HR 3849, Internet Tax Freedom Act.
Approved by House Commerce Committee, 5/14/98.
Source: Office of Rep. Chris Cox, 5/13/98.  This document was created by converting Rep. Cox's PDF copy into HTML.

IN THE HOUSE OF REPRESENTATIVES

M. introduced the following bill; which was referred to the Committee on

A BILL

To amend the Communications Act of 1934 to establish a, national policy against Federal and State regulation of Internet access and online services, and to exercise congressional jurisdiction over interstate and foreign commerce by establishing a, moratorium on the imposition of exactions that would interfere with the free flow of commerce conducted over the Internet, and for other purposes.

SECTION 1. SHORT TITLE.

This Act may be cited as the "Internet Tax Freedom Act".

Title II of the Communications Act of 1934 is amended by inserting after section 230 (47 U.S.C. 230) the following new section:

"SEC. 231. PROHIBITION ON REGULATION OF INTERNET ACCESS AND ONLINE SERVICES.

"(a) The Commission shall have no authority or jurisdiction under this title or section 4(i) of the Communications Act of 1934, as amended (47 U.S.C. 154(i)), nor shall any State commission have any authority or jurisdiction, to regulate the prices or charges paid by subscribers for Internet access or online services.

"(b) PRESERVATION OF AUTHORITY.--Nothing in this subsection shall limit or otherwise affect--

"(1) the Commission's or State Commission's implementation of the Telecommunications Act of 1996 (P.L. 104-104) or the amendments made by such Act; and

"(2) the Commission's or State Commission's authority to regulate common carriers that offer Internet access or online services in conjunction with the provision of any, telephone toll, telephone exchange, or exchange access services as such terms are defined in title I.

"(c) DEFINITIONS.--As used in this Section:

"(1) 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.

"(2) INTERNET ACCESS.--The term 'Internet access' means a service that enables users to access content, information, and other services offered over the Internet.

"(3) ONLINE SERVICE.--The term 'online service' means the offering or provision of content or information services to a, user as part of a package of services that are combined with Internet access.".

SEC. 3. FEDERAL REGULATORY FEES.

(a) No REGULATORY FEES.--Title 11 of the Communications Act of 1934 is amended by inserting in section 9(h) (47 U.S.C. 159(h)) after "47 C.F.R. Part 97" "; or (3) providers of Internet access or online service".

(b) CONFORMING AMENDMENT.--Section 9(h) of the Communications Act of 1934 (47 U.S.C. 159(h)) is amended by striking "or" that appears before "(2)".

(c) DETERMINATION.--Not later than 1 year after the date of the enactment of this Act, the National Telecommunications and Information Administration shall determine whether any direct or indirect Federal regulatory, fees, other than the fees identified in subsection (a), are imposed on providers of Internet access or online services, and if so, make recommendations to the Congress regarding whether such fees should be modified or eliminated.

SEC. 4. REPORT ON FOREIGN COMMERCE.

(a) CONTENTS OF REPORT.--In order to promote electronic commerce the Secretary of Commerce, in consultation with appropriate committees of the Congress, shall undertake an examination of

(1) barriers imposed in foreign markets on United States providers of property goods, services, or information engaged in electronic commerce and on United States providers of telecommunications services;

(2) how the imposition of such barriers will affect United States consumers, the competitiveness of United States citizens providing property, goods, services, or information in foreign markets, and the growth and maturing of the Internet; and

(3) what measures the Government should pursue to foster, promote, and develop electronic commerce in the United States and in foreign markets.

(b) PUBLIC COMMENT.--For purposes of this section, the Secretary of Commerce shall give all interested persons an opportunity to comment on the matters identified in subsection (a) through written or oral presentations of data, views, or arguments.

(c) TRANSMITTAL TO THE PRESIDENT.--Not later than IS months after the date of the enactment of this Act, the Secretary of Commerce shall transmit to the President a, report containing the results of the examination undertaken in accordance -with subsection (a).

(d) RECOMMENDATIONS OF THE PRESIDENT.-Not later than 2 years and 45 days after the date of the enactment of this Act, the President shall review the report described in subsection (c) and submit to the appropriate committees of Congress such policy recommendations as the President deems necessary or expedient.

SEC. 5. MORATORIUM ON CERTAIN TAXES.

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

(1) taxes on Internet access or online services;

(2) bit taxes; or

(3) multiple or discriminatory taxes on electronic commerce.

(b) EXCEPTION TO MORATORIUM.--

(1) The moratorium in subsection (a)(1) shall not apply to taxes on Internet access or online services generally imposed and actually enforced under State law before March 1, 1998.

(2) Subsection (b)(1) shall be enforceable only if a, State enacts a law to expressly impose such tax within one year from the date of enactment. Failure of a State to act does not affect liabilities for taxes accrued and enforced prior to March 1, 1998 nor does it affect ongoing litigation relating to such assessments.

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

SEC. 6. 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 Act referred to a,s the "Commission"). The Commission shall--

(1) be composed of 29 members, which includes 2 chairpersons selected in accordance with subsection (b); and

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

(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) Two representatives from the Federal Government comprised of 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 Conference of Mayors; and 1 representative each from the International City/County Managers Association and the American Legislative Exchange Council.

(C) Thirteen representatives of taxpayers and business, of which 3 shall be appointed by the President and 2 each shall be appointed by the Senate majority leader, the Senate minority, leader, the Speaker of the House, the House majority leader, and the House minority, leader.

(2) CHAIRPERSONS.--The Commission shall have 2 chairpersons to serve as co-chairpersons. One of the Chairpersons shall be a, representative selected by the National Governors Association from I of the groups identified in subsection (b)(1)(B). The other Chairperson shall be a representative selected jointly by the Speaker of the House of Representatives and the majority leader of the Senate from 1 of the groups identified in subsection (b)(1)(C).

(3) APPOINTMENTS.--Appointments to the Commission shall be made not later than 45 days after the date of enactment of this Act. The Chairpersons shall be appointed not later than 60 days after the date of the enactment of this Act.

(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 Commerce and the Department of Treasury. The Commission shall also have reasonable access to use the facilities of the Department of Commerce and Department of 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 8 concludes consideration of the legislation proposed under section 7; or

(2) 3 years after the date of the enactment of this Act; whichever occurs first.

(f) RULE OF THE COMMISSION.--

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

(2) Any meetings held by, the Commission shall be duty 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 Commission, in consultation with the National Tax Association Communications and Electronic Commerce Tax Project, and other interested parties, shall

(1) identify the taxes, fees, and charges imposed on electronic commerce within the United States that could impede the development of such commerce;

(2) propose a uniform system of definitions of electronic commerce that may be subject to sales and use tax within each State;

(3) propose a simplified system for sales and use tax for electronic commerce 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;

(4) examine ways to simplify the interstate administration of sales and use tax on electronic 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;

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

(6) examine the level of contacts sufficient to permit a State to impose a sales or use tax on electronic commerce that would subject a remote seller to collection obligations imposed by the State, including the definition of a level of contacts below which a State may not impose collection obligations on a remote seller;

(7) examine the level of contacts sufficient to permit a State to impose sales or use tax on transactions not involving electronic commerce, and whether collection obligations imposed by a State are applied in a nondiscriminatory manner with respect to electronic commerce and such transactions,

(8) examine ways to simplify State and local taxes imposed on the provision of telecommunications services; and

(9) examine other issues that the Commission determines to be relevant.

(h) FEDERAL ADVISORY COMMITTEE ACT.--The Federal Advisory Committee Act (5 U.S.C. App.) shall not apply with respect to the Commission.

SEC. 7. LEGISLATIVE RECOMMENDATIONS.

(a) TRANSMISSION OF PROPOSED LEGISLATION.--Not later than 2 years after the date of the enactment of this Act, the Commission described in section 6 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 18 members of the Commission and shall

(1) define with particularity the level of contacts between a State and remote seller that the Commission considers should be sufficient to permit a State to impose collection obligations on the remote seller;

(2) provide that if, and only if, a State has adopted a single sales and use tax rate for electronic commerce, 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 electronic 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 electronic 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 5 with respect to Internet access and online services, as well as such other taxes (including those described in section 5) that the Commission deems appropriate;

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

(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 appropriate committees of the Congress such policy recommendations as the President deems necessary or expedient.

(a) Not later than 90 legislative days after the transmission to the Congress of the proposed legislation described in section 7, 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.

It is the sense of the Congress that the President should seek bilateral and multilateral agreements through the World Trade Organization, the Organization for Economic Cooperation and Development, the International Telecommunications Union, the Asia, Pacific Economic Cooperation Council, the Free Trade Area, of the Americas, and other appropriate international fora. Such agreements should require, inter alia, that the provision of Internet access or online services be free from undue and discriminatory regulation by foreign governments and that electronic commercial transactions between United States and foreign providers of property, goods, services, and information be free from undue and discriminatory regulation, international tariffs, and discriminatory taxation.

SEC. 10. DEFINITIONS.

For the purposes of this Act:

(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;

(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;

(iv) establishes a, classification of Internet access provider or online service 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 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) a, provider of Internet access or online services is deemed to be the agent of a, remote seller for determining tax collection obligations as a, result of

(I) the provider displaying a, remote seller's information or content on such provider's computer server; or

(II) the provider maintaining or taking orders through such provider's computer server.

(4) ELECTRONIC COMMERCE.--The term "electronic commerce" means any transaction conducted over the Internet or an online service, 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 and online services.

(5) INFORMATION SERVICES.--The term "information services" has the meaning given such term in section 3(20) of the Communications Act of 1934 (47 U.S.C. 3(20)) 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, and other services offered over the Internet.

(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 taxed by any other (or the same State, except in the case of sales taxes) State or political subdivision thereof whether or not at the same rate or on the same basis without an offsetting credit for taxes paid in other jurisdictions or other similar mechanisms for avoiding double taxation of the same transactions" or

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

(9) ONLINE SERVICE.--The term "online service" means the offering or provision of content or information services to a user as part of a package of services that are combined with Internet access.

(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 using the Internet.

(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--

(A) any levy, fee, or charge imposed under governmental authority by any governmental entity; or

(B) the imposition of or obligation to collect and to remit to a governmental entity, any such levy, fee, or charge imposed by a governmental entity.

Such term does not include any franchise fees or similar fees imposed by a State or local franchising authority, pursuant to section 622 or 653 of the Communications Act of 1934 (47 U.S.C. 5427 573), as amended.

(13) TELECOMMUNICATIONS SERVICES.--The term "telecommunications services" has the meaning given such term in section 3(46) of the Communications Act of 1934 (47 U.S.C. 3(46)).

SEC. 11. NO EXPANSION OF TAX AUTHORITY.

Nothing in this Act shall be construed to expand the power of any State or political subdivision thereof to collect taxes on Internet access, online services, bits, or electronic commerce beyond the power that existed on March 1, 1998.

SEC. 12. PRESERVATION OF AUTHORITY.

Nothing in this Act shall limit or otherwise affect the implementation of the Telecommunications Act of 1996 (Public Law 104-104) or amendments made by such Act.