In case you missed it as the 113th Congress wrapped up its frantic lame duck days, it did manage to keep Internet access for most folks safe from taxation for another fiscal year.
One of the provisions packed into the $1.1 trillion federal spending package passed in mid-December was an extension of the moratorium on local and state taxes for Internet access through October.
A quick note for all y'all logging on in Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Wisconsin and alongside me here in Texas. We'll still see taxes on our Internet providers' bills because the taxes in these seven states were grandfathered by virtue of being in place prior to Oct. 1, 1998.
Everyone else, however, continues to benefit from the extended no tax on Internet access law, formally known as the Internet Tax Freedom Act, or ITFA.
E-sales taxes, too: The ITFA had expired last November. Its renewal was stalled by different approaches in the House and Senate. Matters were further complicated when the ITFA became entangled with the separate issue of state collection of sales taxes on online purchases.
That other tax measure is the Marketplace Fairness Act, which would establish a nationwide system for all online sellers to collect sales taxes. Brick-and-mortar retailers, especially the smaller businesses in the 45 states that charge sales taxes, say that online tax collection is crucial to Main Street shops' survival in the digital age. When e-tailers don't collect sales taxes, real shop owners lose customers to the 'Net.
Although some progress was made last Congressional session on the online sales tax battle, the fight must begin anew with the arrival tomorrow, Jan. 6, of the 114th Congress.
Expect the Capitol Hill online skirmishing over a longer-term and perhaps permanent ITFA, along with the sales tax collection question to take up a lot more legislative debate time.
Digital taxes across the pond: U.S. lawmakers, however, aren't the only ones facing online tax issues. The Internet and related tax concerns know no boundaries.
In fact, the arrival of 2015 also brings new digital taxes to the European Union.
Under rules first approved in 2008 and expanding this year across the 28-country European bloc, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters, writes Mark Scott in the New York Times.
This change in the value added tax, or VAT, a tax on goods and services similar to U.S. state sales taxes, is part of a continuing push by to tax the digital economy more heavily. The tax on many purchases of digital content like e-books and smartphone applications now will increase.
Tax experts, according to Scott's article, say the revamped digital purchasing rules could add up to an extra $1 billion a year in tax revenue to European treasuries.
The big remaining question, however, is just who in the EU will pay most of the bill? Will it be passed along to consumers or will retailers and/or manufactures absorb it?
"There inevitably will be a price change," Richard Mollet, chief executive of the British trade group Publishers Association, told Scott. "The question is whether retailers, publishers or customers will have to take on board any increase."
Luxembourg a possible big loser: It also could prompt some international companies that located within European tax haven borders to rethink their jurisdictional choice.
Luxembourg will be one of the countries most affected by the tax change. The tiny country also has low VAT rates, which have lured companies such as Apple's international iTunes business and Microsoft's digital download operation.
But with the new digital tax on the horizon, Luxembourg lawmakers have announced an increase from 15 percent to 17 percent in the country's VAT rate on most goods.
"Luxembourg is going to lose an enormous amount of revenue," said Karen Robb, a tax partner at the accounting firm Grant Thornton in London, told Scott. "There will be fewer compelling tax reasons for companies to stay in Luxembourg."
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