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June 1, 2020

Internet Tax Freedom Actís prohibition against taxing internet access applies to all states beginning July 1, 2020

On June 30, 2020, the grandfathering provisions of the Internet Tax Freedom Act (ITFA),1 which permitted states that taxed internet access before the ITFA’s enactment to continue doing so, will expire. Accordingly, the six remaining states that tax Internet access (Hawaii, New Mexico, Ohio, South Dakota, Texas and Wisconsin) must, by federal law, stop charging those taxes beginning July 1, 2020.


Originally enacted in 1998 as a temporary moratorium barring federal, state and local governments from imposing internet access taxes, as well as multiple or discriminatory taxes on electronic commerce, ITFA was renewed eight separate times before being made permanent in 2015 under the Trade Facilitation and Trade Enforcement Act of 2015 (Act).2 In addition to making ITFA permanent, the Act repealed the grandfathering provisions effective June 30, 2020.

State responses

Tax authorities in South Dakota, Texas and Wisconsin have expressly indicated that they will no longer tax internet access after June 30, 2020.

  • The South Dakota Department of Revenue has indicated that internet access will no longer be subject to South Dakota state and municipal sales taxes as of July 1, 2020 due to the June 30, 2020 expiration of the grandfather provisions of the ITFA.3
  • The Texas Comptroller of Public Accounts said that, beginning July 1, 2020, Texas will no longer impose sales tax on separately stated internet access charges.4
  • The Wisconsin Department of Revenue announced that the state will no longer tax internet access services after June 30, 2020.5

The Ohio Department of Taxation (OH DOT), which has not posted any recent guidance, acknowledged the effect of the expiration of ITFA’s grandfathering clause on its internet access tax in a 2016 information release.6; In that guidance, OH DOT stated  that  Ohio amended its definition of a “sale” for purposes of its sales tax in 1993 to include electronic information services (i.e., before the ITFA’s original effective date of October 21, 1998). OH DOT further stated that (1) the same services would have been considered automatic data processing under the law that existed before that date, (2) Ohio sales and use tax on these services has been generally enforced and (3) “[t]herefore, Ohio’s tax on [internet] access and on-line services is not subject to the [federal] moratorium.” It remains to be seen whether the OH DOT will continue to enforce its tax after the ITFA grandfathering clause expires on June 30, 2020, and what controversy, if any, will arise if it does.

At this time, Hawaii and New Mexico, each of which impose a general gross receipts tax that operates as a sales tax, have not provided specific guidance on the applicability of the expiration of the ITFA grandfathering clause to their internet access taxes.


Taxpayers that are currently charged internet access taxes in any of these states should carefully review invoices from their internet service providers after June 30, 2020, to verify that any such tax is no longer applied to their account. Additionally, taxpayers subject to tax on internet access services in Hawaii, Ohio and New Mexico should closely monitor the responses from the revenue agencies in these states, particularly on whether each may attempt to continue taxing internet access services by reclassifying them as taxes on data, information services or other services, and if any judicial challenges or controversy involving the federal preemption may arise. It is possible that, in response to recent U.S. Supreme Court holdings (such as NCAA v. Murphy7), these states could mount a challenge to what they may view as an attempt by Congress to hamstring their state sovereignty by limiting their ability to continue taxing internet access.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Megan Mahony (
   • Karl Nicolas (
   • Mike Wasser (
   • Mike Woznyk (


1 P.L. 105-277 (and currently codified at 47 U.S. Code §?151 note (Moratorium on Internet Taxes).

2 P.L. 114-125, Section 922.

3 S.D. Dept. of Rev., Newsletter (Winter 2020); S.D. Dept. of Rev., Internet Tax Freedom Act: Internet Access Taxation (December 2019).

4 Tax Policy News (May 2020). Additionally, Texas has proposed repealing its rule requiring taxation of internet access, effective July 1, 2020, to reflect federal law.  Tex. Comp. of Pub. Accts., Proposed repeal of 34 Tex. Admin. Code § 3.366 (45 TexReg 3257, May 15, 2020).

5 Wis. Dept. of Rev., Pub. 201 (January 2019).

6 Ohio Dept. of Taxn., Info. Release ST 1999-04 – Online Services and Internet Access (January 1999, updated December 2015, September 2016).

7 Murphy v. National Collegiate Athletic Assn., 584 U.S. ___, No. 16-476 and 16-477 (May 14, 2018) (slip opinion available on the Internet at