Senate Mulls Internet Tax Ban - VoIP Exempt?

securitas writes "eWEEK's Caron Carlson reports that this week the U.S. Senate will vote on renewing an Internet tax ban, but voice over IP (VoIP) may be taxed. The bill renews a state/local ban on taxing Internet services like VoIP. The federal government wants to define VoIP as a software application exempt from taxes while most states see it as an alternate form of telephony subject to telecommunications taxes. House and Senate bills that define VoIP as a software application have already been introduced but may not be voted on before the Internet tax vote."

pathetic

how are they planning on enforcing this? It's completley pointless.

What defines VoIP?

For instance, Unreal Tournament 2004 has VoIP functionality built-in in order to facilitate communication between teammates. Might it be subject to taxation?

What about GAIM's VoIP plugins? Or Gnomemeeting/Netmeeting?

Are we just talking about apps that mimic a telephone, or are we talking about all VoIP applications?

I don't trust Congress on these matters. I get the feeling that VoIP will end up being broadly defined and some horror stories resulting from the mess.

don't they understand the word "NO"?

or are they proposing to use the proceeds to eliminate internet spam?

tax spam not consumer/user chosen communications... Or do I have to pay tax to say this?

Free Speech?

They might be right

I'm not saying what I think they should do. But I'm going to play devil's advocate and say they might have a point. VoIP isn't the internet. It is a service. VoIP isn't necesarilly an international domain thing. It's really not all that different from any other telephone service. It would be like them placing a 1 dollar a month user-fee on ISP's services. Not the same as putting a sales tax on internet goods, or taxing it based on usage, or charging for e-mails. I beleive the term politicians use is "luxury tax." Would no doubt bring in huge revenues.

Like I said, I'm just playing devil's advocate.

Skype?

Skype [skype.com] is a P2P VoIP application that is independant of any central servers, has great quality audio, NAT, etc.

How exactly do they intend to regulate the unregulatable?

I wonder why

Lets see - the large RBOC's and ILEC's have convinced the FCC that UNEP should be killed. God forbid that everyone has access to the infrastructure that your tax dollar helped build. Considering that many of the RBOC's are loosing money on DSL - it makes a lot of sense to not have competition in the area.

These same people have been working very hard and were able to convince some PSC that rate hikes were in order. [This besides the fact that they had highly profitable quarters even during the economic down turn] Thus stuffing the war chests of the big guys, helping them roll out their "loss leaders" in an effort to crush any competition.

Now they are agitating for VoIP with no taxes. Why? Simple. They've finally agreed to come to the party. Many companies have been doing VoIP for some time, and the idea that VoIP would be taxed has been held out, but now that the RBOC's and ILECS all have made major VoIP announcements suddenly we're considering legislation! IMAGNINE THAT!

At VON this year everyone was screaming that the government should take a "hand off approach". This included a rep from the FCC, AT&T legal, california and florida PSD reps. No one wants to "kill the goose that lays the golden egg". From my POV that is ideal. Let us compete and we will crush the inefficient, lazy, technically inept RBOC and ILECS. The problem is that I don't see this hands off approach staying that way. The FCC and california PSC guy hinted that some sort fo universal access fee may be in order. The other thing that was strongly hinted at is that the state's are going to loose a larege source of recouring revenue that they can't afford to loose. so a state tax may be considered.

In the end, I see VoIP taxes heading the same way as our current PSC and FCC. Favor the big guy (ie campaign contributers), and lets not have too much competition. It wasn't more than 2 years ago when somone said that VoIP will take 2 decades to become mainstream. Sprint, AT&T, Bell South and Verizon will all be switching voice at their cores within 7.

This bill is a step in the right direction. Lets see if the congress can keep the playing field even. If they do - the RBOC's and ILECs are in trouble unless they make some fundemental changes to their corporate cultures. I bet they will protect their little fiefdoms - look for modified legislation in the next 12-18 months to give them a leg up. (As if their monopoly's weren't enough)

cluge
AngryPeopleRule [angrypeoplerule.com]

Anonymous sources have told me that...

... this guy gets paid by the acronym.

Stop Taxing my electrons...

If they tax our electrons, they should be paid in photons!

"Enclosed is my tax payment - you will find 1 blue LED and a battery. Turn it on and let it glow. At the end of the battery life my internet taxes will be paid in full, in several billion photons."

I think you still might be able to pay taxes in live chickens, but
that would be so unfair to the chickens!

What I would really like for VoIP...

...is to use the recent short-range band (Bluetooth, WLAN, direct phone-phone connections et al) to turn my cell phone into a landline w/wireless, when in range. That would be a real boon for IP telephony. VoIP with headset or specialized IP-capable phones have their use, but if you could use any cell phone the market would explode.

Kjella

IP law is not the enemy?

All this time we keep focusing on how bad IP law is going to keep us in the technological dark ages compared to our more adaptable evolutionary cousins abroad - but really it's looking more and more like the tax-mad politicians are the true enemies of evolution. It was easy to look at the nonsense going on in India with the government attempting to ban IP telephony and criticise, but it appears our own politicians are determined to prove once and for all India (has) had nothing on us.

If they are applications...

and the FCC is still in on the act [eweek.com] - then will the user licenses have *decency clauses* [pnnonline.org] written into them?

the chaos of law

You can see all kinds of examples of how, over the years, our lawmakers have tried to govern all kinds of things that they didn't understand. If you want a good example of how the laws governing the internet will look in fifty years, go wander around among the laws governing the environment for a while, or the regulations under which the FDA operates, or anywhere else that the government tries to regulate a scientific or technical issue. These people are lawmakers, not scientists or engineers, and aside from the fact that they simply do not understand what it is they are trying to regulate, they are not really listening to anyone who does understand either. The primary focus of a lawmakers attentions are on their own wallets, followed by those people who see a profit to be made or lost, and lastly by those blocks of voters who might be able to march together under some doomsday banner of dire predictions. I don't want to sound like I'm advocating anarchy, because some degree of regulation is needed on the internet (think child porn or DDoS attacks) but the more we allow the government to regulate, the more confusing and contradictory the regulations will become. Thinking just in this cae, they might tax VoIP now, with half a dozen exceptions to exempt games for instance, only to have to pass new laws later to close loopholes and make new exemptions, until such a time as when a game-maker may need to pay a lawer a weeks worth of wages just so he can safely publish his work. I can only see internet taxes working as an all or nothing deal if we're going to avoid a tax code that would be 10 times as confusing as the most complicated codes we have now. Think some flat (2% maybe?) tax on all goods and services that would be collected by a federal department and redistributed to the states by percentage of what was actually sold in a state. If we just let the lawmakers go according to whim the resulting tax code will choke anyone who wants to do business with or on the internet. Not that I'm fond of the idea of another tax or another governmentl department to administer it.....

Technically, how would this be possible?

How could they do this without monitoring all data streams extensively, and determing somehow "gee, this is voice and this isn't", etc. And tracing them to individual IP addresses? Just throw some random numbers at the whole internet? I mean, speech (and video) between people over the net has been around a long time, CUSEEME as an example.

This sounds more like some sort of random tax that still won't allow what you want to do with your machine, just like the blank CD tax/fees you pay still won't let you completely off the hook with the RIAA MPAA goons and their pet legislation they inspired, even though it was supposed to.

The only way to keep the net free is just that, no taxes on it for any reason. It's slippery slope, once the government gets a money toe hold on it, eventually it will be highly regulated.

And speaking of taxes and unnecessary fees, why can't we get unbundled POTS yet? Why do I have to pay all these ridiculous fees I see on my phone bill to use a phone line just for the net? I don't use it for anything but net access. I certainly can't get unbundled copper, no negotiations there as far as I know without jumping through a ton of ridiculous hoops and expense. I guess what I am asking is, why can't I be my own isp with just a pair of copper wires, why do I need all the extra fees and go through someone who has a fat pipe, is there any technical reason they can't throw some switches, etc, and just let me use PPP? Is this an artifical blockade they put on it? I honestly don't know the answer to that, not familiar enough with how it is set up at the local telco or how this is arranged beyond getting an assigned IP and/or domain name and IP. Would it be technically possible to just buy an IP directly, and eliminate a couple of middleman steps? I've never worked at an ISP or anything so I don't know what steps are involved with access and hardware and software and protocols.

States like mine in a quandry

So what do states like mine (South Carolina) really want?

Our govenor says that promoting small business and entrepreneurs is the key while attracting big companies like BMW.

Yet, taxing VoIP is against the sentiment entirely. I know that telephony (especially on the business side) is a VERY expensive part of my overhead. I plan on switching to Vonage soon. Taxing it would make it less of an advantage vs regular phone service.

So either our goverments want it easier to for small business to succeed due to the reduction of overhead costs that the internet brings or they don't.

It goes the same for taxes in general over the internet. Not having to collect and send in sales taxes is HUGE relief of manpower!

VOIP

I think people are being to broad with their interpretation of VOIP. When I think of VOIP I think of SIP, H232, Telephony over IP, etc. I don't consider say, Unreal Tournament 2004's voice support as VOIP.

In that regard, if they want to tax VOIP providers as they do normal telco's I don't have a complaint, I'd assume that'd just be a given. But if they want to try and tax every program that could possibly send speech over the net then I'd be a bit annoyed (to put it lightly)

I wouldn't consider Skype, Teamspeak, etc as VOIP from my point of view, I think of them as just another chat program. If it can tie into my phone, or someone elses, then it's VOIP.

My Vonage account has recently had a new $1 tax added to it, so...

"On The Internet" should be irrelevant

Why is this so damn difficult for most people to understand?

1. Commerce "on the internet" should be treated exactly the same way as all other forms of non-local commerce (phone, fax, mail order, etc).
2. If you think we need a rule #2, please refer to rule #1.

Hmm? Taxing a particular kind of software?

"House and Senate bills that define VoIP as a software application have already been introduced but may not be voted on before the Internet tax vote."

I wonder how they will collect the tax on an open source / free software version of a VoIP application?

15% of $0.00? Here's your 'tax' Mr./Ms. senator ;).

I'm not sure if tax on a particular kind of software has ever been done before? I don't think it will work out that great in this case.

A Moving Target

The Gov. needs to stop chasing shadows when it comes to the Internet. Just because an application or Web product provides the same function as something else does not make it that something else.

Taxes are used by the government to level a playing field, reduce the impact or reduce the desirablity of something. Liquor and cigarettes are heavly taxed to help pay for the gov. services used because of those products and to reduce their desirablity.

With the Internet you have a slightly different problem. The gov wants you to be using it, for a number of reasons. But they also see it as a revenue generator for them or at least a place that revenue can be lost because of switching from other revenue generators. I.e.. sales tax and now communication taxes. But the problem is they don't understand what the Internet is, so they keep arguing about whether or not to tax this part of it, or some other part of it. But this is sheer stupidity. The 'Net has yet to fully define itself. It keeps on morphing every day into some differnet functionality. Who would have thought when the 'Web came into being, in the 80's that it would be used to affect the music industry.

The only thing certain in this life is death and taxes. The Internet or portions of the Internet are going to get taxed, but how is the big problem.

VOIP companies will move overseas

If VOIP starts being taxed in the USA, I predict VOIP companies will move their operations overseas.

Joe Consumer and his buddies in the USA will then download their VOIP software from Europe, Asia, Australia, and route their calls through VOIP servers located overseas.

Wouldn't this make it a bit more difficult for the USA to impose a tax on VOIP?

Interstate Vs Intrastate Commerce

As long as internet traffic is intrastate, the federal government has no authority, under currently enforced court interpretations of the Constitution, to ban an internet tax.

The original article starts:

The U.S. Senate is slated to vote this week whether or not to renew a ban that keeps state and local governments from taxing Internet access.

This is a violation of the interstate commerce clause of the US Constitution [findarticles.com] which grants the Federal government only the power:

To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;

The 14th Amendment [wikipedia.org], which many have attempted to extend to totally eliminate all state soveriegnty, has, for example, been interpreted not even to protect basic enumerated rights [cornell.edu]. An example is, the right kee and to bear arms with military utility. The federal courts have ruled States have a right to violate this enumerated right because the bill of rights doesn't fall under any of the enumerated powers of the Constitution, nor does it fall under any of the specifically mentioned rights to be protected under the 14th Amendment. See Quilici v. Village of Morton Grove, 695 F. 2d 261 (7th Cir. 1982), cert. denied, 464 U.S. 863 (1983) [cmu.edu].

Isn't it already taxed?

Because it'd be near impossible to meter, it's unreasonable to expect VOIP-to-VOIP traffic to be regulated and taxed. However, VOIP which peers with the PSTN (i.e. the phone company) is a much easier target. But aren't taxes already being collected here? For each phone number assigned to a VOIP device, the party providing you with service (i.e. voice ISP, such as Vonage) needs to get a PRI or similar hookup to the phone system. Doesn't that get taxed? And what about sales tax? An argument could be made that wherever the VOIP provider has POPs, they could charge sales tax. And don't I already pay taxes to my ISP for my internet connection?

I'm not against taxes - I'm against excessive, stupid taxes. Like paying an E911 tax, only to find out [usatoday.com] that the money collected is going towards office supplies, dry cleaning, cars, etc. Or paying over 20% tax on my cell phone service.

The Supreme Court said it best

When they ruled against Maryland saying that a state cannot tax a federal agency because..... (and it applys to everything) "the power to tax is the power to destroy."

The States See Another Cash-Cow Disappearing

The key can be found in the article...
--
"It's the threat and the possibility that all of these services could migrate to the Internet," said Alexander's aide. "As services migrate to the Internet, you could bundle these services, and the telecom taxes that states currently collect they could no longer collect." -- Sen. Lamar Alexander (R-TN)
--

This is simply about the states being afraid of losing a very lucrative revenue source. The thought behind it has nothing to do with with the implementation, the technical reasons for VoIP deployment, or even whether its a Bad Idea (TM) or not. Its all about maintaining tax revenue for the state.

There are legions of accoutants, lawyers, and beauracrats in every state (hell, in every level of government) looking for things that might be taxed to generate revenue. It has nothing to do with whether the tax is smart, appropriate, or germane. Its about finding sources of revenue to support state spending.

What ?

I thought the government has to first be involved in something before they tax it. The gov't doesn't own any part of the internet, so what is it that allows them to consider taxing it? I use VoIP (Ventrilo) to communite with my team mates during an online game or just for chatting. If I wanted to write some interface to use a VoIP enabled phone with that, would THAT then be elligable for taxation? Taxing the internet is rediculous. I'll be glad to leave the terrible service of my regional baby bell.

How do you tax VoIP? And why?

If I release a free VoIP app, how could they expect to collect taxes on it? It'd just be sending an audio stream to another computer while at the same time receiving another stream back from that computer. Why tax just one form of two way communication? Especially the one most closely matching resembling speech, as in the free speech guaranteed by the first amendment? They wouldn't tax it just for the money. They'd tax it as a sneaky way to require call logging. Private voice communications would be a form of tax evasion. And by classifying VoIP as a type of telephone communication, they could require that all encrypted VoIP apps support wiretapping.

Title

Was that a haiku?
You were one syllable short
Better luck next time

Question on Current Internet Tax Ban

Just what does this cover anyway? Because I found out this year, retroactively, when I was doing my New York State taxes that they had a section for stuff you bought over the internet so you could pay tax on that, or they had a standard amount they would charge you if you didn't itemize(yeah, right, I didn't know to itemize untill a month after the year ended!). Is this legal...? I wondered about this at tax time, it seemed shady because one, they are basically retroactively taxing a year on purchases over the net, and two - at least till this year, wasn't there a BAN on internet taxes?

Re:Bah

So.. can I spoof my IP address and get my calls billed to my neighbor??

Nice try

Erm, yeah... except that's a four-year-old HOAX [urbanlegends.com]!

Re:Bah

There was just recently a nice article in Forbes about this very subject. Apparently, the local phone companies are scared shitless because the internet is capable of destroying their stranglehold on the telecommunications market.

The biggest problem with taxing VoIP is that you only need to pay for VoIP when calling someone who still has POTS. VoIP-to-VoIP calls are free.
I strongly believe the feds should ban ALL taxes on internet based telecommunications.

The only good benefit we get from the phone taxes is the emergency services connection. That WILL have to be figured out though.

Re:Bah

Is it so ridiculous? Attach it like a sales tax. Your SMTP server provider would be the tax collector. They track how many e-mails you send and you get the bill at the end of the month. Every time a spammer sends you an e-mail, they pay for one of your e-mails and that e-mail.

VoIP (as in the serve ices that are like using telephones) taxation wouldn't be that much different. I don't know much about VoIP but IIRC you need a service provider (I'm not talking about the kind of VoIP you have in games) so just charge a 25 cent a month user-fee.

I'm not saying I think they should do it. I'm just saying it's not all that ridiculous of a thing to do.

Re:Go home

I must have missed your point. If they tax ALL internet connections with a VoIP tax, where do you go for a "blackmarket" connection ??

Re:Go home

Actually i was doing my best to troll, and yes VOIP will become a 'black market' because there is just no way to say "oh those encrypted packets over there, the're VOIP traffic lets tax them"

You got that backwards again.

Are bullets taxed? im pretty sure bullets should have a heavey tax - say 150%? No? thought not, so dont tax the fucking internet you republican dick-head gun toting rednecks!

Last time I looked it was the Republicans that were trying to keep the taxes off the Internet (free market, create wealth, etc.) and the Democrats that were thirsting for another source of tax money.

= = = =

But of course the lefties are ALWAYS accusing their opposition of their own sins. It serves as a preemptive strike (so somebody who later points out the lefties' misbehavior looks like a "No, HE did it!" playground finger-pointer). And they place no value on honesty: Winning the argument with a lie is considered "intelligent" rather than "reprehensible". (I'd have said "dishonest" - but then lefties wouldn't understand that I meant something bad. B-) )

As for "Rednecks": Apparently, despite all their other rhetoric, lefites think racial and ethnic slurs are fair game if directed at the rural working class. (And I bet he either doesn't know or care that the term includes a reference to the assimilated indians and part-indians that form a significant component of it.)