News and Insights

New York State Tax Ruling Favors Broad Reading of the Internet Tax Freedom Act

Tax Development May 19, 2023

New York State Tax Ruling Favors Broad Reading of the Internet Tax Freedom Act

In a ruling dated May 4, 2023, New York Administrative Law Judge Donna M. Gardiner granted the petition of Verizon New York Inc. in Matter of Verizon New York Inc. (DTA No. 829240) and canceled the notice of deficiency issued by the N.Y. Division of Taxation for the assessment of tax due on gross receipts for providing internet access services under the Internet Tax Freedom Act (ITFA).

ITFA prohibits state and local governments from imposing taxes on internet access and multiple or discriminatory taxes on electronic commerce. Verizon New York Inc. did not report its receipts from asymmetric digital subscriber lines, fiber broadband services, and other internet services along with all gross receipts from telephone services because it believed internet services were exempt under the Act. For a three-year period, the taxpayer was assessed approximately $12 million and subsequently appealed.

The Division argued that the taxpayer’s sales were not exempt under the Act because the gross receipts at issue were for sales for resale, not exempt sales to the ultimate consumer. Looking to the federal law, Gardiner noted that a tax on internet access, whether imposed on a provider of internet access or a buyer, is prohibited. Ruling for the taxpayer, Gardiner was not persuaded by the Division’s argument that the definition of internet access services should be applied according to the outdated state definition because it was restrictively narrow in scope and contrary to the intended broad application of the Act.

We will keep you updated with future developments relating to the Internet Tax Freedom Act.


Brian Stromen

Britte Kirby
Senior Consultant

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