Regulators in Minnesota are nothing if not persistent. In 2003, government officials were upset that they were losing tax revenue as people switched from telephone services to VoIP services like Vonage. While telecom services are clearly regulated and have a variety of tax requirements, VoIP as an internet service, is not subject to taxation. Of course, regulators who want tax dollars don't want to pay attention to the reasons for this and prefer the "looks like a duck" test. Thus, Minnesota started telling VoIP providers like Vonage that they needed to pay telco taxes despite not being a telco. Since the laws are pretty clear that internet services are not to be taxed, Minnesota's regulators were told by a judge to take a hike. The FCC followed this up by reminding Minnesota that states have no right to regulate VoIP -- and that, if anyone can, it's only the federal government. Minnesota appealed this and an Appeals Court again told Minnesota it cannot tax VoIP. In 2005, Minnesota appealed again, asking for the right to tax VoIP systems, and now a federal appeals court has upheld the original FCC ruling saying that states cannot tax VoIP. Given nearly four years of Minnesota regulators being slapped down over this issue again and again and again and again... somehow we think that they're not about to give up just yet. Minnesota has the option of appealing to the full 8th Circuit Appeals Court (rather than just the 3-judge panel) or jumping straight to the Supreme Court. You get the feeling that at some point, this will end up at the Supreme Court level.
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