To extend the moratorium enacted by the Internet Tax Freedom Act through 2006, and encourage States to simplify their sales and use taxes.

February 8, 2001

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

To extend the moratorium enacted by the Internet Tax Freedom Act through 2006, and encourage States to simplify their sales and use taxes.

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 Nondiscrimination Act'.

SEC. 2. FINDINGS.

The Congress makes the following findings:

(1) The moratorium of the Internet Tax Freedom Act on taxes on multiple and discriminatory taxes on electronic commerce should be extended and taxes on Internet access should be permanently banned.

(2) States maintain the authority to determine what items are included in the State's sales tax base and should be encouraged to simplify and unify their sales and use tax systems, including systems imposing transaction taxes on telecommunications.

(3) As a matter of economic policy and basic fairness, similar sales transactions should be treated equally, without regard to the manner in which sales are transacted, whether in person, through the mails, over the telephone, on the Internet, or by other means.

(4) Congress may facilitate such simplification and uniformity by virtue of its constitutional power to regulate interstate commerce.

(5) If a sufficient number of States simplify and unify their sales and use tax systems, the Congress should consider authorizing those States to require sellers to collect taxes on sales of goods or services delivered in-state.

(6) Authorizing the States to require out-of-State sellers to collect transaction taxes should have no impact on business activity tax or income tax claims against sellers who lack nexus with the State. The rules regarding taxable presence, therefore, should be made clearer to reduce costly litigation between out-of-State sellers and States.

(7) Online consumer privacy is of paramount importance to the growth of electronic commerce and must be protected in any simplified and unified State sales and use tax system.

SEC. 3. EXTENSION OF INTERNET TAX FREEDOM ACT MORATORIUM THROUGH 2006.

(a) EXTENSION; INTERNET ACCESS TAXES- Section 1101 of the Internet Tax Freedom Act (47 U.S.C. 151 nt.) is amended--

(1) by striking `taxes during the period beginning on October 1, 1998, and ending 3 years after the date of enactment of this Act--' in subsection (a) and inserting `taxes--';

(2) by striking paragraph (1) of subsection (a) and inserting the following:

`(1) Taxes on Internet access.';

(3) by inserting before `multiple' in paragraph (2) of subsection (a) the following: `During the period beginning on October 1, 1998, and ending on December 31, 2006,';

(4) by striking subsection (d); and

(5) by redesignating subsections (e) and (f) as subsections (d) and (e), respectively.

(b) CONFORMING AMENDMENT- Section 1104(10) of that Act (47 U.S.C. 151 nt) is amended by striking `services unless such tax was generally imposed and actually enforced prior to October 1, 1998.' and inserting `services.'.

SEC. 4. SENSE OF THE CONGRESS.

(a) IN GENERAL- It is the sense of the Congress that the following criteria are necessary elements of a State law providing for a simplified sales and use tax system for remote sales:

(1) The law provides a centralized, one-stop, multi-state registration system for sellers.

(2) The law provides uniform definitions for goods or services that are included in the tax base.

(3) The law provides uniform and simple rules for attributing transactions to particular taxing jurisdictions.

(4) The law provides uniform rules for the designation and identification of purchasers and transactions exempt from sales and use taxes, including a database of all exempt entities and a rule ensuring that reliance on that database immunizes sellers from liability.

(5) The law provides uniform procedures for the certification of software that sellers rely on to determine State and local use tax rates and taxability.

(6) The law provides uniform bad debt rules.

(7) The law provides uniform tax returns and remittance forms.

(8) The law provides uniform electronic filing and remittance methods.

(9) The law provides for State administration of all State and local sales taxes and a single rate and a single filing for all sales.

(10) The law--

(A) provides for uniform audit procedures for out-of-State sellers; and

(B) includes an option under which a seller that agrees to be subject to audit by any State that uses those procedures is subject to no more than 1 audit per year under those procedures.

(11) The law provides reasonable compensation for tax collection by sellers.

(12) The law provides an exemption from use tax collection requirements for out-of-State sellers whose gross annual sales are less than a specified threshold of not less than $5,000,000.

(13) The law, or another State law, provides protection for consumer privacy.

(14) The law provides for a single uniform Statewide sales and use tax rate on all transactions on which a sales or use tax is assessed.

(15) In any State that imposes a sales or use tax on goods or services delivered via the Internet, the law--

(A) provides an origin State default rule for transactions where the location of the customer is not disclosed during the transaction; and

(B) permits the seller to rely upon information given by the customer during the transaction.

(16) The law provides clear standards for determining the nexus of business activity, for tax purposes, that limit business activity tax nexus to sellers that have continuous and systematic contacts with the State.

(17) Other features that will achieve a simplified and uniform sales and use tax system.

(b) DEFINITIONS- In this section:

(1) UNIFORM- The term `uniform' when used in reference to a tax, a procedure, a standard, or a system of classification means that the tax, procedure, standard, or system--

(A) does not discriminate unreasonably between sellers that have a business location or presence in a State and sellers that do not have a business location or presence in the State; and

(B) is not inconsistent with a similar tax, procedure, standard, or system employed by another State in which a seller is located or does business.

(2) ORIGIN STATE DEFAULT SYSTEM- The term `origin State default system' means a system for determining the sales or use tax liability associated with a purchase under which, if the seller cannot determine the State or residence of the purchaser from the purchase order, the seller may determine and compute the sales or use tax liability, if any, for the purchase according to the credit card information, payment address, delivery address, or other data in accordance with the law of the State in which the seller is located.

(3) LEASES AND LICENSES- The term `sales' and the term `seller' include `leases' and `lessor', respectively, and `licenses' and `licensor', respectively in any State in which the leasing or licensing of property, whether tangible or intangible, is treated for purposes of a sales or use tax imposed by that State as the first retail sale of that property.

SEC. 5. AUTHORIZATION TO REQUIRE COLLECTION OF USE TAXES.

(a) FEDERAL AUTHORIZATION REQUIRED- No State may require a seller, who lacks nexus with, or a tax obligation to, the State, to collect or remit sales or use tax on any sales in that State until Congress provides such authority to the States, by joint resolution under subsection (b).

(b) JOINT RESOLUTION- The Congress may authorize the States to require sellers to collect a sales or use tax on sales of goods or services delivered in the taxing State under any law that meets the criteria set forth in section 4 only by the adoption of a joint resolution--

(1) the resolving clause of which is as follows: `That the Congress approves the State collection of sales or use taxes on goods or services delivered in a State without regard to the State in which the seller is physically present under the State laws described in section 4. This resolution does not apply to the collection of any State tax if the law under which the tax is collected imposes multiple or discriminatory taxation.'; and

(2) the second section of which lists or describes the State laws to which the resolution initially applies.

(c) FAST-TRACK PROCEDURE FOR APPROVAL- The procedures set forth in section 152 of the Trade Act of 1974 (19 U.S.C. 2192) apply to the joint resolution described in subsection (b) of this section, except that--

(1) section 152(a) does not apply; and

(2) the references to the House of Representatives Committee on Ways and Means and the Senate Committee on Finance are deemed, for purposes of this section, to refer to the House of Representatives Committee on Commerce and the Senate Committee on Commerce, Science, and Transportation.

(d) APPLICATION WITH OTHER LAW- This subsection does not supersede section 1101 of the Internet Tax Freedom Act (47 U.S.C. 151 nt.)

(e) NO EFFECT ON NEXUS- No obligation imposed by virtue of authority granted in the joint resolution described in subsection (b), or any provision of this Act, shall be considered in determining whether a seller has a nexus with, or other tax obligation to, any State for any tax other than a sales or use tax. Nothing in this Act permits a State--

(1) to license or regulate any person;

(2) to require any person to qualify to transact intrastate business; or

(3) to subject any person to State taxes not expressly related to the authority granted by the joint resolution described in subsection (b).

END