Legal Issues

by Mike Masnick

Appeals Court Tells Minnesota, Yet Again, That It Cannot Tax VoIP

from the how-many-times-must-you-be-told? dept

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.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Mark, Mar 21st, 2007 @ 7:37pm

    But wait

    Don't we pay a tax on our broadband access? I live in Texas, but I swear I see a tax line item on my inet bill...

    reply to this | link to this | view in thread ]

  2. identicon
    Bumbling old fool, Mar 21st, 2007 @ 8:18pm


    Which Telco is paying their legal fees?

    reply to this | link to this | view in thread ]

  3. identicon
    Derrick Hinkle, Mar 21st, 2007 @ 8:29pm

    Money grubbers.

    reply to this | link to this | view in thread ]

  4. identicon
    Rolf Shervey, Mar 21st, 2007 @ 8:41pm

    money grubbers- you're damn right

    I'm a Minnesotan and a Vonage customer, and this dosen't suprise me. The liberal politicians in my state look for every opportunity to re-distribute wealth Lenin style through their ridiculous "government has a right to tax everything, just because" mentality. Though otherwise a proud champion of the virtues of my state, this shames me, among other things where politics are concerned...

    reply to this | link to this | view in thread ]

  5. identicon
    Thomas, Mar 21st, 2007 @ 10:07pm

    Re: But wait

    They cheat you out of the tax by passing it as other things. Such as; the line, customer service, reliability, employees, etc..
    Even though it comes in conjunction with your service, if you really thought about it, you're not paying for it at all. If you really want to screw with your ISP, call them up and harass them for a bit.

    reply to this | link to this | view in thread ]

  6. identicon
    ashamed MN-n, Mar 22nd, 2007 @ 4:54am

    same regulators

    It's probably the same regulators that asked not to sell alcohol, or cars on Sundays.

    reply to this | link to this | view in thread ]

  7. identicon
    billy, Mar 22nd, 2007 @ 5:54am


    all they have to do is find the set of judges that are in the telcos pockets and they're set

    reply to this | link to this | view in thread ]

  8. identicon
    billy, Mar 22nd, 2007 @ 5:55am


    it is good to see the judges ruling in an actually good manner
    logical and lawful for a change

    reply to this | link to this | view in thread ]

  9. identicon
    RandomThoughts, Mar 22nd, 2007 @ 5:56am

    Vonage should be responsible for the same taxes and regulations that all other phone providers have to collect and abide by. They market the product as phone service, so it should be required to act like phone service. Should they have to go beyond what AT&T or Verizon has to do? Of course not.

    As for not selling cars on Sunday, the reason you can't buy a car on Sunday is because you can't transfer title on Sunday, because the office is closed. Can't sell a house or a boat (or anything else that has a title) on Sunday either. The no booze on Sunday deal? I just don't get that.

    reply to this | link to this | view in thread ]

  10. identicon
    Nasty Old Geezer, Mar 22nd, 2007 @ 6:00am

    Interesting idea

    Maybe the Minnesotans actually "got it" about technology, more than RIAA/MPAA/other legislatures/etc.

    They are claiming the right to tax our ability to talk over a distance, regardless of the underlying technology. Nobody likes paying taxes, but at least they get it enough to see that what is important is the service provided -- audible communication -- and not analog versus digital signaling.

    Now if we could get the rest of the old world to see that they need to focus on the real business they are in, we could get some rational laws around copyrights, patents, file transfers, entertainment costs, and many other things.

    reply to this | link to this | view in thread ]

  11. identicon
    |333173|3|_||3, Mar 22nd, 2007 @ 7:16am

    Re: Interesting idea

    I do not like hte idea of paying tax on long distance calls any more than I like taxes on anything, but the idea of taxing the service rather than the technique is sound. Unfortunately, there is the problem of juristiction, which would lead to problems regarding the corect alloation of tax revenues to states, if the user of one VoIP account were to travel interstate but still use the account while travelling. The taxation would have to work in the same way as Mobile 'phone coverage, however that is arranged.

    reply to this | link to this | view in thread ]

  12. identicon
    MN lindy, Mar 22nd, 2007 @ 8:28am

    tip of the iceberg

    Minnesota car dealers faught a proposed law to be able to sell cars on sunday, the legislator thought he was doing them a favor by proposing the change of the law, but the dealers went crazy about having to staff an extra day.
    If electric cars or high milage hybrids really become the norm, where do they
    get revenue from what used to be the gas tax? We are the second highest taxed state in the union, so don't be surprised if our great legislature finds a new way to tax things on that 'new fangled internet thing'.
    As for no liquor on sundays, can't figure that one out either, why do we sell 3.2 beer?
    Want an example of crazy state legislators? We have a gal that proposed a law allowing illegal immagrants the right to vote. Yes, you read this right. She also in a previous year was proposing that 12 year olds amnd upbe allowed to vote for school board members.
    I tell ya its crazy up here!

    reply to this | link to this | view in thread ]

  13. identicon
    MN lindy, Mar 22nd, 2007 @ 8:30am


    sorry for the bad typos at the end, me gots fat fingers!

    reply to this | link to this | view in thread ]

  14. identicon
    John, Mar 22nd, 2007 @ 1:57pm

    Who's paying?

    Let me get this straight: the state of Minnesota went to court once, ignored the FCC, and then appealed the case *twice*? Who is paying the legal fees for this? No wonder they want to tax Vonage- someone has to pay for the legal filings.

    On the other hand, maybe Vonage should start *receiving* money from Minnesota to pay their legal fess to respond to these appeals. But, then how would Minnesota raise money? Ah, yes, tax something else... maybe something the FCC will allow.

    reply to this | link to this | view in thread ]

  15. identicon
    Kevin, Mar 23rd, 2007 @ 7:01am

    Re: Selling Cars on Sunday

    It seems to me that Minnesota is still living in the dark ages when it comes to being able to transfer a title on Sundays. Who cares if the office is closed. In this day and age of computers, can't the car dealers have access to the state's system for handling these transactions? It's funny how many other states have this ability. I live in Arizona, and we just don't have this problem.

    reply to this | link to this | view in thread ]

  16. identicon
    Brandon, Mar 24th, 2007 @ 1:05am


    its not that VoIP should pay taxes because they run phone services, its the fact that the telecom tax laws were made for taxation on the existing lines / drive for the need of additional phonelines and the maintenance of them. With VoIP, the same service ran on a [taxed] phone line is being used on a digital service thus eliminating the phone lines, etc.

    reply to this | link to this | view in thread ]

  17. identicon
    Me, Apr 2nd, 2007 @ 7:51am

    Re: money grubbers- you're damn right

    >>I'm a Minnesotan and a Vonage customer,
    >>and this dosen't suprise me. The liberal
    >>politicians in my state

    Umm, the governor of MN is a Republican, and it's his administration that has been pushing this.

    reply to this | link to this | view in thread ]

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