[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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