Court: No new taxes for VoIP

State governments say they will appeal decision upholding FCC finding. The loss in tax revenue is substantial.

A federal appeals court recently ruled that VoIP services like Vonage should not be regulated the same as phone companies, reports the Associated Press.

The decision - which upholds a 2004 FCC finding that VoIP should not be saddled with existing regulations - bars states from regulating Internet-based phone service companies - and so, there will be no windfall in tax revenues from the services.

Since the issue hangs on technical distinctions, "In such situations we accord a high level of deference to the informed decision of the agency charged with making those fact findings," Judge Kermit Bye wrote for the Eight Circuit Court of Appeals.

[The decision] allows Vonage to continue growing our business unfettered by outdated pre-Internet regulatory structures,"
said Vonage CEO Mike Snyderin a statement.

Burl Haar, executive secretary for the Minnesota Public Utilities Commission, said officials were still deciding whether to appeal to the full 8th Circuit or the U.S. Supreme Court.

"They project themselves to the public as providing telephone services, and all their marketing seems to indicate that's the service they're providing," Haar said.

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