In keeping with the Clinton administration's policy of no Internet taxation, a task force appointed by Florida's governor recommended Friday that the state not impose taxes on the Internet - at least for now.
"Many other states have been watching and waiting to see what Florida would do," said Susan Larkston, executive director of the Florida Telecom Industry Association. "It does seem to be precedent-setting."
The 19-member task force - which comprises state lawmakers, city representatives, and heavyweight industry leaders Microsoft, Sprint, BellSouth, and AT&T - concluded after a seven-month review that the Internet was too new of a medium to begin imposing taxes on it.
"More analysis needs to be done before the Internet can be taxed," said Bruce Reid, director of state and local tax issues at Microsoft and a member of the task force. "The industry is converging so quickly, that it's too early to know what the Internet will look like."
The task force will present its findings, which include streamlining telecommunications taxation, to the governor on 1 February. The recommendations then will be passed onto the state Legislature, which will most likely decide not to tax Internet access and related services this year.
"Far and away the most likely scenario is that ultimately there will be no charges on the Internet in Florida," said Alan Johansen, director of the governor's budget and planning office.
For the first time since the Reconstruction era, Republicans hold the majority in the Florida House and Senate. The Florida Republican Congress has come up with a series of legislative guidelines - reminiscent of 1994's "Contract with America" - including no new taxes. "This Congress is very anti-tax increase, and very friendly to the telecommunications industry," Johansen added.
Other states that considered taxing the Net have since backed off as well. After a New York state task force reached similar conclusions two weeks ago, Gov. George Pataki announced that his state would not impose taxes on Internet access. "New York must encourage the new media industry to continue to expand and thrive in our state," Pataki said at the time.
Recently, US Sen. Ron Wyden of Oregon and Rep. Chris Cox of California said they would introduce legislation in February that would impose a moratorium on state Internet taxation until a uniform standard is developed. And, the Clinton administration has sent a clear message that taxation should not be done hastily. At a meeting of the Internet Tax Association on Friday, Ira Magaziner, who is heading up the White House's task force on electronic commerce, reiterated this message of not jumping into taxation.
But still, the idea of getting revenue from the Internet is appealing to cash-strapped states. On Wednesday, a state committee on taxation in Tennessee deliberated whether and how to tax the Internet, and in Iowa, a tabled proposal would apply sales taxes to Internet access.
"This is certainly not the end of the story," Microsoft's Reid said. "In the end, states may decide to tax the Internet, but hopefully they will be informed about the technology and impose an appropriate tax system, not just try to apply old tax regulations to the new medium."
