S 442 IS.
Internet Tax Freedom Act.
Source: Library of Congress.

S 442 IS

105th CONGRESS

1st Session

To establish a national policy against State and local government 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 flow of commerce via the Internet, and for other purposes.

IN THE SENATE OF THE UNITED STATES

March 13, 1997

Mr. WYDEN (for himself and Mr. KERRY) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

To establish a national policy against State and local government 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 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 inadministrable 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 long 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, and the concomitant uniformity, simplicity, and fairness 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 political subdivision thereof may impose, assess, or attempt to collect a tax 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 or 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 having a business location in the taxing jurisdiction; and

(3) does not affect a State or political subdivision thereof's authority 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 generally imposed and collected by that State or political subdivision thereof on interstate sales or 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 compute 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, and 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 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. 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 that activity on the Internet and interactive computer services is free from tariff and taxation.

SEC. 6. 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 includes the imposition on the seller of an obligation to collect and remit a tax imposed on the buyer.