[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3849 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 3849

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.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 12, 1998

   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 Committees on Ways and Means, the Judiciary, and Rules, 
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

_______________________________________________________________________

                                 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.

    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. PROVISION OF INTERNET ACCESS AND ONLINE SERVICES.

    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 (Public Law 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 electro- magnetic transmission 
media, and related equipment and software, comprising the 
interconnected world-wide 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 II 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, service, 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 18 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 as 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 
                Conferences 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) Chairperson.--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 1 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 the Treasury. The 
Commission shall also have reasonable access to use the facilities of 
the Department of the Commerce and 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 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) Rules 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 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 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 the 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; 
        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 appropriate committees of 
the Congress such policy recommendations as the President deems 
necessary or expedient.

SEC. 8. EXPEDITED CONSIDERATION OF LEGISLATIVE RECOMMENDATIONS.

    (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.

SEC. 9. DECLARATION THAT THE INTERNET SHOULD 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 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 enable 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 transaction; 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. 
        542, 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.
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