That is the question being raised by Karl Auerbach. In a letter, Auerbach has asked newly-elected California Governor Arnold Schwarzenegger to launch an inquiry into whether organizations such as ICANN should be exempt from paying California taxes "and, if appropriate, to take steps to eliminate the gifts that California makes to those corporations that claim to benefit the public but that, in reality, are really nothing more than facades for for-profit industries who use the State of California as a nothing more than flag of convenience." Auerbach argued that ICANN does not actually benefit the public but "has worked hard to insulate itself from meaningful contact with the public and, as a practical matter, is accountable to no one. ... Is this the kind of entity that deserves to be exempt from California taxes? That exemption is unfair to those of us who do pay California taxes and who are going to have to repay the loans that you are asking California to undertake."

See
http://www.internetdemocracyproject.org/#highlights

Sincerely,
Christopher Chiu
Technology Policy Analyst
American Civil Liberties Union