VoIP: To tax or not to tax
As the debate over Internet taxation heats up in
Congress, legal experts are keeping one eye fixed firmly on
Florida, where officials are poised to begin enforcing a
little-known state law that could open the door to a wide range
of new telecommunications taxes.
For nearly two decades, Florida's Substitute
Communications statute has gone relatively unnoticed and has not
been widely enforced. But as the state looks for new sources of
revenue, the law has emerged as an unexpected--and
controversial--potential cash source. Using a broad
interpretation of the statute, the state revenue office as soon
as this summer could begin taxing voice over Internet Protocol
(VoIP) service providers and businesses that use local area
networks (LANs) to transmit voice calls.
State lawmakers have until Friday to revise or
postpone enforcement of the statute, at which point local
officials said they will have no choice but to begin enforcing
the law.
"I do think this is a law of unintended
consequences," said Dave Bruns, a spokesman for the State
Revenue Department in Florida. "It was written before anyone
outside of Silicon Valley had even thought of local area
networks or VoIP. It's our responsibility to administer the tax
policy. If the guidance we get from the legislature is to
maintain the current course, we will enforce it to the best of
our ability."
Florida lawmakers have opposed VoIP taxation in
the past, and they may well vote to limit or postpone the law.
In addition, the measure has not been tested in court and could
yet be struck down. VoIP rules have already led to legal clashes
between state and federal regulators, with at least one ruling
limiting state control of Internet phone services.
Last year, a federal judge barred the Minnesota
Public Utilities Commission from requiring VoIP providers to
register as a phone company or submit to local telephone
rules--a decision that raised significant questions over whether
states have the authority to regulate VoIP carriers. Since then,
states have largely held back from asserting broad regulatory
authority over VoIP carriers such as Vonage, 8x8 and
VoicePulse.
Despite such hurdles, opponents to VoIP taxation
say the Florida law underscores deep ambiguities in
telecommunications policy brought on by the Internet. In a
worst-case scenario, some say, other states might use Florida's
law as a template for VoIP regulation and taxation.
"I'm afraid that states that tend to tax heavily,
will look at Florida as a model of how to apply similar taxes in
their own state," said Jeff Pulver, the founder of Free World
Dialup, a free Net phone service. "I just hope that Florida can
straighten this out before it becomes a problem."
