Office of U.S. Rep. Sensenbrenner: Sensenbrenner Provision Eliminates Internet Taxes for Wisconsin

Raj Bharwani

(202) 225-5101

WASHINGTON, DC — Earlier today, when the House passed S. 150 the Internet Tax Nondiscrimination Act and the related Senate enrolling resolution, it included a provision inserted by Menomonee Falls Congressman Jim Sensenbrenner that will save Wisconsin taxpayers money that they pay to use the Internet. Beginning November 1, 2006, Wisconsinites will no longer have to pay a state tax when they access the Internet.

“Most people in America don’t pay a tax to log on to the Internet because, in 1998, Congress passed the Internet Tax Freedom Act (ITFA), which prevented states from levying new taxes on Internet access,” said Sensenbrenner. “This law was supposed to help all Americans, particularly low-income individuals and families, by stopping states from levying yet another onerous tax upon their residents.”

However, before the 1998 moratorium, some states had already rushed to tax the Internet. Consequently, eleven states claimed to be exempt under the ITFA’s “grandfather” provision, most of which have continued to tax people’s Internet service today. Wisconsin is one such state that decided to implement this tax, and did so based on an interpretation by the Department of Revenue, without even a vote in the state legislature. In 2002, the state billed Wisconsin Internet users an estimated $24.3 million.

Many consumers don’t know they’ve been hit because the Internet taxes are sometimes hidden as general state taxes. Under Governor Doyle, Wisconsin’s state government is continuing this painful practice against the express will of Congress because the grandfather was intended as a transition period, not to provide any state with a permanent special taxing status at a time when 40+ states stopped taxing people’s Internet access.

“Whether it’s for checking e-mail, purchasing items online, or researching a subject for school, the Internet has become an integral part of life for many Americans,” Sensenbrenner continued. “As one of only a handful of states that taxes Internet access, Wisconsin’s growth and ability to remain competitive in the technology sector is seriously hampered. Removing this tax is a step toward eliminating Wisconsin’s ‘high-tax’ reputation.” According to the June issue of a Bloomberg report, Wisconsin is ranked last among all fifty states and the District of Columbia as a place for seniors to retire, and it is ranked second to last in overall personal wealth friendliness.

Under current law, Wisconsin applies a 5% sales tax on Internet access, with up to an additional half-percent tax in localities that have such a tax. Legislation passed last year in the House by the Judiciary Committee under Sensenbrenner would have immediately ended Wisconsin’s taxation of Internet access. But some Senators, led by Senator Herb Kohl, objected and insisted that the taxation continue until November 1, 2006.

“What this means is that if your Internet access bill is $20 a month, then beginning November 1, 2006, people in Wisconsin will save at least a dollar, if not more, each month. This savings will allow more low-income individuals to access the Internet and relieve a tax burden on Wisconsin’s economic growth.”

“While Governor Doyle and Senator Kohl support this tax and believe that the money should go to the state, I believe this tax should be eliminated, so that the people of Wisconsin can decide how best to spend their own money,” Sensenbrenner concluded.