New Hampshire wants to tax email and chat

State officials in New Hampshire have announced that they have "discovered" that chat, email, and other Internet services are "two way communication" and have decided that those services fall under the umbrella of a statute written in the early nineties (before the rise of the Internet) that taxes telelphone services.

New Hampshire, like many states, is facing budget shortfalls, so it is understandable they are looking for ways to increase revenues. But given the reliance of the Knowledge Economy on the Internet, it would be hard to find a tax that would do more to discourage the formation of businesses or the the growth of existing businesses. The size of the tax (7%) is especially daunting. Judging from the news coverage of the issue, it's a tempest in a teapot. It would appear that state legislators are not likely to let the bureacrats move forward with this.

A side issue, but an important one, is the fact that outside of perhaps AOL, I don't know of any service providers that are set up to monitor those "communications" uses. Technically, it is easy enough to do, but it would require additional equipment and billing software, and the cost of billing individually for email and chat (so that you could determine how much tax to pay) would be a nightmare. Most providers would probably opt for simply charging a flat monthly fee for email and chat, which is still more than they are doing now.

So the cost of accessing the Internet in New Hampshire would increase directly because of higher provider costs, and you would have the 7% tax on top of that. Not a recipe to compete in the global Knowledge Economy.

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