State to Charge Tax on Fiber Optic Users

Today, I came into possession of a letter from Scott Daniels, Vice President of Internet Operations for Genext, one of the providers of Internet service on the Grant County PUD Zip fiber system. It is disturbing in that it outlines the levying of an illegal tax on users of the Zipp Fiber Optic system here in Grant County by the Washington State Department of Revenue.

As you know, many years ago Congress made it illegal to charge sales or use tax on Internet users and that law is still in effect today. The State of Washington has chosen to violate that law by levying a tax on fiber users. It is not taxing any other broadband service, only fiber.

As many of my readers are fiber customers, I thought you should be made aware of this. Although I am publishing this letter from Genext, I am not one of their customers, nor do I in any way recommend their service. But, I must commend them for writing to to their customers in such plain language and letting them know how they feel. I hope some of you will take action as I know I will.

Here is the letter:

As you may have read in the Columbia Basin Herald over the past several months, the Washington State Department of Revenue has decided to place a 'Sales and Use' tax on the Fiber Internet Service that customers receive via the Grant County PUD Fiber Network. At a time when the FCC and our Nations Congressional leaders have protected the Internet from taxation, the Washington State DOR has decided to go against this federal policy and place
a tax on PUD fiber access. It is our understanding that this tax is not being levied on other Internet access services like DSL, Wireless or Cable wholesale services, only PUD Fiber!

Starting July 1st, 2005, Service Providers on the Grant PUD Network will be charged sales tax on the wholesale services they purchase for subscriber access. We feel that the State has no authority to place a retail sales tax on a wholesale communication transport service; however, we are highly compelled to comply. Regrettably, in response to this increase in cost, we are forced to increase the retail price of our Internet Services in Grant County, as of August 1st.

We have been battling this tax issue fiercely and up until official notice from Grant County on June 23rd 2005, we have held firm against charging taxes on Fiber Internet Services.

In spite of the fact that Genext will begin accruing taxes starting July 1st, we are providing 30-days advance notice as a courtesy to you, our valued customer. As of August 1st, all Grant County Fiber Connections will be charged a $2.50 flat rate 'recovery' fee. The monies generated as a result of this fee does not cover the entire expense incurred by Genext.

New rates are as follows:

Residential Internet Access
1 Mbps Internet Service $37.50
2Mbps Internet Service $47.50
Business Internet Access
1 Mbps Internet Service $47.50
2 Mbps Internet Service $57.50
Special VLAN's
10 Mbps VLAN $47.50

This is the first time since July of last year that we have been forced to increase our rates on Grant County Fiber Services and we have worked to offset these costs by offering additional value added services such as our E-Mail Security, as well as additional email addresses; now 5 included with your broadband account with increased storage upon request!

We sincerely regret this obligatory rate increase and feel that the Department of Revenue has gone far beyond their legitimate authority. If you, too, feel that this tax is improper and unwarranted, please contact your state legislative representative and let them know how you feel. Exercise your rights, voice your thoughts, contact your representative. Thank you for your understanding and support in voicing your thoughts to your Representative. Should you have any questions, please don't hesitate to call for more information.

We appreciate your support and continued patronage and look forward to continuing to provide you with exceptional service and reliability for years to come.

Regards,

Scott Daniels
VP Internet Operations
Genext, LLC