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H.R. 3529 (105th): Internet Tax Freedom Act of 1998


The text of the bill below is as of Oct 10, 1998 (Reported by House Committee).


HR 3529 RH

Union Calendar No. 452

105th CONGRESS

2d Session

H. R. 3529

[Report No. 105-808, Part I]

To establish a national policy against State and local interference with interstate commerce on the Internet or online services, and to excise congressional jurisdiction over interstate commerce by establishing a moratorium on the imposition of exactions that would interfere with the free flow of commerce via the Internet, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

March 23, 1998

Mr. CHABOT introduced the following bill; which was referred to the Committee on the Judiciary, and in addition to the Committees on Rules, and Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

October 10, 1998

Reported from the Committee on the Judiciary with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

October 10, 1998

Referral to the Committees on Rules and Ways and Means extended for a period ending not later than October 10, 1998

October 10, 1998

Committees on Rules and Ways and Means discharged; commmitted to the Committee of the Whole House on the State of the Union and ordered to be printed

[For text of introduced bill, see copy of bill as introduced on March 23, 1998]


A BILL

To establish a national policy against State and local interference with interstate commerce on the Internet or online services, and to excise congressional jurisdiction over interstate commerce by establishing a moratorium on the imposition of exactions that would interfere with the free flow of commerce via the Internet, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Internet Tax Freedom Act of 1998’.

SEC. 2. MORATORIUM ON CERTAIN TAXES.

    (a) AMENDMENT- Title 4 of the United States Code is amended by adding at the end the following:

‘CHAPTER 6--MORATORIUM ON CERTAIN TAXES

‘Sec.

      ‘151. Moratorium.

      ‘152. Advisory commission on electronic commerce.

      ‘153. Legislative recommendations.

      ‘154. Expedited consideration of legislative recommendations

      ‘155. Definitions.

‘Sec. 151. Moratorium

    ‘(a) MORATORIUM- For a period of 3 years following the date of the enactment of this chapter, neither any State, nor any political subdivision thereof, shall impose, assess, collect, or attempt to collect--

      ‘(1) taxes on Internet access;

      ‘(2) bit taxes; or

      ‘(3) multiple or discriminatory taxes on electronic commerce.

    ‘(b) EXCEPTION TO MORATORIUM- (1) Subject to paragraph (2), the moratorium in subsection (a)(1) shall not apply to the following taxes (as applicable), as in effect on the date of the enactment of this chapter, on Internet access:

      ‘(A) STATE OF CONNECTICUT- Section 12-407(2)(i)(A) of the General Statutes of Connecticut.

      ‘(B) STATE OF WISCONSIN- Section 77.52(2)(a)5 of the Wisconsin Statutes (1995-96).

      ‘(C) STATE OF IOWA- Section 422.43(1) of the Code of Iowa (1997).

      ‘(D) STATE OF NORTH DAKOTA- North Dakota Century Code 57-39.2 and 57-34.

      ‘(E) STATE OF SOUTH DAKOTA- South Dakota Codified Law Annotated 10-45-5.

      ‘(F) STATE OF NEW MEXICO- New Mexico Statutes Annotated 7-9-3.

      ‘(G) STATE OF TENNESSEE- Tennessee Code Annotated 67-6-221, 67-6-102(23)(iii), and 67-6-702(g).

      ‘(H) STATE OF OHIO- Chapter 5739 of the Ohio Revised Code.

    ‘(2)(A) Paragraph (1) shall apply with respect to a tax referred to in such paragraph only if the referenced State enacts, during the 1-year period beginning on the date of the enactment of this chapter, a law to expressly affirm that such tax is imposed on Internet access.

    ‘(B) A State that satisfies the requirement specified in subparagraph (A) shall be deemed to have satisfied such requirement immediately after the enactment of this chapter, except that such State may not impute penalties or interest on any tax accrued during the period beginning on the date of the enactment of this Act and ending of the date such State satisfies such requirement.

    ‘(c) APPLICATION OF MORATORIUM- Subsection (a) shall not apply with respect to the provision of Internet access that is offered for sale as part of a package of services that includes services other than Internet access, unless the service provider separately states that portion of the billing that applies to such services on the user’s bill.

‘Sec. 152. Advisory Commission on Electronic Commerce

    ‘(a) ESTABLISHMENT OF COMMISSION- There is established a temporary commission to be known as the Advisory Commission on Electronic Commerce (in this chapter referred to as the ‘Commission’). The Commission shall--

      ‘(1) be composed of 31 members appointed in accordance with subsection (b), including the chairperson who shall be selected by the members of the Commission from among individuals specified in subsection (b); and

      ‘(2) conduct its business in accordance with the provisions of this chapter.

    ‘(b) Membership-

      ‘(1) IN GENERAL- The Commissioners shall serve for the life of the Commission. The membership of the Commission shall be as follows:

        ‘(A) Three representatives from the Federal Government comprised of the Attorney General, the Secretary of Commerce, and the Secretary of the Treasury, or their respective representatives.

        ‘(B) Fourteen representatives from State, local, and county governments comprised of 2 representatives each from the National Governors’ Association, the National Conference of State Legislatures, the Council of State Governments, the National Association of Counties, the National League of Cities, and the United States Conferences of Mayors; and 1 representative each from the International City/County Managers Association and the American Legislative Exchange Council.

        ‘(C) Fourteen representatives of taxpayers and business--

          ‘(i) 7 of whom shall be appointed jointly by the Speaker of the House of Representatives and the majority leader of the Senate, of whom 3 shall be individuals employed by or affiliated with persons engaged in providing Internet access or communications or transactions that use the Internet, 3 shall be individuals employed by or affiliated with persons engaged in electronic commerce (including at least 1 who is employed by or affiliated with a person also engaged in mail order commerce), and 1 shall be an individual employed by or affiliated with a person engaged in software publishing; and

          ‘(ii) 7 of whom shall be appointed jointly by the minority leader of the House of Representatives and the minority leader of the Senate, of whom 3 shall be individuals employed by or affiliated with persons engaged in providing Internet access or communications or transactions that use the Internet, 3 shall be individuals employed by or affiliated with persons engaged in electronic commerce (including at least 1 who is employed by or affiliated with a person also engaged in mail order commerce), and 1 shall be an individual employed by or affiliated with a person engaged in software publishing.

      ‘(2) APPOINTMENTS- Appointments to the Commission shall be made not later than 45 days after the date of enactment of this chapter. The chairperson shall be selected not later than 60 days after the date of the enactment of this chapter.

    ‘(c) ACCEPTANCE OF GIFTS AND GRANTS- The Commission may accept, use, and dispose of gifts or grants of services or property, both real and personal, for purposes of aiding or facilitating the work of the Commission. Gifts or grants not used at the expiration of the Commission shall be returned to the donor or grantor.

    ‘(d) OTHER RESOURCES- The Commission shall have reasonable access to materials, resources, data, and other information from the Department of Justice, the Department of Commerce, and the Department of the Treasury. The Commission shall also have reasonable access to use the facilities of the Department of Justice, the Department of Commerce, and the Department of the Treasury for purposes of conducting meetings.

    ‘(e) SUNSET- The existence of the Commission shall terminate--

      ‘(1) when the last of the committees of jurisdiction referred to in section 154 concludes consideration of the legislation proposed under section 153; or

      ‘(2) 3 years after the date of the enactment of this chapter;

    whichever occurs first.

    ‘(f) RULES OF THE COMMISSION-

      ‘(1) Sixteen members of the Commission shall constitute a quorum for conducting the business of the Commission.

      ‘(2) Any meetings held by the Commission shall be duly noticed at least 14 days in advance and shall be open to the public.

      ‘(3) The Commission may adopt other rules as needed.

    ‘(g) DUTIES OF THE COMMISSION- The duties of the Commission, to be carried out in consultation with the National Tax Association Communications and Electronic Commerce Tax Project, and other interested persons, may include--

      ‘(1) conducting a thorough study of State and local taxation of transactions using the Internet and Internet access;

      ‘(2) examining the collection and administration of consumption taxes on remote commerce in other countries and the United States, and the impact of such collection on the global economy;

      ‘(3) examining the advantages and disadvantages of authorizing States and local governments to require remote sellers to collect and remit sales and use taxes;

      ‘(4) proposing a uniform system of definitions of remote and electronic commerce that may be subject to sales and use tax within each State;

      ‘(5) examining model State legislation relating to taxation of transactions using the Internet and Internet access, including uniform terminology, definitions of the transactions, services, and other activities that may be subject to State and local taxation, procedural structures and mechanisms applicable to such taxation, and a mechanism for the resolution of disputes between States regarding matters involving multiple taxation;

      ‘(6) examining a simplified system for administration and collection of sales and use tax for remote commerce, that incorporates all manner of making consumer payments, that would provide for a single statewide sales or use tax rate (which rate may be zero), and would establish a method of distributing to political subdivisions within each State their proportionate share of such taxes, including an examination of collection of sales or use tax by small volume remote sellers only in the State of origin;

      ‘(7) examining ways to simplify the interstate administration of sales and use tax on remote commerce, including a review of the need for a single or uniform tax registration, single or uniform tax returns, simplified remittance requirements, and simplified administrative procedures;

      ‘(8) examining the need for an independent third party collection system that would utilize the Internet to further simplify sales and use tax administration and collection;

      ‘(9) reviewing the efforts of States to collect sales and use taxes owed on purchases from remote sellers, as well as review the appropriateness of increased activities by States to collect sales and use taxes directly from customers of remote sellers;

      ‘(10) examining the level of contacts sufficient to permit a State to impose a sales or use tax on remote commerce that would subject a remote seller to collection obligations imposed by the State, including--

        ‘(A) the definition of a level of contacts below which a State may not impose collection obligations on a remote seller;

        ‘(B) whether or not such obligations are applied in a nondiscriminatory manner with respect to nonremote transactions; and

        ‘(C) the impact of such obligation on small business remote sellers;

      ‘(11) examining making permanent the temporary moratorium described in section 151 with respect to Internet access as well as such other taxes that the Commission deems appropriate;

      ‘(12) examining ways to simplify State and local taxes imposed on the provision of telecommunications services;

      ‘(13) requiring the Commission to hold a public hearing to provide an opportunity for representatives of the general public, taxpayer groups, consumer groups, State and local government officials, and tax-supported institutions to testify; and

      ‘(14) examining other issues that the Commission determines to be relevant.

    ‘(h) FEDERAL ADVISORY COMMITTEE ACT- The Federal Advisory Committee Act shall not apply with respect to the Commission.

‘Sec. 153. Legislative recommendations

    ‘(a) TRANSMISSION OF PROPOSED LEGISLATION- Not later than 2 years after the date of the enactment of

this chapter, the Commission shall transmit to the President and the Congress proposed legislation reflecting any findings concerning the matters described in such section.

    ‘(b) CONTENTS OF PROPOSED LEGISLATION- The proposed legislation submitted under subsection (a) by the Commission shall have been agreed to by at least 19 members of the Commission and may--

      ‘(1) define with particularity the level of contacts between a State and remote seller that the Commission considers sufficient to permit a State to impose collection obligations on the remote seller and the level of contacts which is not sufficient to impose collection obligations on remote sellers;

      ‘(2) provide that if, and only if, a State has adopted a single sales and use tax rate for remote commerce and established a method of distributing to its political subdivisions their proportionate share of such taxes, and adopted simplified procedures for the administration of its sales and use taxes, including uniform registration, tax returns, remittance requirements, and filing procedures, then such State should be authorized to impose on remote sellers a duty to collect sales or use tax on remote commerce;

      ‘(3) provide that, effective upon the expiration of a 4-year period beginning on the date of the enactment of such legislation, a State that does not have in effect a single sales and use tax rate and simplified administrative procedures shall be deemed to have in effect a sales and use tax rate on remote commerce equal to zero, until such time as such State does adopt a single sales and use tax rate and simplified administrative procedures;

      ‘(4) include uniform definitions of categories of property, goods, services, or information subject to, or exempt from, sales and use taxes;

      ‘(5) make permanent the temporary moratorium described in section 151 with respect to Internet access, as well as such other taxes (including those described in section 151) that the Commission deems appropriate;

      ‘(6) provide a mechanism for the resolution of disputes between States regarding matters involving multiple taxation; and

      ‘(7) include other provisions that the Commission deems necessary.

    ‘(c) RECOMMENDATIONS OF THE PRESIDENT- Not later than 45 days after the receipt of the Commission’s legislative proposals, the President shall review such proposals and submit to the Congress such policy recommendations as the President deems necessary or expedient.

‘Sec. 154. Expedited consideration of legislative recommendations

    ‘(a) Not later than 90 legislative days after the transmission to the Congress by the Commission of the proposed legislation described in section 153, such legislation shall be considered by the respective committees of jurisdiction within the House of Representatives and the Senate, and, if reported, shall be referred to the proper calendar on the floor of each House for final action.

    ‘(b) For purposes of this section, the 90-day period shall be computed by excluding--

      ‘(1) the days on which either House is not in session because of an adjournment of more than 3 days to a day certain or an adjournment of the Congress sine die; and

      ‘(2) any Saturday and Sunday, not excluded under paragraph (1), when either House is not in session.

‘Sec. 155. Definitions

    ‘For the purposes of this chapter:

      ‘(1) BIT TAX- The term ‘bit tax’ means any tax on electronic commerce expressly imposed on or measured by the volume of digital information transmitted electronically, or the volume of digital information per unit of time transmitted electronically, but does not include taxes imposed on the provision of telecommunications services.

      ‘(2) COMPUTER SERVER- The term ‘computer server’ means a computer that functions as a centralized provider of information and services to multiple recipients.

      ‘(3) DISCRIMINATORY TAX- The term ‘discriminatory tax’ means--

        ‘(A) any tax imposed by a State or political subdivision thereof on electronic commerce that--

          ‘(i) is not generally imposed and legally collectible by such State or such political subdivision on transactions involving similar property, goods, services, or information accomplished through other means;

          ‘(ii) is not generally imposed and legally collectible at the same rate by such State or such political subdivision on transactions involving similar property, goods, services, or information accomplished through other means, unless the rate is lower as part of a phase-out of the tax over not more than a 5-year period;

          ‘(iii) imposes an obligation to collect or pay the tax on a different person or entity than in the case of transactions involving similar property, goods, services, or information accomplished through other means; or

          ‘(iv) establishes a classification of Internet access provider for purposes of establishing a higher tax rate to be imposed on such providers than the tax rate generally applied to providers of similar information services delivered through other means; or

        ‘(B) any tax imposed by a State or political subdivision thereof, if--

          ‘(i) the mere use of a computer server by a remote seller to create or maintain a site on the Internet is considered a factor in determining a remote seller’s tax collection obligation; or

          ‘(ii) the display of a remote seller’s information or content on the computer server of a provider of Internet access, or the processing of orders through the computer server of a provider of Internet access, is considered a factor in determining whether the provider of Internet access is deemed to be the agent of the remote seller for tax collection purposes.

      ‘(4) ELECTRONIC COMMERCE- The term ‘electronic commerce’ means any transaction conducted over the Internet or through Internet access, comprising the sale, lease, license, offer, or delivery of property, goods, services, or information, whether or not for consideration, and includes the provision of Internet access.

      ‘(5) INFORMATION SERVICES- The term ‘information services’ has the meaning given such term in section 3(20) of the Communications Act of 1934 as amended from time to time.

      ‘(6) INTERNET- The term ‘Internet’ means the combination of computer facilities and electromagnetic transmission media, and related equipment and software, comprising the interconnected worldwide network of computer networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocol, to transmit information.

      ‘(7) INTERNET ACCESS- The term ‘Internet access’ means a service that enables users to access content, information, electronic mail, or other services offered over the Internet, and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include telecommunications services.

      ‘(8) MULTIPLE TAX- The term ‘multiple tax’ means--

        ‘(A) any tax that is imposed by one State or political subdivision thereof on the same or essentially the same electronic commerce that is also subject to another tax imposed by another State or political subdivision thereof (whether or not at the same rate or on the same basis), without a credit (for example, a resale exemption certificate) for taxes paid in other jurisdictions (The term ‘multiple tax’ shall not include a sales or use tax imposed by a State and 1 or more political subdivisions thereof pursuant to a law referred to in section 151(b)(1) on the same electronic commerce or a tax on persons engaged in electronic commerce which also may have been subject to a sales or use tax thereon. For purposes of this subparagraph, the term ‘sales or use tax’ means a tax that is imposed on or incident to the sale, purchase, storage, consumption, distribution, or other use of tangible personal property or services as may be defined by laws imposing such tax and which is measured by the amount of the sales price or other charge for such property or service); or

        ‘(B) any tax on Internet access if the State or political subdivision thereof classifies such Internet access as telecommunications or communications services under State law and such State or political subdivision thereof has also imposed a tax on the purchase or use of the underlying telecommunications services that are used to provide such Internet access without allowing a credit for other taxes paid, a sale for resale exemption, or other mechanism for eliminating duplicate taxation.

      ‘(9) REMOTE COMMERCE- The term ‘remote commerce’ means the sale, lease, license, offer, or delivery of property, goods, services, or information by a seller in 1 State to a purchaser in another State.

      ‘(10) REMOTE SELLER- The term ‘remote seller’ means a person who sells, leases, licenses, offers, or delivers property, goods, services, or information from one State to a purchaser in another State.

      ‘(11) STATE- The term ‘State’ means any of the several States, the District of Columbia, or any territory or possession of the United States.

      ‘(12) TAX- The term ‘tax’ means any obligation to pay or to collect and remit any levy, fee, or charge imposed by any governmental entity solely for the purpose of generating revenues for governmental purposes and not--

        ‘(A) in return for a specific privilege, service, or benefit conferred on a person or entity;

        ‘(B) to support public regulatory commissions; or

        ‘(C) to support special purpose telecommunications service programs.

      Such term does not include any franchise fees or similar fees imposed by a State or local franchising authority, referred to in section 622 or 653 of the Communications Act of 1934, as amended from time to time.

      ‘(13) TELECOMMUNICATIONS SERVICES- The term ‘telecommunications services’ has the meaning given such term in section 3(46) of the Communications Act of 1934, as amended from time to time.’.

    (b) CONFORMING AMENDMENT- Title 4 of the United States Code is amended in the table of chapters by adding at the end the following:

151’.

SEC. 3. NO EXPANSION OF TAX AUTHORITY.

    Nothing in this Act shall be construed to expand the duty of any person to collect or pay taxes beyond that which existed immediately before the date of the enactment of this Act.