WASHINGTON, DC, U.S.A., 1996 JUL 30 (NB) -- By Bill Pietrucha. Tacoma, Washington, has just gained the distinction of being the only municipality in the United States to tax Internet Access providers (IAPs) like telephone service providers.

The city of Tacoma has extended its six percent gross receipts tax on telecommunications services to include Internet services, Information Technology Association of America (ITAA) spokesperson Bob Cohen told Newsbytes.

"IAPs use telephone lines to provide consumers with the `on-ramp' access to the Internet," Cohen told Newsbytes. "Since consumers and providers already pay taxes on basic telephone service," Cohen said, "the new Tacoma tax would amount to double taxation, applying to both the telephone service and the content transmitted over the telephone line."

Cohen said ITAA has called on Tacoma Mayor Brian Ebersole to rescind the new tax, saying that "excessive regulation and taxation will change the fundamental nature of this new medium (the Internet)."

In urging the mayor to stop the city's attempt to impose a tax on the IAPs, ITAA President Harris N. Miler said that "Tacoma will be hurting both the Internet and its own economic future."

Miller told Newsbytes that the tax will mean "a loss of profits to Tacoma-based IAPs, as well as a paperwork nightmare which may drive companies out of business. IAPs doing business in Tacoma will be at a competitive disadvantage to their competitors in other municipalities."

Miller noted that the tax regime could cause Tacoma-based IAPs to move to other jurisdictions, "taking the jobs they provide, and the taxes they currently pay, with them. They (IAPs) may also decide not to provide service to Tacoma residents rather than deal with the administrative nightmare of complying with the new tax regulations," Miller said.

If other cities attempted to follow Tacoma's lead in taxing IAPs, Miler said, it could cause the "Balkanization of the Internet, a hodgepodge of confusing, conflicting, and difficult to administer Internet tax rules and regulations.

Miller also hinted that the tax could inadvertently be in violation of international tax treaties.

"To begin taxing at the local level before it is clear what the impact will be on industry and the public in general is bad public policy," Miller said.

(19960730/Press Contact: Bob Cohen, Information Technology Association of America, 703-284-5333, Internet e-mail bcohen@itaa.org)

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