New York has become what appears to be the first state to set policy to exempt Internet service providers from sales tax. In a report submitted to Governor George Pataki by Taxation and Finance Commissioner Michael Urbach last week, the Tax Department concluded after a year-long study that because Internet access is not, unsurprisingly mentioned in tax law it should not be subject to sales tax. State officials with the Empire State Development team said it was a case of once a tax is created, there’s no way it can be rescinded. The report also concludes that because Internet access is not telecommunications, it is outside the scope of gross receipts excise tax. Connecticut, Massachusetts, Texas and Tennessee have already declared that they will tax access; Nebraska said it will impose a partial tax of some sort, and Florida, having declared some months ago that it would impose a tax, withdrew the statement and is still studying its options.
