Internet Tax Freedom Act (ITFA)

Starting July 1, 2020, internet access fees in the United States will be exempt from sales tax. This change comes as part of the Internet Tax Freedom Act (ITFA), which prohibits states from imposing taxes on internet access and discriminatory taxes on electronic commerce.

The ITFA, originally enacted in 1998, was made permanent in 2016 through the Trade Facilitation and Trade Enforcement Act. This legislation aims to promote internet accessibility and growth by eliminating additional costs associated with internet usage.

States and local governments have been preparing for this change, which will impact both businesses and consumers by potentially lowering the overall cost of internet services. As a result, internet service providers (ISPs) will no longer include sales tax in their billing for internet access, reflecting this exemption.

This change underscores the growing recognition of the internet as an essential utility, akin to water and electricity, crucial for modern communication, business operations, and access to information. It is a significant step towards making the internet more accessible and affordable for everyone, fostering greater digital inclusion.

Businesses should review their billing systems and update their tax compliance practices to ensure they are not incorrectly charging sales tax on internet access. Consumers should notice a slight reduction in their internet bills as the sales tax exemption takes effect.

For more detailed information, you can refer to the Internet Tax Freedom Act (ITFA) and the Trade Facilitation and Trade Enforcement Act of 2016.