on those things when they're FREE! FREE! FREE!
  • It was in the Oregonian today.

    The idea is to cut the standard B&O tax a couple of tenths of a percentage, and add a tax on telecommunications, including pagers, cell phones and landlines. They want to get it to include VoIP as well.

    Of course, what this will do is make the companies a little mad, because they have to keep track of it and collect the $$$ on behalf of the government taxing body, but the telcos will of course pass those costs onto the consumer...

    Oh well. It's not like there are already v
  • by ispland (460855) on Monday November 08, 2004 @11:45PM (#10762744) Homepage
    This entire issue is very much about reduced gov't and reduced taxation vs. increased gov't and more taxes.

    State and local policiticans see VoIP is an easy mark for more tax revenue. But it's only taxable if they can control the entire telephone and long distance business thru state level regulation. So don't underestimate the determination here, both of these issues greatly increase the power of local politicians.

    Since VoIP is only used by businesses and a few not-too-vocal consumers, it's an popular and easy mark to tax right now. And the common man sees lots of taxes on his home phone bills, so it's only fair that everyone else pay taxes on their phone calls, right?

    The monopoly ILEC's see taxation as a matter of reducing competitors' advantage and controlling the growth of VoIP for smaller customers.

    They are late to the party on VoIP and want to use taxes as a means of reducing competition for their POTS based services. It's also seen as a way of narrowing the playing field. More taxes means more regulation, more lawyers, and more barriers to competition.

  • "Otherwise, anyone who wanted to offer Internet phone services could be subject to 51 different sets of state regulations."

    I could be wrong, but aren't there only 50 states? Did we grow a 51st state recently? Or maybe he meant Washington, D.C., which isn't a state? Or maybe Puerto Rico, which also isn't a state, and ignores the territories of Guam and the US Virgin Islands. I guess if you want to get really technical, Virginia and Connecticut(?) are commonwealths.

    Ah, I forgot about North and South Ca
  • by 3770 (560838) on Tuesday November 09, 2004 @12:27AM (#10762972) Homepage

    So, I met this chick at the bar. She was beautiful. I turned on my famous charm. So I was able to get her to give me her IP.

    So this morning I decide to VoIP her and it turns out that she had spoofed the IP.
  • by potus98 (741836) on Tuesday November 09, 2004 @01:14AM (#10763236) Journal

    From an earlier post: "I think this is just a case of government seeing another opportunity to use people."

    Correction: You should think this is just a case of your neighbor seeing another opportunity to take away your money. Assuming we're talking about the US, "we the people" empower the government to use guns to take away resources from other people. NEVER lose site of this. It's the same notion as guns don't kill people, people kill people. Governments don't, on their own, take money from people. People USE the government to take money from people.

    From another earlier post: "voip tax on businesses can be a way to focus taxation on companies that won't go broke even if taxed"

    A similar notion applies here. COMPANIES DON'T PAY TAXES! Companies merely collect taxes from people and forward the money to the government. NEVER lose site of this either.

    Argue these points as much as you like. Left-wing spin or right-wing spin doesn't matter. The basic fact is that people create and empower government to use the threat of deadly force to take away your property and give it to someone else. To some extent, this is usually considered okay. The other basic fact is for EVERY tax that a company pays, somewhere, somehow, their customer (which is eventually a person) pays for the tax. It may be a long path in some instances, but in the end, a PERSON pays for every tax levied on any corporation.

  • Just... (Score:2, Funny)

    by pixelcort (413708)
    Just tax internet usage. Wait, that's the tax on the payments to the ISP. Nevermind.
  • by billstewart (78916) on Tuesday November 09, 2004 @02:10AM (#10763522) Journal
    VOIP is clearly interstate commerce, even if you're using a phone company that has local presence in your state. Therefore, the US Constitution's Commerce Clause makes it Federal jurisdiction, just as shipping between states by boat is interstate commerce even if you're using a dock in some state that would like to tax you. It's not like the access line to your house, which the state's already taxing (even that could be argued to be interstate commerce, but there's a lot of historical precedent.)

    VOIP technology is taking the cost of long-distance calling to zero; the main reason companies like Vonage can get away with charging as much as they do is that they're providing convenience to early adopters, and big long distance spenders use a lot of minutes of last-mile delivery (currently billed about 2 cents per minute in much of the US.)

    Towns like getting money, and once they get a source of it they make sure to spend it irresponsibly, and California's current state budget problems mean that the state is keeping more money that was previously going to the cities, so they're looking around harder for any sources of catch and grouchier about anything they lose. But this source of money is toast.

    • ...are you sure that a big part of California's budget problems aren't discretionary spending by legislators (aka Pork)?

      Illinois is good with this. Billion-dollar budget deficit, but no reduction in discretionary programs, only non-discretionary programs.

      • I'm shocked, shocked to hear allegations of pork-barrel spending by our fine Legislature!

        But no, the problems aren't caused by the legislature's spending money on pork-barrel. They're caused by the legislature and executive branch being unwilling to make honest and realistic predictions of income, expenses, and risk, and being unwilling to come up with the political guts to either raise taxes enough to cover their current expenses plus past debts or else to cut spending, and reality's making it harder to

    • VOIP is clearly interstate commerce, even if you're using a phone company that has local presence in your state.

      Is it really? I think of it as more bandwidth which may or may not be used for VoIP.

      If I can run an FTP session between two machines without it being the business of the government what I do, I fail to see why VoIP is different. You are already paying for the bandwidth from the provider, and the way you use it is just doling it out.

      Are they going to start requiring all businesses to keep de

  • I don't care if it's e-mail, telephone calls, etc. The mediums used on the Internet shouldn't be taxed.

    The only thing that should be taxed is perhaps the ISP service price. Imagine simply having sales tax on the $30 or so you pay for Internet access itself.

    But with the U.S. "wanting" over a half trillion dollars per year for defense purposes, they are going to try getting every penny they can.
    • But with the U.S. "wanting" over a half trillion dollars per year for defense purposes, they are going to try getting every penny they can.

      Nice troll. Too bad California LOCAL TAXES don't pay for the military.

      On topic, this brings up an imporant point. As IP technologies overtake conventional technologies governments will be forced to change tax structures to retain income. Our choices are to tax the new technologies or force the government to live smaller. Guess which one YOUR elected representative nor
  • by Fuzzums (250400) on Tuesday November 09, 2004 @05:12AM (#10764128) Homepage
    When VoiP is taken care of, the next step will be stamps for e-mail.

    Internet, computers, politics and Thai food are all just the same. If you don't know what you're dealing with, better keep your hands off...

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