One of the biggest things that VOIP has going for it is the fact that is costs way cheaper than traditional telephony and one of the main reasons for this low cost is the fact that VOIP services are not subject to the same taxes and charges that traditional telecommunications providers are. So what happens if VOIP providers become taxed? In Los Angeles, California, it seems that they are taking this route. Steve Stanek writes in Heartland:

Los Angeles voters have imposed a 9 percent tax on Internet phone calls, known as VoIP (Voice over Internet Protocol). VoIP calls had been tax-free in the city. Voters also enacted a 1 percentage point reduction in the tax on all other phone calls, from 10 percent to 9 percent. Most phone calls are still made over traditional wireline or wireless phones, but Internet phone service is a rapidly growing segment of the telephone market.

Measure S appeared on the February 5 ballot in Los Angeles and won by nearly a two-thirds margin. Voters were promised if they supported Measure S, the tax money would go toward police protection. Critics of the new VoIP tax say there is no guarantee any of the money will go to police or other public safety services, as the proceeds will simply go into the city’s general fund.

Tax Called Illegal
Last fall, Congress passed a seven-year extension of the federal moratorium protecting Internet access services from federal, state, and local sales or excise taxes. President George W. Bush signed the bill November 1.
Huffman said Measure S was sprung on voters with almost no notice, which bothered several taxpayer and business organizations, including VICA.

“We were disappointed at how the Los Angeles City Council placed this measure on the ballot. It came out of nowhere,” said Huffman, leaving almost no time for opponents to muster arguments against it. Huffman said association members are also upset the new VoIP tax was proposed barely two weeks after the Los Angeles City Council granted 20 to 25 percent pay raises for all city employees, making them the highest-paid city employees in California. City officials should have simply acknowledged they needed more revenue to pay for those high salaries and benefits instead of arguing it was a matter of public safety, Huffman said. “It’s a matter of honesty,” Huffman said. “They should have been upfront with us.”

As is expected, this issue involves more than VOIP service. As for now, though, VOIP users in LA can expect higher fees as a result of this law.

Don't miss a post! Subscribe to the RSS feed or by email today!