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Senate Mulls Internet Tax Ban - VoIP Exempt? 143

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."
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Senate Mulls Internet Tax Ban - VoIP Exempt?

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  • pathetic (Score:3, Insightful)

    by parksie ( 540658 ) on Sunday April 25, 2004 @07:53AM (#8964203)
    how are they planning on enforcing this? It's completley pointless.
    • Re:pathetic (Score:3, Funny)

      by nkh ( 750837 )
      The new Aprils Fools RFC: Voice Over IP Taxation Bit...
    • Exactly...

      The only way I could see them levying the tax would be to add a tax onto the software when you buy it, kind of like the video cassette tax back in the 80's.

      How would they know it's a conversation? How would they differentiate between a Powwow chat and a cisco VoIP? How would they know this packet contains VoIP so it should be taxed (by who and how...but that's another matter) and this packet contains Aunt Matilda's Hallmark greeting card?

      I agree with the FP, they are a bunch of money loving b

      • Re:pathetic (Score:3, Insightful)

        by SquierStrat ( 42516 )
        Of course they would. It's called power. If you control someone's finances you have power over them. That's why your employer can tell you what to do and that's why the founding fathers tried to limit taxation by banning direct taxes.
  • What defines VoIP? (Score:5, Interesting)

    by ZaMoose ( 24734 ) on Sunday April 25, 2004 @07:54AM (#8964205)
    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.
    • Stop voting for the people you don't trust and elect people you do trust then.
      • They dont exist. Its a "lesser of two evils" situation and has always been. mostly.
        • Try voting for a third party, or how about YOU run? If you distrust them so much, you go do it. Hell, if you'll lower taxes and let freedom abound, I'll vote for you. Come to Georgia and run for Zell Miller's seat.
      • What people? Both sides of the fence want to randomly tax things to see how much money they can get [to ultimately commit more warcrimes with poorly educated peeps] while alienating their voting public the least.

      • That's all well and good, but I don't trust people in other areas to do the same. I vote for those i trust every time, it's just getting enough other people to agree with me that's the difficult part...

        For instance, I'm trying to help give Snarlin' Arlen Specter the boot from Pennsylvania, but the sniveling PA GOP refuses to actually stand up for supposedly "Republican" principles and is backing one of the most un-Republican senators out there, simply in the name of political expediency and clout.
    • by bwy ( 726112 )
      My guess is that if this goes through, their intention is to tax VOIP when it is implemented through a telco. It is hard to tell from these articles that were posted though because aren't written with a lot of technical detail.

      Sure, there are other ways to use VOIP technology, but it is totally nothing compared to the number of people who use the PSTN. My guess is they would like to position themselves to levy taxes as some telcos go from circuit switched technology to packet switched.

      You're probably ri
      • I suspect that the intended defniition of "VOIP" is to cover things which have interconnects to the PSTN and let you contact people on the PSTN (e.g. vonage)
    • If it interfaces with the PSTN its a telecommunications medium and should be taxed accordingly because it is a PSTN service.

      If its a point to point connection between two users with no PSTN involvement the baby bells can go jump.

      Fair? I think so.
    • Okay. Here's the deal: No one is trying to tax your UT, or your *meeting calls. At least not yet.

      Currently, "VoIP" in the government's eyes is carrier-class packet telephony implemented to replace PSTN services for consumers and business. There are companies out there, like mine, who are gaining traction delivering this type of service. Multisite companies love not paying LD charges between LATAs/states...

      This really means PSTN-quality audio, without the regulated tarriffs, origination fees, and te
      • I think it'd be extremely difficult to achieve consistent taxation across VoIP connections, simply because without a hell of a lot of packet sniffing how do you tell that the traffic is VoIP at all.

        On the other hand, taxing it at the VoIP - PSTN gateway end (bear in mind most current and short-term-future VoIP use will ultimately need to break out onto a PSTN network eventually) would probably be easier to implemnet consistently.

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

      The sane thing to do would be to tax subscription VoIP/PSTN bridging. (PSTN = Public Switched Telephone Network.)

      VoIP computer-to-computer connection is just another IP application. It lets you communicate with another computer user - but so does just about EVERY OTHER application on the Internet. (VoIP just happens to transmit voice, rather than the text streams of chat and IM, the compositions of ema
  • 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 (Score:4, Interesting)

    by SquierStrat ( 42516 ) on Sunday April 25, 2004 @08:05AM (#8964237) Homepage
    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.
    • by nkh ( 750837 )
      VoIP means "Voice Over IP", and IP means "the Internet".
      VoIP can be coded in a software (which can be Free, as in Free Beer), and that's why it is neither a good, nor a service.
    • by cibus ( 670787 )
      One has already paied for the bandwidth one uses for VoIP. Thats what differs it so much from normal telephony.
      If some service provider wants to charge for a VoIP service then this provider should be taxed... but for regular "free" services taxing makes no sense.
      Whats next... HTTP taxing??
  • Skype? (Score:5, Interesting)

    by Locky ( 608008 ) on Sunday April 25, 2004 @08:07AM (#8964248) Homepage
    Skype [] 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?
    • Simple. All they have to do is get the IP to monitor the traffic and bill you. This would also make it pretty uneconomical to run a free proxy like they describe, so you can say bye-bye to the firewall traversal feature.
      • Oops, I meant ISP not IP.
      • They can't and won't monitor encrypted traffic because cryptography can be done in real time now (a small Diffie-Hellman IIRC and they're fscked), that's why they will bill everyone in the end...
        • Re:Skype? (Score:2, Interesting)

          by sploo22 ( 748838 )
          Good point, but if the packets use a predefined protocol they'll still be able to do traffic analysis, even if they can't decode the data. Just scan for the headers and bill people per packet.

          I guess you could get around this by using IPsec, OTOH.
    • tax all internet connections, just like federal taxes on POTS lines. In other words, everybody will pay whether it benefits them or not.
    • Re:Skype? (Score:3, Insightful)

      -->How exactly do they intend to regulate the unregulatable?

      They don't. Even the pols aren't that stupid. What they will end up doing is taxing any applications that interface and crossover to the Public Switched Telephone Network (PSTN). The last time I looked Skype did not do this (and now probably won't ever do so).
  • I wonder why (Score:5, Insightful)

    by cluge ( 114877 ) on Sunday April 25, 2004 @08:07AM (#8964249) Homepage
    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)

    AngryPeopleRule []

  • by Anonymous Coward on Sunday April 25, 2004 @08:10AM (#8964259)
    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!
  • by Kjella ( 173770 ) on Sunday April 25, 2004 @08:11AM (#8964262) Homepage 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.

    • Awesome point, and in fact, some computer based pbx systems implement something similar. By pluggin a cell phone into a special cradle and the cradle into a port on the pbx, anybody with an extension on the pbx can make outgoing calls on that cell phone.
      The cell phone becomes a "trunk".

      You are right, once things like this become more common the market will explode.
      Plus its just cool as hell.
  • by poptones ( 653660 ) on Sunday April 25, 2004 @08:14AM (#8964274) Journal
    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.
    • It was easy to look at the nonsense going on in India with the government attempting to ban IP telephony [...]

      That's the first I've heard of that. (And it's important to me.)

      Do you have a pointer to any articles on it?

      • Google "ip telphony" and "india" and you'll see lots of articles. A few years ago villages were beginning to make wide use of IP telephony via computers and some governments went so far as to sniff and destroy packets carrying voice messaging. Other areas simply firewalled out the relevant ports. They eventually figured out it was an impossible case to ban such use, but that won't stop anyone from taxing them.

        Don't forget you don't have to tax EVERYONE or regulate EVERYONE. All you have to do is tax and re

  • by crem_d_genes ( 726860 ) * on Sunday April 25, 2004 @08:15AM (#8964279)
    and the FCC is still in on the act [] - then will the user licenses have *decency clauses* [] written into them?
  • the chaos of law (Score:5, Insightful)

    by plnrtrvlr ( 557800 ) on Sunday April 25, 2004 @08:19AM (#8964291)
    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.....
  • by zogger ( 617870 ) on Sunday April 25, 2004 @08:31AM (#8964327) Homepage Journal
    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.
    • With enough money anything technical is possiable. Given the lengths the IRS now goes to for a few dollars tax and many more dollars of penalty, I can envision the H-O-W, High-capacity Online Where-finder. After all it will be your money financing the program.
    • Technically you can start your own internet.
      You just start off with a couple of computers and give them a couple of IP addresses. There are two ways to go about this: completely on your own and just pick some number out of thin air (but you will not be compatible with the current Internet) or get a range from IANA (with IPv6 there are anough to get it straight from the horses mouth).

      Now you connect your neighbour's computers to your own with ethernet and two routers. Now in most countries you may not lay c
    • Why would they get into all that when they can just tax all internet connections equally ? A flat VoIP tax avoids all of that technical crap and gets them what they want. Revenue.
  • by adzoox ( 615327 ) * on Sunday April 25, 2004 @08:37AM (#8964343) Journal
    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!
    • I think your governor might be lying just so he can get more votes while still receiving donations from larger companies (like the telephone company). Lying ,in general, is pretty common among politicians. They can even lie and stay in office. Look at Nethercutt (a representative from Washington). He promised to stay in office for only three terms, but he was doing such a good job that he ran for office again, and won again. In that case it wasn't really a bad thing since most of the people loved him, but t
    • You still think politicians work for the little guy? You must be new here.
  • VOIP (Score:2, Informative)

    by maitai ( 46370 )
    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, T
  • by frankie ( 91710 ) on Sunday April 25, 2004 @09:48AM (#8964556) Journal
    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.
    • All other forms of non-local commerce are tax free anyway. There is no national sales tax, so why should there be a tax on anything related to the internet? We are already heavily taxed on our income, why do they keep increasing the burden?
  • "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.
  • 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

    • Re:A Moving Target (Score:2, Insightful)

      by DragonTHC ( 208439 )
      we pay communication taxes on the internet service!
      and on my phone line which my DSL is on.

      I pay about $20 a month just in taxes for my phone+DSL.

      taxing VOIP is ridiculous since you're still paying taxes on the internet service.

      as for sales tax on the web, we're still dodging that bullet.

      adding it would seriously decrease website revenues.
    • I doubt that the government is the origin of the desire to tax VoIP. Think carefully now, what industry with billions to buy politicians with would *really* like high taxes on VoIP? The telephone companies maybe? Gee.....

      This is simply the telephone companies seeing a new and competing technology arising and then doing its best to strangle that new technology. The government is, in this case, nothing more or less than the hired thug of the phone company. Watch carefully as various congresspeople who

  • 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 [] which grants the Federal government only the power:

    To regulate commerce with forei

  • by no_such_user ( 196771 ) <jd-slashdot-20071008&dreamallday,com> on Sunday April 25, 2004 @11:32AM (#8965052)
    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 [] that the money collected is going towards office supplies, dry cleaning, cars, etc. Or paying over 20% tax on my cell phone service.
  • 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."
  • by ZPO ( 465615 ) on Sunday April 25, 2004 @12:00PM (#8965212)
    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.
  • 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

If you fail to plan, plan to fail.