United States: Tax Effects of Internet Telecommunications Services

Abstract It is popular to say both that “the Internet changes everything” and that “death and taxes are inevitable.” According to this framework, it may be tempting to think about the issue of taxes on Internet telecommunications services as a new, unstoppable force (the Internet) meeting an immovable object (taxes). However, this framework is flawed in that both telecommunications services and taxes applicable to telecommunications services have been changing for at least a century, long before the advent of the Internet. Government authorities have proven quite adept at adopting legislation and revising regulations to make new telecommunications offerings and providers subject to high, industry-specific taxes. Since the spread of Internet telecommunications services, there have been changes in some of the taxes applicable to these and other telecommunications services. Yet, the processes of adapting taxes to new telecommunications technologies, offerings, and market structures have shown their resiliency with regard to the growing revenues of Internet telecommunications services and the growing demands for tax collections.