[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 664 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 664
To provide jurisdictional standards for the imposition of State and
local tax obligations on interstate commerce, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 29, 2001
Mr. Gregg (for himself and Mr. Kohl) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide jurisdictional standards for the imposition of State and
local tax obligations on interstate commerce, 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 ``New Economy Tax Fairness Act or NET
FAIR Act''.
SEC. 2. JURISDICTIONAL STANDARDS FOR THE IMPOSITION OF STATE AND LOCAL
BUSINESS ACTIVITY, SALES, AND USE TAX OBLIGATIONS ON
INTERSTATE COMMERCE.
Title I of the Act entitled ``An Act relating to the power of the
States to impose net income taxes on income derived from interstate
commerce, and authorizing studies by congressional committees of
matters pertaining thereto'', approved on September 14, 1959 (15 U.S.C.
381 et seq.), is amended to read as follows:
``TITLE I--JURISDICTIONAL STANDARDS
``SEC. 101. IMPOSITION OF STATE AND LOCAL BUSINESS ACTIVITY, SALES, AND
USE TAX OBLIGATIONS ON INTERSTATE COMMERCE.
``(a) In General.--No State shall have power to impose, for any
taxable year ending after the date of enactment of this title, a
business activity tax or a duty to collect and remit a sales or use tax
on the income derived within such State by any person from interstate
commerce, unless such person has a substantial physical presence in
such State. A substantial physical presence is not established if the
only business activities within such State by or on behalf of such
person during such taxable year are any or all of the following:
``(1) The solicitation of orders or contracts by such
person or such person's representative in such State for sales
of tangible or intangible personal property or services, which
orders or contracts are approved or rejected outside the State,
and, if approved, are fulfilled by shipment or delivery of such
property from a point outside the State or the performance of
such services outside the State.
``(2) The solicitation of orders or contracts by such
person or such person's representative in such State in the
name of or for the benefit of a prospective customer of such
person, if orders or contracts by such customer to such person
to enable such customer to fill orders or contracts resulting
from such solicitation are orders or contracts described in
paragraph (1).
``(3) The presence or use of intangible personal property
in such State, including patents, copyrights, trademarks,
logos, securities, contracts, money, deposits, loans,
electronic or digital signals, and web pages, whether or not
subject to licenses, franchises, or other agreements.
``(4) The use of the Internet to create or maintain a World
Wide Web site accessible by persons in such State.
``(5) The use of an Internet service provider, on-line
service provider, internetwork communication service provider,
or other Internet access service provider, or World Wide Web
hosting services to maintain or take and process orders via a
web page or site on a computer that is physically located in
such State.
``(6) The use of any service provider for transmission of
communications, whether by cable, satellite, radio,
telecommunications, or other similar system.
``(7) The affiliation with a person located in the State,
unless--
``(A) the person located in the State is the
person's agent under the terms and conditions of
subsection (d); and
``(B) the activity of the agent in the State
constitutes substantial physical presence under this
subsection.
``(8) The use of an unaffiliated representative or
independent contractor in such State for the purpose of
performing warranty or repair services with respect to tangible
or intangible personal property sold by a person located
outside the State.
``(b) Domestic Corporations; Persons Domiciled in or Residents of a
State.--The provisions of subsection (a) shall not apply to the
imposition of a business activity tax or a duty to collect and remit a
sales or use tax by any State with respect to--
``(1) any corporation which is incorporated under the laws
of such State; or
``(2) any individual who, under the laws of such State, is
domiciled in, or a resident of, such State.
``(c) Sales or Solicitation of Orders or Contracts for Sales by
Independent Contractors.--For purposes of subsection (a), a person
shall not be considered to have engaged in business activities within a
State during any taxable year merely by reason of sales of tangible or
intangible personal property or services in such State, or the
solicitation of orders or contracts for such sales in such State, on
behalf of such person by one or more independent contractors, or by
reason of the maintenance of an office in such State by one or more
independent contractors whose activities on behalf of such person in
such State consist solely of making such sales, or soliciting orders or
contracts for such sales.
``(d) Attribution of Activities and Presence.--For purposes of this
section, the substantial physical presence of any person shall not be
attributed to any other person absent the establishment of an agency
relationship between such persons that--
``(1) results from the consent by both persons that one
person act on behalf and subject to the control of the other;
and
``(2) relates to the activities of the person within the
State.
``(e) Definitions.--For purposes of this title--
``(1) Business activity tax.--The term `business activity
tax' means a tax imposed on, or measured by, net income, a
business license tax, a business and occupation tax, a
franchise tax, a single business tax or a capital stock tax, or
any similar tax or fee imposed by a State.
``(2) Independent contractor.--The term `independent
contractor' means a commission agent, broker, or other
independent contractor who is engaged in selling, or soliciting
orders or contracts for the sale of, tangible or intangible
personal property or services for more than one principal and
who holds himself or herself out as such in the regular course
of his or her business activities.
``(3) Internet.--The term `Internet' means collectively the
myriad of computer and telecommunications facilities, including
equipment and operating software, which comprise the
interconnected world-wide network of networks that employ the
Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such Protocol.
``(4) Internet access.--The term `Internet access' means a
service that enables users to access content, information,
electronic mail, or other services offered over the Internet,
and may also include access to proprietary content,
information, and other services as a part of a package of
services offered to users.
``(5) Representative.--The term `representative' does not
include an independent contractor.
``(6) Sales tax.--The term `sales tax' means a tax that
is--
``(A) imposed on or incident to the sale of
tangible or intangible personal property or services as
may be defined or specified under the laws imposing
such tax; and
``(B) measured by the amount of the sales price,
cost, charge, or other value of or for such property or
services.
``(7) Solicitation of orders or contracts.--The term
`solicitation of orders or contracts' includes activities
normally ancillary to such solicitation.
``(8) State.--The term `State' means any of the several
States, the District of Columbia, or any territory or
possession of the United States, or any political subdivision
thereof.
``(9) Use tax.--The term `use tax' means a tax that is--
``(A) imposed on the purchase, storage,
consumption, distribution, or other use of tangible or
intangible personal property or services as may be
defined or specified under the laws imposing such tax;
and
``(B) measured by the purchase price of such
property or services.
``(10) World wide web.--The term `World Wide Web' means a
computer server-based file archive accessible, over the
Internet, using a hypertext transfer protocol, file transfer
protocol, or other similar protocols.
``(f) Application of Section.--This section shall not be construed
to limit, in any way, constitutional restrictions otherwise existing on
State taxing authority.
``SEC. 102. ASSESSMENT OF BUSINESS ACTIVITY TAXES.
``(a) Limitations.--No State shall have power to assess after the
date of enactment of this title any business activity tax which was
imposed by such State or political subdivision for any taxable year
ending on or before such date, on the income derived for activities
within such State that affect interstate commerce, if the imposition of
such tax for a taxable year ending after such date is prohibited by
section 101.
``(b) Collections.--The provisions of subsection (a) shall not be
construed--
``(1) to invalidate the collection on or before the date of
enactment of this title of any business activity tax imposed
for a taxable year ending on or before such date; or
``(2) to prohibit the collection after such date of any
business activity tax which was assessed on or before such date
for a taxable year ending on or before such date.
``SEC. 103. TERMINATION OF SUBSTANTIAL PHYSICAL PRESENCE.
``If a State has imposed a business activity tax or a duty to
collect and remit a sales or use tax on a person as described in
section 101, and the person so obligated no longer has a substantial
physical presence in that State, the obligation to pay a business
activity tax or to collect and remit a sales or use tax on behalf of
that State applies only for the period in which the person has a
substantial physical presence.
``SEC. 104. SEPARABILITY.
``If any provision of this title or the application of such
provision to any person or circumstance is held invalid, the remainder
of this title or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not
be affected thereby.''.
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