[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 512 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 512

 To foster innovation and technological advancement in the development 
 of the Internet and electronic commerce, and to assist the States in 
                 simplifying their sales and use taxes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 9, 2001

   Mr. Dorgan (for himself, Mr. Enzi, Mr. Graham, Mr. Voinovich, Mr. 
    Breaux, Mr. Thomas, Mr. Durbin, Mr. Chafee, Mrs. Lincoln, Mrs. 
 Hutchison, and Mr. Rockefeller) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To foster innovation and technological advancement in the development 
 of the Internet and electronic commerce, and to assist the States in 
                 simplifying 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 Moratorium and Equity 
Act''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The moratorium of the Internet Tax Freedom Act on new 
        taxes on Internet access and on multiple and discriminatory 
        taxes on electronic commerce should be extended.
            (2) States should be encouraged to simplify their sales and 
        use tax systems.
            (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 equal taxation consistent 
        with the United States Supreme Court's decision in Quill Corp. 
        v. North Dakota.
            (5) States that adequately simplify their tax systems 
        should be authorized to correct the present inequities in 
        taxation through requiring sellers to collect taxes on sales of 
        goods or services delivered in-state, without regard to the 
        location of the seller.
            (6) The States have experience, expertise, and a vital 
        interest in the collection of sales and use taxes, and thus 
        should take the lead in developing and implementing sales and 
        use tax collection systems that are fair, efficient, and non-
        discriminatory in their application and that will simplify the 
        process for both sellers and buyers.
            (7) Online consumer privacy is of paramount importance to 
        the growth of electronic commerce and must be protected.

SEC. 3. EXTENSION OF INTERNET TAX FREEDOM ACT MORATORIUM THROUGH 2005.

    Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 151 
note) is amended by striking ``3 years after the date of the enactment 
of this Act--'' and inserting ``on December 31, 2005:''.

SEC. 4. STREAMLINED SALES AND USE TAX SYSTEM.

    (a) Development of Streamlined System.--It is the sense of Congress 
that States and localities should work together to develop a 
streamlined sales and use tax system that addresses the following in 
the context of remote sales:
            (1) A centralized, one-stop, multi-state registration 
        system for sellers.
            (2) Uniform definitions for goods or services, the sale of 
        which may, by State action, be included in the tax base.
            (3) Uniform rules for attributing transactions to 
        particular taxing jurisdictions.
            (4) Uniform procedures for--
                    (A) the treatment of purchasers exempt from sales 
                and use taxes; and
                    (B) relief from liability for sellers that rely on 
                such State procedures.
            (5) Uniform procedures for the certification of software 
        that sellers rely on to determine sales and use tax rates and 
        taxability.
            (6) A uniform format for tax returns and remittance forms.
            (7) Consistent electronic filing and remittance methods.
            (8) State administration of all State and local sales and 
        use taxes.
            (9) Uniform audit procedures, including a provision giving 
        a seller the option to be subject to no more than a single 
        audit per year using those procedures; except that if the 
        seller does not comply with the procedures to elect a single 
        audit, any State can conduct an audit using those procedures.
            (10) Reasonable compensation for tax collection by sellers.
            (11) Exemption from use tax collection requirements for 
        remote sellers falling below a de minimis threshold of 
        $5,000,000 in gross annual sales.
            (12) Appropriate protections for consumer privacy.
            (13) Such other features that the States deem warranted to 
        promote simplicity, uniformity, neutrality, efficiency, and 
        fairness.
    (b) No Undue Burden.--Congress finds that, if adopted, the system 
described in subsection (a) will not place an undue burden on 
interstate commerce or burden the growth of electronic commerce and 
related technologies in any material way.
    (c) Study.--It is the sense of Congress that a joint, comprehensive 
study should be commissioned by State and local governments and the 
business community to determine the cost to all sellers of collecting 
and remitting State and local sales and use taxes on sales made by 
sellers under the law as in effect on the date of enactment of this Act 
and under the system described in subsection (a) to assist in 
determining what constitutes reasonable compensation.

SEC. 5. INTERSTATE SALES AND USE TAX COMPACT.

    (a) Authorization and Consent.--In general, the States are 
authorized to enter into an Interstate Sales and Use Tax Compact. 
Subject to subsection (c), Congress consents to their entry into that 
Compact. The Compact shall describe a uniform, streamlined sales and 
use tax system consistent with section 4(a), and shall provide that 
States joining the Compact must adopt that system.
    (b) Expiration.--The authorization and consent in subsection (a) 
shall expire if the Compact has not been formed before January 1, 2006.
    (c) Congressional Consent Withdrawn if Compact Disapproved.--
            (1) Adopting states to transmit.--Upon the 20th State 
        becoming a signatory to the Compact, the adopting States shall 
        transmit a copy of the Compact to Congress.
            (2) Congressional action.--The consent of Congress to the 
        Compact is withdrawn if Congress, by law, disapproves the 
        Compact within 120 days (computed in accordance with section 
        154 of the Trade Act of 1974 (19 U.S.C. 2194)) after the 
        adopting States transmit the Compact to Congress.

SEC. 6. AUTHORIZATION TO SIMPLIFY STATE USE-TAX RATES THROUGH 
              AVERAGING.

    (a) In General.--Subject to the exception in subsection (e), a 
State that adopts the Compact authorized under section 5 and that 
levies a use tax shall impose a single, uniform State-wide use-tax rate 
on all remote sales on which it assesses a use tax for any calendar 
year for which the State meets the requirements of subsection (b).
    (b) Averaging Requirement.--A State meets the requirements of this 
subsection for any calendar year in which the single, uniform State-
wide use-tax rate is in effect if such rate is no greater than the 
weighted average of the sales tax rates actually imposed by the State 
and its local jurisdictions during the 12-month period ending on June 
30 prior to such calendar year.
    (c) Computation of Rate No Greater Than Weighted Average.--For 
purposes of subsection (b), a State-wide use-tax rate is no greater 
than the weighted average of the sales tax rates imposed during a 12-
month period described in subsection (b) only if, had such rate been 
assessed during such period on all sales subject to the sales and use 
tax by such State and its local jurisdictions, such rate would not have 
yielded a greater total assessment of taxes than the total taxes 
actually assessed on such sales during such period.
    (d) Annual Option To Collect Actual Tax.--Notwithstanding 
subsection (a), a remote seller may elect annually to collect the 
actual applicable State and local use taxes on each sale made in the 
State.
    (e) Alternative System.--A State that adopts the dramatically 
simplified sales and use tax system described in the Compact authorized 
under section 5 so that remote sellers can use information provided by 
the State to identify the single applicable rate for each sale, may 
require a remote seller to collect the actual applicable State and 
local sales or use tax due on each sale made in the State if the State 
provides such seller relief from liability to the State for relying on 
such information provided by the State.

SEC. 7. AUTHORIZATION TO REQUIRE COLLECTION OF USE TAXES.

    (a) Grant of Authority.--
            (1) States that adopt the system may require collection.--
        Any State that has adopted the system described in the Compact 
        is authorized, notwithstanding any other provision of law, to 
        require all sellers not qualifying for the de minimis exception 
        to collect and remit sales and use taxes on remote sales to 
        purchasers located in such State after the expiration of the 
        120 day period described by section 5(c)(2) unless the Compact 
        is disapproved under section 5(c).
            (2) States that do not adopt the system may not require 
        collection.--Paragraph (1) does not extend to any State that 
        does not adopt the system described in the Compact.
    (b) No Effect on Nexus, Etc.--No obligation imposed by virtue of 
authority granted by subsection (a)(1) or denied by subsection (a)(2) 
shall be considered in determining whether a seller has a nexus with 
any State for any other tax purpose. Except as provided in subsection 
(a), nothing in this Act permits or prohibits 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 related to the 
        sale of goods or services.

SEC. 8. LIMITATION.

    In general, nothing in this Act shall be construed as subjecting 
sellers to franchise taxes, income taxes, or licensing requirements of 
a State or political subdivision thereof, nor shall anything in this 
Act be construed as affecting the application of such taxes or 
requirements or enlarging or reducing the authority of any State or 
political subdivision to impose such taxes or requirements.

SEC. 9. DEFINITIONS.

    In this Act:
            (1) State.--The term ``State'' means any State of the 
        United States of America and includes the District of Columbia.
            (2) Goods or services.--The term ``goods or services'' 
        includes tangible and intangible personal property and 
        services.
            (3) Remote sale.--The term ``remote sale'' means a sale in 
        interstate commerce of goods or services attributed, under the 
        rules established pursuant to section 4(a)(3), to a particular 
        taxing jurisdiction that could not, except for the authority 
        granted by this Act, require that the seller of such goods or 
        services collect and remit sales or use taxes on such sale.
            (4) Locus of remote sale.--The term ``particular taxing 
        jurisdiction'', when used with respect to the location of a 
        remote sale, means a remote sale of goods or services 
        attributed, under the rules established pursuant to section 
        4(a)(3), to a particular taxing jurisdiction.
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