[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 1888 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 1888

 To establish a moratorium on exactions that would interfere with the 
flow of commerce via the Internet, to establish a commission to develop 
    a uniform set of definitions and principles for State and local 
     jurisdictions to utilize regarding regulation and taxation of 
    commercial transaction on the Internet, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 31, 1998

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

_______________________________________________________________________

                                 A BILL


 
 To establish a moratorium on exactions that would interfere with the 
flow of commerce via the Internet, to establish a commission to develop 
    a uniform set of definitions and principles for State and local 
     jurisdictions to utilize regarding regulation and taxation of 
    commercial transaction on 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 Fairness and Interstate 
Responsibility Act'' or ``Net FAIR Act''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) By exercising its authority under article I, section 8, 
        clause 3 of the United States Constitution, Congress may best 
        achieve a consistent and coherent national policy regarding 
        regulation and 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.
            (2) Because the Federal Government and State and local 
        governments will have numerous reasons to interact over the 
        Internet with the individuals and companies that use it, a 
        lexicon of terms relating to the Internet and its use is vital.
            (3) A limited number of States have already adopted by law 
        or regulation various forms of taxes that apply to commercial 
        activity that are unique to the Internet or to providers of 
        Internet services.
            (4) There are approximately 30,000 separate taxing 
        jurisdictions in the United States, thus presenting the 
        potential for an enormous variety of taxes and tax rates on 
        Internet activity.
            (5) The unique character of the Internet transcends 
        physical and political boundaries and permits commercial and 
        intellectual communications to move from city to city, State to 
        State, and nation to nation without any set path in a manner 
        that is virtually unparalleled in history.
            (6) The Internet is a global network that offers the 
        potential for entrepreneurial individuals and small businesses 
        throughout the United States to reach customers and markets 
        throughout the world with their products and services.
            (7) The United States must create an example for the rest 
        of the world by preventing discriminatory taxation on Internet 
        activities so that the United States can persuade our trading 
        partners to resist the temptation to tax such activities and 
        thereby limit the potential growth of such activities.
            (8) The innovation and creativity that has helped computer 
        technology evolve into the present-day Internet has thrived in 
        a tax-free environment and should be granted protection from 
        local, State, and Federal taxation in order to permit this new 
        medium to reach its fullest potential.
            (9) 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, and other appropriate 
        international organizations and fora to establish that 
        commercial transactions using the Internet are free from tariff 
        and discriminatory taxation.

SEC. 3. MORATORIUM ON IMPOSITION OF TAXES ON INTERNET AND INTERNET-
              RELATED 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 Internet-related services; or
            (2) the use of the Internet or Internet-related 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 Internet-related services 
        if such taxes are applied uniformly to all businesses;
            (2) does not apply to fairly apportioned business license 
        taxes applied to businesses having a business location in the 
        taxing jurisdiction if such taxes are applied uniformly to all 
        businesses;
            (3) does not affect the authority of a State or political 
        subdivision to impose a sales or use tax on sales or other 
transactions effected by use of the Internet or Internet-related 
services if--
                    (A) the tax is the same as the tax generally 
                imposed and collected by that State or political 
                subdivision thereof on 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 
                Internet-related services is imposed on the same person 
                or entity as in the case of sales or transactions 
                affected by mail order, telephone, or other remote 
                means; and
            (4) does not apply to taxes on real or personal property 
        used in connection with the providing of Internet or Internet-
        related services if such taxes are applied to all businesses 
        using real or personal property in connection with their 
        businesses.
    (c) Termination.--The moratorium set forth under subsection (a) 
shall terminate on December 31, 2001.

SEC. 4. COMMISSION ON INTERNET TAXATION AND REGULATION.

    (a) Establishment.--
            (1) In general.--There is established a commission to be 
        known as the Commission on Internet Taxation and Regulation 
        (hereafter in this section referred to as the ``Commission'').
            (2) Membership.--The Commission shall be composed of 15 
        members of whom--
                    (A) one shall be the Secretary of Commerce;
                    (B) one shall be the Secretary of State;
                    (C) one shall be the Secretary of the Treasury; and
                    (D) twelve shall be appointed by the President 
                without regard to political affiliation, of whom--
                            (i) three shall be the chief executive 
                        officer of a State (including at least one who 
                        is the chief executive officer of a State that 
                        does not impose a sales tax);
                            (ii) three shall be the chief executive 
                        officer of a political subdivision of a State 
                        (including at least one who is the chief 
                        executive officer of a political subdivision 
                        that does not impose a sales tax);
                            (iii) three shall be individuals employed 
                        by or affiliated with companies engaged in 
                        computer manufacturing activities, software 
                        activities, or activities relating to the 
                        Internet or the provision of Internet-related 
                        services; and
                            (iv) three shall be individuals employed by 
                        or affiliated with companies engaged in 
                        electronic commerce (including at least one who 
                        is employed by or affiliated with a company 
                        engaged in mail order commerce).
            (3) Period of appointment; vacancies.--Members shall be 
        appointed for the life of the Commission. Any vacancy in the 
        Commission shall not affect its powers, but shall be filled in 
        the same manner as the original appointment.
            (4) Chairman and vice chairman.--The Commission shall 
        select a Chairman and Vice Chairman from among its members.
            (5) Meetings.--The Commission shall meet at the call of the 
        Chairman.
            (6) Quorum.--A majority of the members of the Commission 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    (b) Duties.--
            (1) In general.--The Commission shall have as its duties 
        the following:
                    (A) To conduct a thorough study of taxation and 
                regulation of the Internet and Internet-related 
                services under State and local law and identify any 
                inconsistencies in such taxation or regulation.
                    (B) To consider the effect of current Federal 
                statutes and regulations on the Internet and Internet-
                related services and recommend appropriate 
                modifications of such statutes and regulations.
                    (C) To propose model legislation (a so-called 
                ``Uniform Internet Commercial Code'') relating to 
                commercial transactions on the Internet and to 
                Internet-related services in order to facilitate 
                uniform treatment of such transactions and such 
                services under Federal law and State law.
            (2) Model legislation.--The model legislation under 
        paragraph (1)(C) shall--
                    (A) provide terminology applicable to commercial 
                transactions on the Internet and to Internet-related 
                services;
                    (B) define the transactions, services, and other 
                activities covered by the legislation; and
                    (C) establish regulatory structures and mechanisms 
                applicable to such transactions, services, and other 
                activities.
            (3) Adoption of positions.--The Commission may not adopt a 
        position with respect to a matter under this subsection unless 
        the position is approved by at least 10 members of the 
        Commission.
    (c) Report.--Not later than December 31, 2000, the Commission shall 
submit to Congress and the President a report on its activities under 
this section. The report shall--
            (1) set forth the findings of the Commission under 
        subsection (b)(1)(A);
            (2) set forth any findings of the Commission under 
        subsection (b)(1)(B), including any recommendations relating to 
        such findings;
            (3) set forth the model legislation proposed under 
        subsection (b)(1)(C); and
            (4) include any additional findings and recommendations 
        that the Commission considers appropriate.
    (d) Powers of Commission.--
            (1) Hearings.--The Commission may hold such hearings, sit 
        and act at such times and places, take such testimony, and 
        receive such evidence as the Commission considers advisable to 
        carry out the purposes of this section.
            (2) Information from federal agencies.--The Commission may 
        secure directly from any Federal department or agency such 
        information as the Commission considers necessary to carry out 
        the provisions of this section. Upon request of the Chairman of 
        the Commission, the head of such department or agency shall 
        furnish such information to the Commission.
            (3) Postal services.--The Commission may use the United 
        States mails in the same manner and under the same conditions 
        as other departments and agencies of the Federal Government.
            (4) Gifts.--The Commission may accept, use, and dispose of 
        gifts or donations of services or property.
    (e) Commission Personnel Matters.--
            (1) Compensation of members.--Each member of the Commission 
        who is not an officer or employee of the Federal Government 
        shall be compensated at a rate equal to the daily equivalent of 
        the annual rate of basic pay prescribed for level IV of the 
        Executive Schedule under section 5315 of title 5, United States 
        Code, for each day (including travel time) during which such 
        member is engaged in the performance of the duties of the 
        Commission. All members of the Commission who are officers or 
        employees of the United States shall serve without compensation 
        in addition to that received for their services as officers or 
        employees of the United States.
            (2) Travel expenses.--The members of the Commission shall 
        be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Commission.
            (3) Staff.--
                    (A) In general.--The Chairman of the Commission 
                may, without regard to the civil service laws and 
                regulations, appoint and terminate an executive 
                director and such other additional personnel as may be 
                necessary to enable the Commission to perform its 
                duties. The employment of an executive director shall 
                be subject to confirmation by the Commission.
                    (B) Compensation.--The Chairman of the Commission 
                may fix the compensation of the executive director and 
                other personnel without regard to the provisions of 
                chapter 51 and subchapter III of chapter 53 of title 5, 
                United States Code, relating to classification of 
                positions and General Schedule pay rates, except that 
                the rate of pay for the executive director and other 
                personnel may not exceed the rate payable for level V 
                of the Executive Schedule under section 5316 of such 
                title.
            (4) Detail of government employees.--Any Federal Government 
        employee may be detailed to the Commission without 
        reimbursement, and such detail shall be without interruption or 
        loss of civil service status or privilege.
            (5) Procurement of temporary and intermittent services.--
        The Chairman of the Commission may procure temporary and 
        intermittent services under section 3109(b) of title 5, United 
        States Code, at rates for individuals which do not exceed the 
        daily equivalent of the annual rate of basic pay prescribed for 
        level V of the Executive Schedule under section 5316 of such 
        title.
    (f) Termination.--The Commission shall terminate 90 days after the 
date on which the Commission submits its report under subsection (c).

SEC. 5. DEFINITIONS.

    In this Act:
            (1) Internet.--The term ``Internet'' means the computer 
        facilities and telecommunications facilities, 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 by wire or radio.
            (2) Internet-related services.--The term ``Internet-related 
        services'' includes the following:
                    (A) Internet access services, including the 
                storage, processing, and transmission of information 
                that enables an individual to make use of the resources 
                found via the Internet.
                    (B) Online services, including the information, 
                information processing, electronic commerce, and other 
                services available to an individual as part of a 
                package of services that are combined with Internet 
                access service and offered to the user for a single 
                price.
            (3) 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.
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