SAN DIEGO — If fickle subscribers, low profits and an unsettled future weren't enough to worry about, online service providers are now confronted by another problem: the growing movement among governments to try to tax the Internet.
Many state and local governments looking for revenue sources see Internet access providers and online service companies as freeloaders, escaping the taxes and access fees that other telecommunications services such as telephone and cable TV companies must pay.
Moreover, tax advocates view the transmission of Internet content and programming as a taxable sale. Also adding fuel to the taxation fire is the growing use by consumers of the Internet to make mail-order purchases from out-of-state firms, which deprives the states of sales tax revenues.
The industry's biggest tax scare came last spring in Florida, when the state nearly imposed a tax that could have added 12% or more to the cost of online services such as those sold by America Online, CompuServe, Prodigy and other Net providers.
Bowing to industry pressure, Florida Gov. Lawton Chiles this month deferred action until 1997. But Chiles served notice that the industry was fair game.
"The Internet is now an extremely viable marketplace with routine business transactions taking place every minute of every day, fundamentally changing traditional business relationships," Chiles said earlier this month when he formed the Florida Telecommunications Taxation Task Force to study how to ensure "the long-term integrity of our tax base."
At least four other states are studying the possibility of imposing new Internet taxes, including California, which is reexamining its entire telecommunications tax regime.
California doesn't tax services now, but many municipalities and counties levy utility taxes on cable, telephone and other telecommunications companies. It is the smaller jurisdictions that are applying pressure for new Internet taxes, said Dean Andal, a Stockton-based member of the state Board of Equalization, which sets tax policy for the state.
However, Andal opposes any new taxes on Internet providers, saying they would have a chilling effect on California's three "industries of the future": entertainment, computers and telecommunications.
