According to a recent Government Accountability Office (GAO) study, state and local governments may have the ability to tax specific aspects of Internet usage due to a federal law that was instituted to ban such fees, CNET News reports.

The study was commissioned by Congress to analyze a current law known as the Internet Tax Freedom Act.  The act prevents local and state governments from taxing "a service that enables users to access content, information, electronic mail, or other services offered over the Internet."

However, GAO says that voice over Internet Protocol (VoIP) and other traditional telephone and video offerings by Internet service providers (ISPs) do not fall under the protections of the law, and are taxable.  In layman’s terms, GAO is saying any ISP that procures goods or services for its network from a telecommunications company is subject to taxation during the "wholesale" transaction.

The main issue is the auditors’ finding that the law does not apply to "acquired services"-the wires, cables, fibers and additional hardware use within various telecommunications services.

"We acknowledge that other have different views about the scope of the moratorium," the reports reads. "Congress could, or course, deal with this issue by amending the statute to explicitly address the status of acquired services."

Sens. Ron Wyden (D-Ore.) and George Allen (R-Va.), who both were involved in drafting the legislation, were quick to express their discontent with GAO’s interpretation of the Act.

"The plain language of the stature, as well as the relevant legislation history, reflect a clear legislative intent to ban Internet access taxes at both the retail and wholesale levels," Allen said.

-Al Sacco