Federal Bill Would Cost Texas Cities $51 Million

On Wednesday of this week the House Judiciary Committee passed H.R. 3086, the Permanent Internet Tax Freedom Act, over objections and amendments from Texas representatives. The bill would permanently ban Internet taxing authority, similar to the existing moratorium on Internet taxes except in one key respect:  the new bill would cancel a grandfathering provision that permits ten states, including Texas, to continue pre-existing taxes on Internet access. Texas, and Texas cities, currently apply sales taxes to Internet access charges in excess of $25 per month.

The net effect of the bill, if passed, on the State of Texas would be a $280 million loss per year, and $51 million per year loss for Texas cities.

Next in the Congressional process is for the bill to be scored by the Congressional Budget Office. Then the bill could be passed by the U.S. House. Concerned city officials should contact their U.S. House members now. The message is this:  while Texas officials don’t seek new taxing authority in this area, we do wish to maintain existing sales taxes. Accordingly, H.R. 3086 must be amended to continue the grandfathering clause of the existing moratorium. Otherwise cities will lose $51 million in revenue that pays for streets, police, and fire protection, among other critical services.


TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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