[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 442 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 442

   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

_______________________________________________________________________

                                 A BILL


 
   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.
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