H.R. 3086, Permanent Internet Tax Freedom Act

H.R. 3086

Permanent Internet Tax Freedom Act


July 15, 2014 (113th Congress, 2nd Session)

Staff Contact

Floor Situation

On Tuesday, July 15, 2014, the House will consider H.R. 3086, the Permanent Internet Tax Freedom Act, under suspension of the rules.  H.R. 3086 was introduced on September 12, 2013 by Rep. Bob Goodlatte (R-VA) and was referred to the House Judiciary Committee.  The bill was marked up on June 18, 2014 and was ordered reported by a vote of 30-4.[1]

[1] House Committee Report 113-510.

Bill Summary

H.R. 3086 permanently extends the Internet Tax Freedom Act (ITFA), which generally prohibits “states and local governments from taxing Internet access or placing multiple or discriminatory taxes on Internet commerce.”[2]

[2] Id. at 2.


ITFA, which was enacted in 1998, prohibited States and localities from (1) imposing new taxes on Internet access; or (2) imposing multiple or discriminatory taxes on electronic commerce.[3]  The initial three-year moratorium imposed by ITFA has been extended through various pieces of legislation since its enactment and is currently set to expire on November 1, 2014.[4]

ITFA’s prohibition of new taxes on “Internet access” applies to “a service ‘that enables users to connect to the Internet to access content, information, or other services.’”[5]  The prohibition of “multiple taxes” on Internet commerce encompasses “‘any tax that is imposed by one State . . . on . . . essentially the same electronic commerce’ that is taxed by ‘another State . . . without a credit for taxes paid in other jurisdictions.’”[6]  An example of such would be if “a resident of Virginia downloads a movie from a company based in Seattle while waiting at the airport in Chicago.  Three states could claim the right to tax it; Virginia, Washington and Illinois.  The statute does not establish priority among those claims.  It merely requires credits so the customer is not subject to three separate tax levies.”[7]  A “discriminatory tax” on Internet commerce, as prohibited by ITFA, is “one that is either ‘not generally imposed’ or is ‘not imposed at the same rate’ on similar transactions ‘accomplished through other means.’”[8]

Personal Internet usage by American adults increased from 14% in 1995 to 86% in 2013.[9]  Individuals increasingly rely on it to access healthcare information, education, and career opportunities.  In addition, the Internet has played an increasingly critical role in the U.S. economy, “becom[ing] the primary driver of U.S. economic growth, innovation and productivity.”[10]  These and other uses demonstrate the vast number of individuals—students, job seekers, employees, and employers—who would be impacted if the ITFA tax moratoriums were allowed to lapse.  The state telecommunications taxes that would be permitted to go into effect could be significant, and would disproportionately impact low income households, who “pay ten times as much in communications taxes as high income households as a share of income.”[11]  As the Internet becomes even more ubiquitous, H.R. 3086 gives users certainty by ensuring the tax moratoriums contained in ITFA are permanently in place.

[3] Id.  “A grandfather clause in ITFA allows states and localities to continue imposing state and local taxes on Internet access that were ‘generally imposed and actually enforced prior to October 1, 1998.’”  Id. at 4.
[4] Id. at 2.
[5] Id.
[6] Id. at 3.
[7] Id.
[8] Id.
[9] Id. at 5.
[10] Id.
[11] Id. at 6.


According to CBO estimates, implementing H.R. 3086 would have no significant impact on the federal budget.  The bill would not affect direct spending or revenues.

Additional Information

For questions or further information contact the GOP Conference at 5-5107.