The Tax that Could Kill VOIP

You've got to hand it to the U.S. Internal Revenue Service. In an attempt to tax the fledgling Internet telephony market, it is apparently planning to use an excise tax enacted in 1898 during the Spanish American War. The 3% federal tax could be applied to changes in technology used in “telephonic or telephonic quality communications”. This seems a strange approach given how the U.S. has bent over backwards to not tax e-commerce activities to encourage the industry's growth. You have to think there are just too many bean-counters in the IRS with too much time on their hands, or the major telecom carriers have got some pretty good lobbyists in Washington. If you take a step back, a 3% tax shouldn't scare the Internet telephony industry and new players such as Vonage Holdings and 8X8 because it seems to be a small cost to play in a fast-growing industry. What Vonage et al should really be concerned about is the aggressive strategies adopted by large telcos such as AT&T.