Governor Gray Davis Signs California Internet Tax Freedom Act
Extends Current Moratorium for Two Years

On September 25, Governor Gray Davis extended the state moratorium on new and discriminatory taxes on the Internet by signing into law SB 394, the California Internet Tax Freedom Act (ITFA). The current moratorium was set to expire in December.

SB 394 prohibits the imposition, assessment, or attempt to collect by any California governmental unit taxes on Internet access, digital bandwidth and special taxes on any online computer service.

A provision in the measure calls for the submission of a study by the California Commission on Tax Policy in the New Economy to Governor Davis and the legislature by December 1, 2002. The law will extend the California ITFA through 2003 if the commission submits its report on time. If it fails to do so, the extension will expire at the end of 2002.

The passage of SB 394 will go a long way in encouraging growth in e-commerce for the state of California. Let’s hope California’s extension of ITFA will encourage the U.S. Congress to pass a clean extension of the federal Internet Tax Freedom Act set to expire October 21.

To read the full text of SB 394, click here.

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