Internet Tax Freedom Act does NOT ban sales tax

August 10, 2011
Internet Tax Freedom Act Amendments Act of 2007

Internet Tax Freedom Act Amendments Act of 2007 (110th congress - H.R. 3678)

Although we see less of this now than we used to, there is still some confusion over the Internet Tax Freedom Act and how it affects sales tax on online purchases.

The truth is, it doesn’t. The Internet Tax Freedom Act (ITFA) was passed in 1998 and renewed/extended in 2007 (it’s now good through 2014) to ban taxes on internet access and internet-only goods or services, such as email and bandwidth. But ITFA expressly did not ban sales tax on online purchases (though it did say that sales tax on online goods must have the same rate as the same goods purchased offline).

As the Main Street Fairness Act has been getting a lot of press attention lately, we’ve seen a few articles, such as this one, that have mistakenly attributed the current rules on online sales tax (including the role of nexus) to the Internet Tax Freedom Act. So consider this an addition to our earlier list of mischaracterizations about online sales tax: The Internet Tax Freedom Act does not ban sales tax on online purchases.