On Tuesday, February 9, Senate leaders announced a deal that would compromise local governments’ ability to deliver essential services to our communities.  Under the deal Senators dropped their objections to the inclusion of the Permanent Internet Tax Freedom Act (PITFA) in the Trade Facilitation and Trade Enforcement Act conference report (HR 644) in exchange for a commitment from Senate majority leadership to provide floor time for a discussion on the Marketplace Fairness Act (S 698) later this year. 

ICMA has repeatedly joined its fellow Big 7 state and local organizatoins in calling on Congress to restore sovereignty to state and local governments by passing remote sales tax legislation and allowing them to set their own tax policy. They have urged Congress to include remote sales tax collection legislation when it considers any extension of the Internet Tax Freedom Act (ITFA). 

The permanent loss of the telecommunications revenue that will result, should the language of the PITFA measure remain in the Trade Facilitation and Trade Enforcement Act, breaches the fundamental sovereign right of states and their local governments to raise revenue. Local governments rely on these revenues to fund essential services in their communities, including well-trained firefighters and police officers; schools, parks, community centers, and libraries to support youth; retirement security for dedicated career employees; and continued investments to fix aging infrastructure. For example, an analysis of the projected revenue loss for the state of Illinois under PITFA projects that the legislation would strip the state’s local governments of $390 million annually in telecommunications taxes – a figure that will undoubtedly grow as cable and telecommunications providers migrate more of their services to broadband platforms.  

Passage of remote sales tax collection legislation, such as the Marketplace Fairness Act (MFA), is highly unlikely under the current scenario. 

ICMA has signed onto an op-ed urging Senators to remove PITFA from the Conference Customs Report, and has joined its fellow Big 7 members in sending a letter to legislators urging the same.