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Internet Tax Freedom Act (Introduced in the House)
HR 1054 IH

105th CONGRESS
1st Session

To amend the Communications Act of 1934 to establish a national policy against State and local interference with interstate commerce on the Internet or interactive computer services, and to exercise 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 13, 1997

Mr. COX of California (for himself and Mr. WHITE) introduced the following bill; which was referred to the Committee on Commerce, and in addition to the Committee on the Judiciary, 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

To amend the Communications Act of 1934 to establish a national policy against State and local interference with interstate commerce on the Internet or interactive computer services, and to exercise 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'.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) As a massive global network spanning not only State but international borders, the Internet is inherently a matter of interstate and foreign commerce within the jurisdiction of the United States Congress under Article I, Section 8 of the United States Constitution.

(2) Even within the United States, the Internet does not respect State lines and operates independently of State boundaries. Addresses on the Internet are designed to be geographically indifferent. Internet transmissions are insensitive to physical distance and can have multiple geographical addresses.

(3) Because transmissions over the Internet are made through packet-switching, it is impossible to determine with any degree of certainty the precise geographic route or endpoints of specific Internet transmissions, and infeasible to separate intrastate from interstate, and domestic from foreign, Internet transmissions.

(4) Inconsistent and unadministrable taxes imposed on Internet activity by State and local governments threaten not only to subject consumers, businesses, and other users engaged in interstate and foreign commerce to multiple, confusing, and burdensome taxation, but also to restrict the growth and continued technological maturation of the Internet itself, and to call into question the continued viability of this dynamic medium.

(5) Because the tax laws and regulations of so many jurisdictions were established before the Internet or interactive computer services, their application to this new medium in unintended and unpredictable ways threatens every Internet user, access provider, vendor, and interactive computer service provider.

(6) The electronic marketplace of services, products, and ideas available through the Internet or interactive computer services can be especially beneficial to senior citizens, the physically challenged, citizens in rural areas, and small businesses. It also offers a variety of uses and benefits for educational institutions and charitable organizations.

(7) Consumers, businesses, and others engaging in interstate and foreign commerce through the Internet or interactive computer services could become subject to more than 30,000 separate taxing jurisdictions in the United States alone.

(8) The consistent and coherent national policy regarding taxation of Internet activity that is needed to avoid burdening this evolving form of interstate and foreign commerce can best be achieved by the United States exercising its authority under Article I, Section 8, Clause 3 of the United States Constitution.

SEC. 3. MORATORIUM ON IMPOSITION OF TAXES ON INTERNET OR INTERACTIVE COMPUTER SERVICES.

(a) MORATORIUM- Except as otherwise provided in this section, no State or local government (including any political subdivision) may impose, assess, or attempt to collect any tax or fee directly or indirectly on--

(1) the Internet or interactive computer services; or

(2) the use of the Internet or interactive computer services.

(b) PRESERVATION OF STATE AND LOCAL TAXING AUTHORITY- Subsection (a)--

(1) does not apply to taxes imposed on and measured by net income derived from the Internet or interactive computer services;

(2) does not apply to fairly apportioned business license taxes applied to businesses that have a business location in the taxing jurisdiction, and

(3) does not affect the authority of a State, or political subdivision thereof, to impose a sales or use tax on sales or other transactions effected by use of the Internet or interactive computer services if--

(A) the tax is the same as the tax imposed and collected by that State, or political subdivision thereof, on sales or interstate transactions effected by mail order, telephone, or other remote means within its taxing jurisdiction; and

(B) the obligation to collect the tax from sales or other transactions effected by use of the Internet or interactive computer services is imposed on the same person or entity as in the case of sales or transactions effected by mail order, telephone, or other remote means.

SEC. 4. ADMINISTRATION POLICY RECOMMENDATIONS TO CONGRESS.

(a) CONSULTATIVE GROUP- The Secretaries of the Treasury, Commerce, or State, in consultation with appropriate committees of the Congress, consumer and business groups, States and political subdivisions thereof, and other appropriate groups, shall--

(1) undertake an examination of United States domestic and international taxation of the Internet and interactive computer services, as well as commerce conducted thereon; and

(2) jointly submit appropriate policy recommendations concerning United States domestic and foreign policies toward taxation of the Internet and interactive computer services, if any, to the President within 18 months after the date of enactment of this Act.

(b) PRESIDENT- Not later than 2 years after the date of enactment of this Act, the President shall transmit to the appropriate committees of Congress policy recommendations on the taxation of sales and other transactions effected on the Internet or through interactive computer services.

(c) RECOMMENDATIONS TO BE CONSISTENT WITH TELECOMMUNICATIONS ACT OF 1996 POLICY STATEMENT- The Secretaries and the President shall take care to ensure that any such policy recommendations are fully consistent with the policy set forth in paragraphs (1) and (2) of section 230(b) of the Communications Act of 1934 (47 U.S.C. 230(b)).

SEC. 5. BAN ON REGULATION OF INTERNET PRICES BY THE FEDERAL COMMUNICATIONS COMMISSION.

(a) PROHIBITION ON COMMISSION REGULATION OF COMPUTER SERVICES- Section 230 of the Communications Act of 1934 (47 U.S.C. 230) is amended--

(1) by redesignating subsections (d) and (e) as subsections (e) and (f), respectively; and

(2) by inserting after subsection (c) the following new subsection:

`(d) PROHIBITION ON COMMISSION REGULATION OF COMPUTER SERVICES- The Commission shall have no authority or jurisdiction under this Act, nor shall any State commission have any authority or jurisdiction, to regulate the prices or charges paid by subscribers for interactive computer services, or information services transmitted through the Internet, except for the requirement in section 254(h) that such services be provided at affordable rates to rural health care providers, schools, and libraries.'.

(b) CONFORMING AMENDMENT- Section 223(h)(2) of the Communications Act of 1934 (47 U.S.C. 223(h)(2)) is amended by striking `230(e)(2)' and inserting `230(f)(2)'.

SEC. 6. DECLARATION THAT THE INTERNET BE FREE OF FOREIGN TARIFFS, TRADE BARRIERS, AND OTHER RESTRICTIONS.

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 Asia Pacific Economic Cooperation Council, or other appropriate international fora to establish activity on the Internet and interactive computer services is free from tariff and taxation.

SEC. 7. DEFINITIONS.

For purposes of this Act--

(1) INTERNET; INTERACTIVE COMPUTER SERVICE- The terms `Internet' and `interactive computer service' have the meaning given such terms by paragraphs (1) and (2), respectively, of section 230(e) of the Communications Act of 1934 (47 U.S.C. 230(e)).

(2) TAX- The term `tax' includes any tax, license, or fee that is imposed by any governmental entity and the imposition on the seller of an obligation to collect and remit a tax imposed on the buyer.