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105th Congress                                            Rept. 105-808
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


 
                    INTERNET TAX FREEDOM ACT OF 1998

                                _______
                                

October 10, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                        [To accompany H.R. 3529]

    [Including cost of estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3529) to establish a national policy against State 
and local interference with interstate commerce on the Internet 
or online services, and to excise congressional jurisdiction 
over interstate commerce by establishing a moratorium on the 
imposition of exactions that would interfere with the free flow 
of commerce via the Internet, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     7
Background and Need for Legislation..............................     7
Hearing..........................................................     9
Committee Consideration..........................................    10
Vote of the Committee............................................    10
Committee Oversight Findings.....................................    10
Committee on Government Reform and Oversight Findings............    10
New Budget Authority and Tax Expenditures........................    10
Congressional Budget Office Estimate.............................    10
Constitutional Authority Statement...............................    15
Section-by-Section Analysis and Discussion.......................    15
Changes in Existing Law Made by the Bill, as Reported............    21
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internet Tax Freedom Act of 1998''.

SEC. 2. MORATORIUM ON CERTAIN TAXES.

    (a) Amendment.--Title 4 of the United States Code is amended by 
adding at the end the following:

                ``CHAPTER 6--MORATORIUM ON CERTAIN TAXES

``Sec.
``151. Moratorium.
``152. Advisory commission on electronic commerce.
``153. Legislative recommendations.
``154. Expedited consideration of legislative recommendations
``155. Definitions.

``Sec. 151. Moratorium

  ``(a) Moratorium.--For a period of 3 years following the date of the 
enactment of this chapter, neither any State, nor any political 
subdivision thereof, shall impose, assess, collect, or attempt to 
collect--
          ``(1) taxes on Internet access;
          ``(2) bit taxes; or
          ``(3) multiple or discriminatory taxes on electronic 
        commerce.
  ``(b) Exception to Moratorium.--(1) Subject to paragraph (2), the 
moratorium in subsection (a)(1) shall not apply to the following taxes 
(as applicable), as in effect on the date of the enactment of this 
chapter, on Internet access:
          ``(A) State of connecticut.--Section 12-407(2)(i)(A) of the 
        General Statutes of Connecticut.
          ``(B) State of wisconsin.--Section 77.52(2)(a)5 of the 
        Wisconsin Statutes (1995-96).
          ``(C) State of iowa.--Section 422.43(1) of the Code of Iowa 
        (1997).
          ``(D) State of north dakota.--North Dakota Century Code 57-
        39.2 and 57-34.
          ``(E) State of south dakota.--South Dakota Codified Law 
        Annotated 10-45-5.
          ``(F) State of new mexico.--New Mexico Statutes Annotated 7-
        9-3.
          ``(G) State of tennessee.--Tennessee Code Annotated 67-6-221, 
        67-6-102(23)(iii), and 67-6-702(g).
          ``(H) State of ohio.--Chapter 5739 of the Ohio Revised Code.
  ``(2)(A) Paragraph (1) shall apply with respect to a tax referred to 
in such paragraph only if the referenced State enacts, during the 1-
year period beginning on the date of the enactment of this chapter, a 
law to expressly affirm that such tax is imposed on Internet access.
  ``(B) A State that satisfies the requirement specified in 
subparagraph (A) shall be deemed to have satisfied such requirement 
immediately after the enactment of this chapter, except that such State 
may not impute penalties or interest on any tax accrued during the 
period beginning on the date of the enactment of this Act and ending of 
the date such State satisfies such requirement.
  ``(c) Application of Moratorium.--Subsection (a) shall not apply with 
respect to the provision of Internet access that is offered for sale as 
part of a package of services that includes services other than 
Internet access, unless the service provider separately states that 
portion of the billing that applies to such services on the user's 
bill.

``Sec. 152. Advisory Commission on Electronic Commerce

  ``(a) Establishment of Commission.--There is established a temporary 
commission to be known as the Advisory Commission on Electronic 
Commerce (in this chapter referred to as the `Commission'). The 
Commission shall--
          ``(1) be composed of 31 members appointed in accordance with 
        subsection (b), including the chairperson who shall be selected 
        by the members of the Commission from among individuals 
        specified in subsection (b); and
          ``(2) conduct its business in accordance with the provisions 
        of this chapter.
  ``(b) Membership.--
          ``(1) In general.--The Commissioners shall serve for the life 
        of the Commission. The membership of the Commission shall be as 
        follows:
                  ``(A) Three representatives from the Federal 
                Government comprised of the Attorney General, the 
                Secretary of Commerce, and the Secretary of the 
                Treasury, or their respective representatives.
                  ``(B) Fourteen representatives from State, local, and 
                county governments comprised of 2 representatives each 
                from the National Governors' Association, the National 
                Conference of State Legislatures, the Council of State 
                Governments, the National Association of Counties, the 
                National League of Cities, and the United States 
                Conferences of Mayors; and 1 representative each from 
                the International City/County Managers Association and 
                the American Legislative Exchange Council.
                  ``(C) Fourteen representatives of taxpayers and 
                business--
                          ``(i) 7 of whom shall be appointed jointly by 
                        the Speaker of the House of Representatives and 
                        the majority leader of the Senate, of whom 3 
                        shall be individuals employed by or affiliated 
                        with persons engaged in providing Internet 
                        access or communications or transactions that 
                        use the Internet, 3 shall be individuals 
                        employed by or affiliated with persons engaged 
                        in electronic commerce (including at least 1 
                        who is employed by or affiliated with a person 
                        also engaged in mail order commerce), and 1 
                        shall be an individual employed by or 
                        affiliated with a person engaged in software 
                        publishing; and
                          ``(ii) 7 of whom shall be appointed jointly 
                        by the minority leader of the House of 
                        Representatives and the minority leader of the 
                        Senate, of whom 3 shall be individuals employed 
                        by or affiliated with persons engaged in 
                        providing Internet access or communications or 
                        transactions that use the Internet, 3 shall be 
                        individuals employed by or affiliated with 
                        persons engaged in electronic commerce 
                        (including at least 1 who is employed by or 
                        affiliated with a person also engaged in mail 
                        order commerce), and 1 shall be an individual 
                        employed by or affiliated with a person engaged 
                        in software publishing.
          ``(2) Appointments.--Appointments to the Commission shall be 
        made not later than 45 days after the date of enactment of this 
        chapter. The chairperson shall be selected not later than 60 
        days after the date of the enactment of this chapter.
  ``(c) Acceptance of Gifts and Grants.--The Commission may accept, 
use, and dispose of gifts or grants of services or property, both real 
and personal, for purposes of aiding or facilitating the work of the 
Commission. Gifts or grants not used at the expiration of the 
Commission shall be returned to the donor or grantor.
  ``(d) Other Resources.--The Commission shall have reasonable access 
to materials, resources, data, and other information from the 
Department of Justice, the Department of Commerce, and the Department 
of the Treasury. The Commission shall also have reasonable access to 
use the facilities of the Department of Justice, the Department of 
Commerce, and the Department of the Treasury for purposes of conducting 
meetings.
  ``(e) Sunset.--The existence of the Commission shall terminate--
          ``(1) when the last of the committees of jurisdiction 
        referred to in section 154 concludes consideration of the 
        legislation proposed under section 153; or
          ``(2) 3 years after the date of the enactment of this 
        chapter;
whichever occurs first.
  ``(f) Rules of the Commission.--
          ``(1) Sixteen members of the Commission shall constitute a 
        quorum for conducting the business of the Commission.
          ``(2) Any meetings held by the Commission shall be duly 
        noticed at least 14 days in advance and shall be open to the 
        public.
          ``(3) The Commission may adopt other rules as needed.
  ``(g) Duties of the Commission.--The duties of the Commission, to be 
carried out in consultation with the National Tax Association 
Communications and Electronic Commerce Tax Project, and other 
interested persons, may include--
          ``(1) conducting a thorough study of State and local taxation 
        of transactions using the Internet and Internet access;
          ``(2) examining the collection and administration of 
        consumption taxes on remote commerce in other countries and the 
        United States, and the impact of such collection on the global 
        economy;
          ``(3) examining the advantages and disadvantages of 
        authorizing States and local governments to require remote 
        sellers to collect and remit sales and use taxes;
          ``(4) proposing a uniform system of definitions of remote and 
        electronic commerce that may be subject to sales and use tax 
        within each State;
          ``(5) examining model State legislation relating to taxation 
        of transactions using the Internet and Internet access, 
        including uniform terminology, definitions of the transactions, 
        services, and other activities that may be subject to State and 
        local taxation, procedural structures and mechanisms applicable 
        to such taxation, and a mechanism for the resolution of 
        disputes between States regarding matters involving multiple 
        taxation;
          ``(6) examining a simplified system for administration and 
        collection of sales and use tax for remote commerce, that 
        incorporates all manner of making consumer payments, that would 
        provide for a single statewide sales or use tax rate (which 
        rate may be zero), and would establish a method of distributing 
        to political subdivisions within each State their proportionate 
        share of such taxes, including an examination of collection of 
        sales or use tax by small volume remote sellers only in the 
        State of origin;
          ``(7) examining ways to simplify the interstate 
        administration of sales and use tax on remote commerce, 
        including a review of the need for a single or uniform tax 
        registration, single or uniform tax returns, simplified 
        remittance requirements, and simplified administrative 
        procedures;
          ``(8) examining the need for an independent third party 
        collection system that would utilize the Internet to further 
        simplify sales and use tax administration and collection;
          ``(9) reviewing the efforts of States to collect sales and 
        use taxes owed on purchases from remote sellers, as well as 
        review the appropriateness of increased activities by States to 
        collect sales and use taxes directly from customers of remote 
        sellers;
          ``(10) examining the level of contacts sufficient to permit a 
        State to impose a sales or use tax on remote commerce that 
        would subject a remote seller to collection obligations imposed 
        by the State, including--
                  ``(A) the definition of a level of contacts below 
                which a State may not impose collection obligations on 
                a remote seller;
                  ``(B) whether or not such obligations are applied in 
                a nondiscriminatory manner with respect to nonremote 
                transactions; and
                  ``(C) the impact of such obligation on small business 
                remote sellers;
          ``(11) examining making permanent the temporary moratorium 
        described in section 151 with respect to Internet access as 
        well as such other taxes that the Commission deems appropriate;
          ``(12) examining ways to simplify State and local taxes 
        imposed on the provision of telecommunications services;
          ``(13) requiring the Commission to hold a public hearing to 
        provide an opportunity for representatives of the general 
        public, taxpayer groups, consumer groups, State and local 
        government officials, and tax-supported institutions to 
        testify; and
          ``(14) examining other issues that the Commission determines 
        to be relevant.
  ``(h) Federal Advisory Committee Act.--The Federal Advisory Committee 
Act shall not apply with respect to the Commission.

``Sec. 153. Legislative recommendations

  ``(a) Transmission of Proposed Legislation.--Not later than 2 years 
after the date of the enactment of this chapter, the Commission shall 
transmit to the President and the Congress proposed legislation 
reflecting any findings concerning the matters described in such 
section.
  ``(b) Contents of Proposed Legislation.--The proposed legislation 
submitted under subsection (a) by the Commission shall have been agreed 
to by at least 19 members of the Commission and may--
          ``(1) define with particularity the level of contacts between 
        a State and remote seller that the Commission considers 
        sufficient to permit a State to impose collection obligations 
        on the remote seller and the level of contacts which is not 
        sufficient to impose collection obligations on remote sellers;
          ``(2) provide that if, and only if, a State has adopted a 
        single sales and use tax rate for remote commerce and 
        established a method of distributing to its political 
        subdivisions their proportionate share of such taxes, and 
        adopted simplified procedures for the administration of its 
        sales and use taxes, including uniform registration, tax 
        returns, remittance requirements, and filing procedures, then 
        such State should be authorized to impose on remote sellers a 
        duty to collect sales or use tax on remote commerce;
          ``(3) provide that, effective upon the expiration of a 4-year 
        period beginning on the date of the enactment of such 
        legislation, a State that does not have in effect a single 
        sales and use tax rate and simplified administrative procedures 
        shall be deemed to have in effect a sales and use tax rate on 
        remote commerce equal to zero, until such time as such State 
        does adopt a single sales and use tax rate and simplified 
        administrative procedures;
          ``(4) include uniform definitions of categories of property, 
        goods, services, or information subject to, or exempt from, 
        sales and use taxes;
          ``(5) make permanent the temporary moratorium described in 
        section 151 with respect to Internet access, as well as such 
        other taxes (including those described in section 151) that the 
        Commission deems appropriate;
          ``(6) provide a mechanism for the resolution of disputes 
        between States regarding matters involving multiple taxation; 
        and
          ``(7) include other provisions that the Commission deems 
        necessary.
  ``(c) Recommendations of the President.--Not later than 45 days after 
the receipt of the Commission's legislative proposals, the President 
shall review such proposals and submit to the Congress such policy 
recommendations as the President deems necessary or expedient.

``Sec. 154. Expedited consideration of legislative recommendations

  ``(a) Not later than 90 legislative days after the transmission to 
the Congress by the Commission of the proposed legislation described in 
section 153, such legislation shall be considered by the respective 
committees of jurisdiction within the House of Representatives and the 
Senate, and, if reported, shall be referred to the proper calendar on 
the floor of each House for final action.
  ``(b) For purposes of this section, the 90-day period shall be 
computed by excluding--
          ``(1) the days on which either House is not in session 
        because of an adjournment of more than 3 days to a day certain 
        or an adjournment of the Congress sine die; and
          ``(2) any Saturday and Sunday, not excluded under paragraph 
        (1), when either House is not in session.

``Sec. 155. Definitions

  ``For the purposes of this chapter:
          ``(1) Bit tax.--The term `bit tax' means any tax on 
        electronic commerce expressly imposed on or measured by the 
        volume of digital information transmitted electronically, or 
        the volume of digital information per unit of time transmitted 
        electronically, but does not include taxes imposed on the 
        provision of telecommunications services.
          ``(2) Computer server.--The term `computer server' means a 
        computer that functions as a centralized provider of 
        information and services to multiple recipients.
          ``(3) Discriminatory tax.--The term `discriminatory tax' 
        means--
                  ``(A) any tax imposed by a State or political 
                subdivision thereof on electronic commerce that--
                          ``(i) is not generally imposed and legally 
                        collectible by such State or such political 
                        subdivision on transactions involving similar 
                        property, goods, services, or information 
                        accomplished through other means;
                          ``(ii) is not generally imposed and legally 
                        collectible at the same rate by such State or 
                        such political subdivision on transactions 
                        involving similar property, goods, services, or 
                        information accomplished through other means, 
                        unless the rate is lower as part of a phase-out 
                        of the tax over not more than a 5-year period;
                          ``(iii) imposes an obligation to collect or 
                        pay the tax on a different person or entity 
                        than in the case of transactions involving 
                        similar property, goods, services, or 
                        information accomplished through other means; 
                        or
                          ``(iv) establishes a classification of 
                        Internet access provider for purposes of 
                        establishing a higher tax rate to be imposed on 
                        such providers than the tax rate generally 
                        applied to providers of similar information 
                        services delivered through other means; or
                  ``(B) any tax imposed by a State or political 
                subdivision thereof, if--
                          ``(i) the mere use of a computer server by a 
                        remote seller to create or maintain a site on 
                        the Internet is considered a factor in 
                        determining a remote seller's tax collection 
                        obligation; or
                          ``(ii) the display of a remote seller's 
                        information or content on the computer server 
                        of a provider of Internet access, or the 
                        processing of orders through the computer 
                        server of a provider of Internet access, is 
                        considered a factor in determining whether the 
                        provider of Internet access is deemed to be the 
                        agent of the remote seller for tax collection 
                        purposes.
          ``(4) Electronic commerce.--The term `electronic commerce' 
        means any transaction conducted over the Internet or through 
        Internet access, comprising the sale, lease, license, offer, or 
        delivery of property, goods, services, or information, whether 
        or not for consideration, and includes the provision of 
        Internet access.
          ``(5) Information services.--The term `information services' 
        has the meaning given such term in section 3(20) of the 
        Communications Act of 1934 as amended from time to time.
          ``(6) Internet.--The term `Internet' means the combination of 
        computer facilities and electromagnetic transmission media, and 
        related equipment and software, comprising the interconnected 
        worldwide network of computer networks that employ the 
        Transmission Control Protocol/Internet Protocol, or any 
        predecessor or successor protocol, to transmit information.
          ``(7) 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 part of a package of 
        services offered to consumers. Such term does not include 
        telecommunications services.
          ``(8) Multiple tax.--The term `multiple tax' means--
                  ``(A) any tax that is imposed by one State or 
                political subdivision thereof on the same or 
                essentially the same electronic commerce that is also 
                subject to another tax imposed by another State or 
                political subdivision thereof (whether or not at the 
                same rate or on the same basis), without a credit (for 
                example, a resale exemption certificate) for taxes paid 
                in other jurisdictions (The term `multiple tax' shall 
                not include a sales or use tax imposed by a State and 1 
                or more political subdivisions thereof pursuant to a 
                law referred to in section 151(b)(1) on the same 
                electronic commerce or a tax on persons engaged in 
                electronic commerce which also may have been subject to 
                a sales or use tax thereon. For purposes of this 
                subparagraph, the term `sales or use tax' means a tax 
                that is imposed on or incident to the sale, purchase, 
                storage, consumption, distribution, or other use of 
                tangible personal property or services as may be 
                defined by laws imposing such tax and which is measured 
                by the amount of the sales price or other charge for 
                such property or service); or
                  ``(B) any tax on Internet access if the State or 
                political subdivision thereof classifies such Internet 
                access as telecommunications or communications services 
                under State law and such State or political subdivision 
                thereof has also imposed a tax on the purchase or use 
                of the underlying telecommunications services that are 
                used to provide such Internet access without allowing a 
                credit for other taxes paid, a sale for resale 
                exemption, or other mechanism for eliminating duplicate 
                taxation.
          ``(9) Remote commerce.--The term `remote commerce' means the 
        sale, lease, license, offer, or delivery of property, goods, 
        services, or information by a seller in 1 State to a purchaser 
        in another State.
          ``(10) Remote seller.--The term `remote seller' means a 
        person who sells, leases, licenses, offers, or delivers 
        property, goods, services, or information from one State to a 
        purchaser in another State.
          ``(11) State.--The term `State' means any of the several 
        States, the District of Columbia, or any territory or 
        possession of the United States.
          ``(12) Tax.--The term `tax' means any obligation to pay or to 
        collect and remit any levy, fee, or charge imposed by any 
        governmental entity solely for the purpose of generating 
        revenues for governmental purposes and not--
                  ``(A) in return for a specific privilege, service, or 
                benefit conferred on a person or entity;
                  ``(B) to support public regulatory commissions; or
                  ``(C) to support special purpose telecommunications 
                service programs.
        Such term does not include any franchise fees or similar fees 
        imposed by a State or local franchising authority, referred to 
        in section 622 or 653 of the Communications Act of 1934, as 
        amended from time to time.
          ``(13) Telecommunications services.--The term 
        `telecommunications services' has the meaning given such term 
        in section 3(46) of the Communications Act of 1934, as amended 
        from time to time.''.
  (b) Conforming Amendment.--Title 4 of the United States Code is 
amended in the table of chapters by adding at the end the following:

``6. Moratorium on Certain Taxes............................     151''.

SEC. 3. NO EXPANSION OF TAX AUTHORITY.

  Nothing in this Act shall be construed to expand the duty of any 
person to collect or pay taxes beyond that which existed immediately 
before the date of the enactment of this Act.

                          Purpose and Summary

    H.R. 3529 establishes a three-year moratorium on certain 
state taxes applied with respect to the Internet.\1\ This is 
necessary to avoid stifling the potential for an innovative 
form of technology to provide information, goods, and services 
quickly and cheaply throughout the world. In addition, 
recognizing the concern that the current subfederal tax system 
was developed in a time and for a form of commerce that could 
make it inappropriate for its application to the technology 
employed by the Internet,\2\ the bill establishes an Advisory 
Commission on Electronic Commerce to examine numerous relevant 
issues and make recommendations to Congress.
---------------------------------------------------------------------------
    \1\ The Internet is a global matrix of interconnected computer 
networks communicating through the Transmission Control Protocol/
Internet Protocol, which specifies how data is subdivided in packets 
and assigned to different address to be transferred over the Internet. 
See Interagency Working Group on Electronic Commerce, Framework for 
Global Electronic Commerce 1 n. (1997) where the term is used to 
encompass ``all such data networks'' despite the fact that some of 
these commerce activities occur on proprietary or other networks that 
are not ``technically part of the Internet.''
    \2\ See Walter Hellerstein, The Taxation of Electronic Commerce: 
Preliminary Thoughts on Model Uniform Legislation, State Tax Notes, 
1315, 1316 (April 28, 1997). (``There is widespread recognition that 
traditional nexus criteria are ill-suited to the creation of sensible 
and administrable rules for determining the taxability of taxpayers or 
transactions in interstate commerce. Traditional tax jurisdiction or 
`nexus' principles, after all, are rooted in concepts of territoriality 
and physical presence in the states.''
---------------------------------------------------------------------------

                Background and Need for the Legislation

    Article I, Section 8, Clause 3 of the United States 
Constitution authorizes Congress to ``regulate Commerce with 
foreign Nations, and among the several States.'' Known as the 
``Commerce Clause,'' it prohibits ``by its own force'' certain 
state actions that interfere with interstate commerce \3\ and 
has had the effect of placing the Congress in a superior 
position with respect to the states. Over the years, the 
Supreme Court's analysis of which state taxes interfere with 
interstate commerce and which are permissible has evolved, at 
first prohibiting taxation of interstate commerce ``in any 
form,'' \4\ then distinguishing between ``direct'' and 
``indirect'' burdens on interstate commerce.\5\ After the 
latter analysis was rejected in Western Live Stock v. Bureau of 
Revenue,\6\ the Court began to focus instead on whether a tax 
subjected interstate commerce to a risk of multiple taxation, 
before reverting to the direct-indirect test in Freeman v. 
Hewit.\7\ That approach was renounced by the Court in Complete 
Auto Transit, Inc. v. Brady,\8\ because it was seen as 
attaching ``constitutional significance to a semantic 
difference,'' notably how the tax was denominated rather than 
what its effect was. Between Freeman and Complete Auto, (in the 
middle of what Justice Stevens described in Quill Corp. v. 
North Dakota,\9\ as ``this latest rally between formalism and 
pragmatism''), the Court decided in National Bellas Hess, Inc. 
v. Department of Revenue of the State of Illinois,\10\ that the 
Commerce Clause prohibits a state from imposing the duty of use 
tax collection and payment upon a seller whose only connection 
with customers in the state is by common carrier or by mail.
---------------------------------------------------------------------------
    \3\ The phrasing of Justice Stone in South Carolina State Highway 
Dept. v. Barnell Brothers Inc., 303 U.S. 1777, 185 (1938).
    \4\ Leloup v. Port of Mobile, 127 U.S. 640, 648 (1888).
    \5\ Sanford v. Poe, 69 F. 546 (5th 1895), aff'd sub nom. Adams 
Express Co. v. Ohio State Auditor, 165 U.S. 194, 220 (1897).
    \6\ 303 U.S. 350, 256-258 (1938).
    \7\ 329 U.S. 249, 256 (1946).
    \8\ 430 U.S. 274, 285 (1977).
    \9\ 504 U.S. 298, 310 (1992).
    \10\ 386 U.S. 753 (1967).
---------------------------------------------------------------------------
    In Quill, the Court reaffirmed the validity of Bellas Hess 
in another case involving mail-order sales, extolling that 
case's value as a ``clear rule.'' Despite recognizing a certain 
artificiality, the Court noted that the rule at least ``firmly 
establishes the boundaries of legitimate state authority * * * 
and reduces litigation concerning these taxes.'' \11\ In 
addition, the Court emphasized that such a ``bright-line'' rule 
with respect to sales and use taxes encouraged ``settled 
expectations'' that fostered ``investment by businesses and 
individuals,'' noting that ``it is not unlikely that the mail-
order industry's growth over the last quarter century is due in 
part to the bright-line exemption from state taxation created 
in Bellas Hess.'' \12\
---------------------------------------------------------------------------
    \11\ Writing for the Court, Justice Stevens noted, ``This benefit 
is important, for as we have so frequently noted, our law in this area 
is something of a `quagmire' and the `application of constitutional 
principles to specific state statutes leaves much room for controversy 
and confusion and little in the way of precise guides to the States in 
the excise of their indispensable power of taxation' Northwestern State 
Cement Co. v. Minnesota, 358 (U.S. 450, 457-458 (1969).'' Quill, 504 
U.S. at 316-317.
    \12\ 504 U.S. at 316.
---------------------------------------------------------------------------
    The development and rise of telecommunications and 
electronic commerce brings with it a considerably elevated 
level of complexity with respect to the effect on interstate 
commerce of taxation by states. As noted by Professor 
Hellerstein, issues peculiar to the taxation of electronic 
commerce include:
        --the potential for competitive inequalities in 
        taxation of the sales of tangible personal property and 
        non-taxation of sales of services or intangibles;
        --the question of just what constitutes a taxable 
        transaction under state laws
        --where the sale of services in electronic commerce 
        takes place.\13\
---------------------------------------------------------------------------
    \13\ Walter Hellerstein, Telecommunications and Electronic 
Commerce: Overview and Appraisal, State Tax Notes 519 at 523 (1997).
---------------------------------------------------------------------------
    The potential exists for the Internet and interactive 
computer service to effect a wide variety of commercial sales 
and activities, including: computer software, video on demand, 
cable television, music albums, books, newspapers, magazines, 
information databases, education and job training, banking, 
electronic bill payment, stock-trading, and direct marketing. 
But as the Internet realizes its commercial potential, 
inevitably state taxation is there to meet it. Approximately 
forty states imposea sales tax on the transmission component of 
electronic commerce. Some one-half of the states impose a sales tax on 
specific categories of online content, such as electronic transmission 
of canned software or cable television. About a quarter of the states 
impose a broader based sales tax on numerous categories of online 
content such as electronic information or computer services. Generally, 
this taxation was not specifically designed for electronic commerce, 
but rather attached as the result of a hodgepodge of existing laws 
intended to reach other types of activities including sales, 
telecommunications, cable television, information services, and data 
processing.
    The tension between this emergent technology and the 
existing subfederal tax structure raises a dual concern. On the 
one hand, technology may render state taxation obsolete or 
unadministrable. On the other hand, the latter may prevent the 
former from realizing its potential. Causing states concern 
generally, as they confront this new technology, is an 
evaporating tax base in a time of increased local 
responsibility. Because, under current constitutional doctrine, 
states cannot require remote vendors to collect use tax on the 
sale of goods and services over the Internet to local 
customers, the growth of the Internet may be viewed by some 
with apprehension as the situs of sales drifts inexorably into 
cyberspace.
    The Committee feels that this is the appropriate time, 
before state taxation and the Internet become confounded, to 
pause and examine the welter of issues raised by electronic 
commerce and to create a coordinated and rational subfederal 
tax structure that will encourage the kind of ``settled 
expectations'' that the Supreme Court found useful in Quill. 
For this proposition, the Committee finds support in the 
Clinton Administration's Framework for Global Electronic 
Commerce.\14\ That document notes the Administration's concern 
``about possible moves by state and local tax authorities to 
target electronic commerce and Internet access'' \15\ and goes 
on to warn that ``uncertainties associated with such taxes and 
the inconsistencies among them could stifle the development of 
Internet commerce.'' \16\ The document recommends that 
``[b]efore any further action is taken, states and local 
governments should cooperate to develop a uniform, simple 
approach to the taxation of electronic commerce, based on 
existing principles of taxation where feasible.'' \17\
---------------------------------------------------------------------------
    \14\  See Interagency Working Group on Electronic Commerce, supra 
note 1.
    \15\ Id. at 8.
    \16\ Id.
    \17\ Id.
---------------------------------------------------------------------------

                                Hearing

    The Committee's Subcommittee on Commercial and 
Administrative Law held a hearing on a related bill, H.R. 1054, 
the ``Internet Tax Freedom Act,'' on Thursday, July 17, 1997. 
Testimony was received from the following 10 witnesses: Stanley 
R. Arnold, Commissioner of the New Hampshire Department of 
Revenue Administration, and President of the Federation of Tax 
Administrators; the Honorable Christopher Cox, a Representative 
in Congress from the State of California; Howard P. Foley, 
President of the Massachusetts High Technology Council; 
Professor Walter Hellerstein of the University of Georgia 
School of Law; Robert Holleyman, President of the Business 
Software Alliance; Kendall L. Houghton, General Counsel of the 
Committee on State Taxation; Andrea L. Ireland, Associate 
General Counsel of Netscape Communications Corporation; Brian 
O'Neill, Council Member of the City of Philadelphia, 
Pennsylvania and First Vice President of the National League of 
Cities; Jack Valenti, President and CEO of the Motion Picture 
Association of America; and the Honorable Ron Wyden, a Senator 
in Congress from the State of Oregon.

                        Committee Consideration

    On June 17, 1998, the Committee met in open session and 
ordered reported the bill, H.R. 3529, with an amendment in the 
nature of a substitute, by voice vote, a quorum being present.

                         Vote of the Committee

    There was one amendment offered during full Committee 
consideration of H.R. 3529. Mr. Goodlatte offered an amendment, 
which was adopted by voice vote, to remove the District of 
Columbia and the home-rule cities of Colorado from the section 
of the bill providing exceptions to the moratorium on Internet 
access taxes.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 3529, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 23, 1998.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate and mandates statement for 
H.R. 3529, the Internet Tax Freedom Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark Hadley 
(for federal costs) and Pepper Santalucia (for the state and 
local impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosures.

H.R. 3529--Internet Tax Freedom Act of 1998

    Summary: H.R. 3529 would impose a three-year moratorium on 
certain state and local taxation of online services and 
electronic commerce. In addition, the bill would establish an 
Advisory Commission on Electronic Commerce to examine issues 
related to the taxation of electronic commerce. CBO estimates 
that enacting H.R. 3529 would result in new discretionary 
spending of $1 million to $2 million over the 1999-2003 period, 
assuming appropriation of the necessary amounts. H.R. 3529 
could affect direct spending and receipts, so pay-as-you-go 
procedures would apply, but CBO estimates that any such effects 
would be negligible. This bill would impose no new private-
sector mandates as defined by the Unfunded Mandates Reform Act 
(UMRA).
    Estimated cost to the Federal Government: H.R. 3529 would 
establish an Advisory Commission on Electronic Commerce to 
examine issues related to the taxation of electronic commerce. 
The commission would exist for up to three years and would 
consist of representatives of federal, state, and local 
governments, citizens, and business interests. The bill would 
authorize the commission to have reasonable access to 
information, resources, and space to conduct meetings from the 
Departments of Commerce, Justice, and the Treasury. CBO 
estimates the commission's expenses for the next three fiscal 
years would be less than $500,000 annually because no staff or 
contractual support would be authorized by the bill. CBO 
expects that nonfederal participants would bear a significant 
portion of the costs of the commission. The costs of this 
legislation fall within budget function 370 (commerce and 
housing credit).
    Pay-as-you-go-considerations: H.R. 3849 would authorize the 
commission to accept and use gifts and donations to assist in 
its work. Donations of money are recorded in the budget as 
governmental receipts (revenues) and the use of any such 
amounts under the bill would be direct spending. Because the 
bill could affect receipts and direct spending, pay-as-you-go 
procedures would apply. CBO expects that any such effects would 
be negligible.
    Estimated impact on State, local, and tribal governments: 
See separate CBO mandates statement.
    Estimated impact on the private sector: This bill would 
impose no new private-sector mandates as defined by UMRA.
    Previous CBO estimates: CBO has completed cost estimates 
for three other versions of the Internet Tax Freedom Act. On 
June 19, 1998, CBO transmitted an estimate of H.R. 3849, as 
reported by the House Committee on the Judiciary on June 19, 
1998. On May 22, 1998, CBO transmitted an estimate of the 
federal costs of H.R. 3849, as ordered reported by the House 
Committee on Commerce on May 14, 1998. And on January 21, 1998, 
CBO transmitted an estimate of the federal costs of S. 442, as 
ordered reported by the Senate Committee on Commerce, Science, 
and Transportation on November 4, 1997.
    Differences between those estimates and the estimate H.R. 
3529 reflect differences in the bills. The Commerce Committee's 
version of H.R. 3849 would require the Department of Commerce 
to study barriers to electronic commerce in foreign markets and 
establish an Advisory Commission on Electronic Commerce, but 
with fewer responsibilities than under H.R. 3529. The Judiciary 
Committee's version of H.R. 3849 also would require the 
Department of Commerce to study barriers to electronic commerce 
in foreign markets, but would not establish an advisory 
commission.
    Estimate prepared by: Mark Hadley.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

             congressional budget office mandates statement

H.R. 3529--Internet Tax Freedom Act of 1998

    Summary: H.R. 3529 contains no private-sector mandates, but 
by imposing a moratorium on certain types of state and local 
taxes, the bill would impose an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act of 1995 (UMRA). For 
reasons described below, CBO cannot estimate whether the direct 
costs of this mandate would exceed the statutory threshold 
established in UMRA ($50 million in 1996, indexed annually for 
inflation).
    Intergovernmental Mandates Contained in the Bill: H.R. 3529 
would impose a three-year moratorium on certain state and local 
taxes, including taxes on Internet access and online services. 
This moratorium would constitute an intergovernmental mandate 
as defined in UMRA. The bill would allow eight states that have 
already imposed a tax on these services to reinstate their 
taxes but only if they enact, within a year's time, a new law 
expressly imposing the taxes.

    Estimated Direct Costs of Mandates to State, Local, and Tribal 
                              Governments

Is the Statutory Threshold Exceeded?

    Because it is unclear what should be counted as the direct 
costs of the mandate, CBO cannot determine whether the 
threshold for intergovernmental mandates would be exceeded in 
any of the three years of the moratorium.

Total Direct Costs of Mandates

    Twelve states, including the District of Columbia, have 
sought to impose their sales and use taxes on Internet access 
and online services. (These twelve include Illinois, which 
taxes these services in only very limited circumstances.) 
Twelve home-rule cities in Colorado also impose such taxes. 
H.R. 3529 would exempt from the moratorium the taxes of eight 
of these states if they enact, within a year's time, a new law 
expressly imposing the taxes. Any of the grandfathered states 
that enact the necessary law could collect taxes covering the 
entire three-year period, including taxes accrued between the 
date of enactment of this bill and the date it enacted its law. 
Illinois, South Carolina, Texas, the District of Columbia, and 
the twelve Colorado cities would not be covered by the 
grandfather clause and would therefore be temporarily 
prohibited from imposing their taxes.
    UMRA defines the direct costs of an intergovernmental 
mandate as ``the aggregate estimated amounts that all state, 
local, and tribal governments * * * would be prohibited from 
raising in revenues in order to comply with the federal 
intergovernmental mandate.'' Because of ambiguities in UMRA, 
CBO is unsure how to measure the direct costs of the mandate in 
this bill. First of all, it is unclear whether giving certain 
states the opportunity to opt out of the moratorium effectively 
eliminates some of the cost of the mandate. Second, it is 
unclear whether taxes assessed but not collected should be 
counted toward the direct costs of the mandate.
    The direct costs of the mandate could be limited to the 
forgone revenues from the states and cities not grandfathered 
plus the administrative costs to enact new laws in the eight 
states grandfathered by the bill. However, any of the eight 
grandfathered states that failed to enact the necessary law 
within a year would incur additional costs because they would 
be precluded from imposing their taxes on these services for 
all three years. CBO is unsure whether those potential forgone 
revenues of the grandfathered states should also be included in 
the direct costs of the mandate, because we are uncertain now 
to measure the costs of a mandate that states can avoid by 
enacting a law. On the one hand, it could be argued that the 
eight states would be able to choose whether or not to abide by 
the moratorium--and that the fiscal consequences of that choice 
would be the responsibility of the states, not of the Federal 
government. On the other hand, in the absence of this bill, a 
state's failure to act would have no fiscal consequences. But 
under this bill, a state's failure to act would result in a 
restriction of its sovereign power to tax. It would be argued, 
therefore, that any loss of revenue should count as the costs 
of a mandate under UMRA.
    In addition, CBO cannot make a threshold determination 
because we are unsure whether the direct costs of the tax 
moratorium should be only actual collections forgone or whether 
tax liabilities that are being litigated should also be 
included. Information from states and industry sources 
indicates that while total collections and unpaid assessments 
for all twelve states in 1997 were close to $50 million, actual 
collections alone were significantly lower than that amount. 
The difference occurs because, in some of the states, companies 
are challenging the applicability of the tax to the service 
they provide or the state's finding thatthey are obliged to 
collect the tax on the state's behalf. In those cases, the companies 
are not collecting the tax, but they are accruing a potential tax 
liability to the states. CBO is unsure whether a tax that is being 
assessed but is not being paid should be counted toward the direct 
costs of a mandate when the applicability or constitutionality of the 
tax is being litigated.
    The potential mandate cost would grow over the three years 
that the moratorium would be in effect, because of the 
projected growth of the market for Internet access and online 
services. Some industry analysts have predicted that the market 
will more than double in the next three years. Growth of this 
magnitude would push the twelve states' collections plus 
potential tax liability over $50 million, but whether actual 
collections would reach that threshold would depend on the 
outcome of litigation. If the states prevail in court, the 
mandate cost, if all twelve states were counted, would exceed 
the threshold. It is even possible that if the states prevail 
in court, the mandate cost for the cities and the four states 
not grandfathered would exceed the threshold. Because of 
Texas's large population and relatively high sales tax rate, we 
estimate that it alone generates half of the tax revenues 
collected by the twelve states.
    It is possible that, in the absence of this legislation, 
some state and local governments would enact new taxes or 
decide to apply existing taxes to Internet access or online 
services during the next three years. It is also possible that 
some governments would repeal existing taxes or preclude their 
application to these services. Such changes would affect the 
ultimate cost of the mandate but are extremely difficult to 
predict. Therefore, for the purposes of estimating the direct 
costs of the mandate in this bill, CBO considered only the 
revenues from taxes that are currently in place.
    The moratorium in H.R. 3529 would also apply to ``bit 
taxes,'' which are taxes based in some way on the volume of 
digital information being transmitted. According to both state 
officials and industry representatives, no state or locality 
has adopted this type of tax. In addition, the moratorium would 
apply to ``multiple or discriminatory taxes on electronic 
commerce.' CBO could not identify any current state or local 
taxes that would clearly meet the definitions provided in the 
bill for these two types of taxes.
    Appropriaton or other Federal financial assistance provided 
in bill to cover mandate cost: None.
    Other impacts on State, local, and tribal governments: H.R. 
3529 would establish a process that could lead to a fundamental 
reform of state and local sales and use taxes as they apply to 
interstate commerce. The bill would establish an Advisory 
Commission on Electronic Commerce made up of federal officials, 
representatives of state and local governments, and 
representatives of taxpayers and businesses. The commission's 
duties would include writing proposed legislation, which could 
give states expanded authority to require the collection of 
sales and use taxes on certain interstate sales if they 
simplify their tax codes. The proposed legislation could also 
provide that, after four years, states that had not yet 
simplified their tax code would lose any authority to tax 
certain interstate sales until they did so. This legislation 
would be submitted to the President, who would then have the 
choice of submitting some or all of it to the Congress. Any 
proposals submitted to the Congress would receive expedited 
consideration.
    Previous CBO estimates: CBO has completed intergovernmental 
mandates statements for five other versions of the Internet Tax 
Freedom Act. The first four versions reviewed would impose a 
moratorium on some categories of state and local taxes. In each 
case, we determined that the moratorium would constitute an 
intergovernmental mandate as defined in UMRA. The direct costs 
that we estimated for the mandate in each bill differed 
depending on the scope and duration of the moratorium. For two 
versions, we determined that the costs of complying with the 
mandate would exceed the threshold established in UMRA. For the 
remaining two versions, we could not determine whether the 
threshold was exceeded. The version reported by the House 
Judiciary Committee on June 19, 1998, contained an 
intergovernmental mandate but did not include a moratorium on 
state and local taxes.

----------------------------------------------------------------------------------------------------------------
               Date                    Bill number               Version              Threshold determination
----------------------------------------------------------------------------------------------------------------
June 18, 1997.....................  S. 442...........  As introduced.............  Threshold exceeded.
January 21, 1998..................  S. 442...........  As ordered reported by      Cannot determine.
                                                        full committee.
March 25, 1998....................  H.R. 1054........  As approved by              Threshold exceeded.
                                                        subcommittee.
May 22, 1998......................  H.R. 3849........  As ordered reported by      Cannot determine.
                                                        House Commerce Committee.
June 19, 1998.....................  H.R. 3849........  As reported by House        Below threshold.
                                                        Judiciary Committee.
----------------------------------------------------------------------------------------------------------------

    Estimate prepared by: Pepper Santalucia.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to Rule XI, clause 2(l)(4) of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, section 8, clause 3 of the 
Constitution.

                      Section-by-Section Analysis

Section 1. Short title

    Section 1 provides that the bill may be cited as the 
``Internet Tax Freedom Act of 1998.''

Section 2. Moratorium on certain taxes

    Section 2(a) amends title 4, United States Code, by adding 
a new Chapter 6 (Sections 151-155) dealing with a moratorium on 
certain state taxes.

Section 151. Moratorium

    Subsection (a) provides for a three-year moratorium from 
the date of enactment during which states (including political 
subdivisions thereof ) would be prohibited from imposing, 
assessing, collecting or attempting to collect taxes on 
Internet access; bit taxes; or multiple or discriminatory taxes 
on electronic commerce.
    Subsection (b) (1) of Section 151 of title 4, United States 
Code, as amended by H.R. 3529, provides that the moratorium 
that applies to taxes on Internet access does not include 
certain taxes specifically iterated in Subparagraphs (A) 
through (H). The taxes enumerated in these subparagraphs are 
those which states have identified as currently being assessed 
upon Internet access.
    Subsection (b) (2) provides in subparagraph (A) that a 
state may continue to impose a tax enumerated in Subsection (b) 
(1) only if it enacts during a one-year period after the date 
of enactment a law to expressly reaffirm that such tax is 
imposed on Internet access. Subparagraph (B) provides that a 
state or city satisfying the requirement specified in 
subparagraph (A) shall be deemed to have satisfied such 
requirement immediately after the date of enactment of this 
chapter.
    Subsection (c) provides that subsection (a) does not apply 
with respect to the provision of Internet access that is 
offered for sale as part of a package of services that includes 
services other than Internet access, unless the service 
provider separately states that portion of the billing that 
applies to such services on the user's bill.

Section 152. Advisory Commission on Electronic Commerce

    Subsection (a) establishes a temporary commission known as 
the Advisory Commission on Electronic Commerce composed of 31 
members appointed in accordance with subsection (b). A 
chairperson is to be selected by the members of the Commission 
from among individuals specified in that subsection. The 
Commission is to conduct its business in accordance with the 
provisions of this chapter.
    Subsection (b) provides in subparagraph (1) that the 
members of the Commission shall serve for the life of the 
Commission and shall be selected as follows: the Attorney 
General, the Secretary of Commerce and the Secretary of the 
Treasury of the United States, or their representatives; 
fourteen representatives from state, local, and county 
governments, comprised of two representatives each from the 
National Governors' Association, the National Conference of 
State Legislatures, the Council of State Governments, the 
National Association of Counties, the National League of 
Cities, and the United States Conference of Mayors; and one 
representative each from the International City/County Managers 
Association and the American Legislative Exchange Council; 
fourteen representatives of taxpayers and business, comprised 
of seven persons appointed jointly by the Speaker of the House 
of Representatives and the majority leader of the Senate, of 
whom threeshall be employed by or affiliated with persons 
engaged in providing Internet access or communications, or transactions 
that use the Internet, three shall be employed by or affiliated with 
persons engaged in electronic commerce (including at least one employed 
by or affiliated with a person also engaged in mail order commerce), 
and one shall be an individual employed by or affiliated with a person 
engaged in software publishing; and seven persons appointed jointly by 
the minority leader of the House of Representatives and the minority 
leader of the Senate, of whom three shall be employed by or affiliated 
with persons engaged in providing Internet access or communications or 
transactions that use the Internet, three shall be individuals employed 
by or affiliated with persons engaged in electronic commerce (including 
at least one person employed by or affiliated with a person also 
engaged in mail order commerce) and one individual employed by or 
affiliated with a person engaged in software publishing.
    Subparagraph (b)(2) provides that appointments to the 
Commission shall be made not later than 45 days after the date 
of enactment of the chapter. The chairperson is to be selected 
not later than 60 days after the date of enactment of the 
chapter.
    Subsection (c) provides that the Commission may accept, 
use, and dispose of gifts or grants of services or property, 
both real and personal, provided to aid and facilitate the work 
of the Commission. Gifts or grants not used at the Commission's 
expiration shall be returned.
    Subsection (d) provides that the Commission shall have 
reasonable access to materials, resources, data, and other 
information from the Departments of Justice, Commerce, and the 
Treasury and shall also have reasonable access to the 
facilities of these departments for the purpose of conducting 
meetings.
    Subsection (e) provides that the Commission shall terminate 
when the last of the committees of jurisdiction of the Congress 
referred to in section 154 of title 4, United States Code as 
amended by H.R. 3529 shall conclude consideration of the 
legislation proposed under section 153; or three years after 
the date of enactment, whichever occurs first.
    Subsection (f) provides that: sixteen members of the 
Commission shall constitute a quorum for conducting business; 
meetings must be noticed at least fourteen days in advance and 
shall be open to the public; and that Commission may adopt 
other rules as needed.
    Subsection (g) provides that the duties of the Commission 
are to be carried out in consultation with the National Tax 
Association Communications and Electronic Commerce Tax Project 
(as well as other interested parties) and may include: (1) 
conducting a thorough study of state and local taxation of 
transactions using the Internet and Internet access; (2) 
examining the collection and administration of consumption 
taxes on remote commerce in other countries and the United 
States, and the impact of such collection on the global 
economy; (3) examining the advantages and disadvantages of 
authorizing states and local governments to require remote 
sellers to collect and remit sales and use taxes; (4) proposing 
a uniform system of definitions of remote and electronic 
commerce that may be subject to sales and use tax within each 
state; (5) examining model state legislation relating to 
taxation of transactions using the Internet and Internet 
access, including uniform terminology, definitions of the 
transactions, services, and other activities that may be 
subject to state and local taxation, procedural structures and 
mechanisms applicable to such taxation, and a mechanism for the 
resolution of disputes between states regarding matters 
involving multiple taxation; (6) examining a simplified system 
for administration and collection of sales and use taxes for 
remote commerce, that incorporates all manner of making 
consumer payments, that would provide for a single statewide 
sales or use tax rate (which rate may be zero) and would 
establish a method of distributing to political subdivisions 
within each state their proportionate share of such taxes, 
including examination of collection of sales or use taxes by 
small volume remote sellers onlyin the state of origin; (7) 
examining ways to simplify the interstate administration of sales and 
use taxes on remote commerce, including a review of the need for a 
single or uniform tax registration, single or uniform tax returns, 
simplified remittance requirements, and simplified administrative 
procedures; (8) examining the need for an independent third party 
collection system that would utilize the Internet to further simplify 
sales and use tax administration and collection; (9) reviewing the 
efforts of states to collect sales and use taxes owed on purchases from 
remote sellers, as well as reviewing the appropriateness of increased 
activities by states to collect sales and use taxes directly from 
customers of remote sellers; (10) examining the level of contacts 
sufficient to permit a state to impose a sales or use tax on remote 
commerce that would subject a remote seller to collection obligations 
imposed by the state, including--(A) the definition of a level of 
contacts below which a state may not impose collection obligations on a 
remote seller, (B) whether such obligations are applied in a 
nondiscriminatory manner with respect to nonremote transactions, and 
(C) the impact of such obligations on small business sellers; (11) 
examining making permanent the temporary moratorium provided for in 
section 151 with respect to Internet access as well as such other taxes 
that the Commission deems appropriate; (12) examining ways to simplify 
state and local taxes imposed on the provision of telecommunications 
services; (13) requiring the Commission to hold a public hearing to 
provide an opportunity for representatives of the general public, 
taxpayer and consumer groups, State and local government officials, and 
tax-supported institutions to testify; and (14) examining other issues 
that the Commission determines to be relevant.
    Section (h) provides that the Federal Advisory Committee 
Act shall not apply to the Commission.

Section 153. Legislative recommendations

    Subsection (a) provides that not later than two years after 
the date of enactment that the Commission shall transmit to the 
President and the Congress proposed legislation that reflects 
it findings.
    Section (b) provides that the contents of the proposed 
legislation shall have been agreed to by at least 19 members of 
the Commission and may: (1) define with particularity the level 
of contacts between state and remote seller that the Commission 
considers sufficient to permit a state to impose collection 
obligations on the remote seller and the level of contacts 
which is not sufficient to impose collection obligations on 
remote sellers; (2) provide that if and only if a state has 
adopted a single sales and use tax rate for remote commerce and 
established a method of distributing to its political 
subdivisions their proportionate share of such taxes, and 
adopted simplified procedures for the administration of its 
sales and use taxes, including uniform registration, tax 
returns, remittance requirements, and filing procedures, then 
such state should be authorized to impose on remote sellers a 
duty to collect sales or use tax on remote commerce; (3) 
provide that, effective upon the expiration of a four-year 
period beginning on the date of enactment, a state that does 
not have in effect a single sales and use tax rate and 
simplified administrative procedures shall be deemed to have in 
effect a sales and use tax rate on remote commerce equal to 
zero, until such time as such state does adopt a single sales 
and use tax rate and simplified administrative procedures; (4) 
include uniform definitions of categories of property, goods, 
services, or information subject to, or exempt from, sales and 
use taxes; (5) make permanent the temporary moratorium 
described in section 151 with respect to Internet access, as 
well as such other taxes (including those described in section 
151) that the Commission deems appropriate; (6) provide a 
mechanism for the resolution of disputes between states 
regarding matters involving multiple taxation; and (7) include 
such other provisions that the Commission considers necessary.
    Subsection (c) provides that no later than 45 days after 
the receipt of the Commission'slegislative proposals, the 
President shall review such proposals and submit to the Congress such 
policy recommendations as the President deems necessary or expedient.

Section 154. Expedited consideration of legislative recommendations

    Subsection (a) provides that no later than 90 legislative 
days after the transmission to the Congress by the Commission 
of its proposed legislation, it shall be considered by the 
respective Congressional committees of jurisdiction and, if 
reported, shall be referred to the proper calendar on the floor 
of each body for final action.
    Subsection (b) provides that the 90 day period shall be 
computed by excluding: (1) days on which either House is not 
session because of an adjournment of more than three days to a 
day certain or an adjournment of the Congress sine die; and (2) 
Saturdays or Sundays, not excluded under paragraph (1), when 
either House is not in session.

Section 155. Definitions

    This section contains definitions for purposes of this 
chapter, including:
          (1) bit tax--which means any tax on electronic 
        commerce expressly imposed on or measured by the volume 
        of digital information transmitted electronically, or 
        the volume of digital information per unit of time 
        transmitted electronically, but does not include taxes 
        imposed on the provision of telecommunications 
        services;
          (2) computer server--which means a computer that 
        functions as a centralized provider of information and 
        services to multiple recipients;
          (3) discriminatory tax--which means; (A) any tax 
        imposed by a state or political subdivision thereof on 
        electronic commerce--(i) is not generally imposed and 
        legally collectible by such state or political 
        subdivision thereof on transactions involving similar 
        property, goods, services, or information accomplished 
        through other means; (ii) is not generally imposed and 
        legally collectible at the same rate by such State or 
        such political subdivision on transactions involving 
        similar property, goods, services, or information 
        accomplished through other means, unless the rate is 
        lower as part of a phase-out of the tax over not more 
        than a five-year period; (iii) imposes an obligation to 
        collect or pay the tax on a different person or entity 
        than in the case of transactions involving similar 
        property, goods, services, or information accomplished 
        through other means; or (iv) establishes a 
        classification of Internet access provider for purposes 
        of establishing a higher tax rate to be imposed on such 
        providers than the tax rate generally applied to 
        providers of similar information services delivered 
        through other means; or (B) any tax imposed by a State 
        or political subdivision thereof, if--(i) the mere use 
        of a computer server by a remote seller to create or 
        maintain a site on the Internet is considered a factor 
        in determining a remote seller's tax collection 
        obligation; or (ii) the display of a remote seller's 
        information or content on the computer server of a 
        provider of Internet access, or the processing of 
        orders through the computer server of a provider of 
        Internet access, is considered a factor in determining 
        whether the provider of Internet access is deemed to be 
        the agent of the remote seller for tax collection 
        purposes.
          (4) electronic commerce--which means any transaction 
        conducted on the Internet or through Internet access, 
        comprising the sale, lease, license, offer, or delivery 
        of property, goods, services, or information, whether 
        or not for consideration, and includes the provision of 
        Internet access.
          (5) information services--which has the meaning given 
        such term in section 3(20) of the Communications Act of 
        1934, as amended.
          (6) Internet--which means the combination of computer 
        facilities and electromagnetic transmission media, and 
        related equipment and software, comprising the 
        interconnected world-wide network of computer networks 
        that employ the Transmission Control Protocol/Internet 
        Protocol, orany predecessor or successor protocol, to 
transmit information.
          (7) Internet access--which means a service that 
        enables users to access content, information, 
        electronic mail, or other services offered over the 
        Internet, and that may also include access to 
        proprietary content, information, and other services as 
        part of a package of services offered to a consumer. 
        This term does not include telecommunications services.
          (8) multiple tax--which means: (A) any tax that is 
        imposed by one state or political subdivision thereof 
        on the same or essentially the same electronic commerce 
        that is also subject to another tax imposed by another 
        state or political subdivision thereof (whether or not 
        at the same rate or on the same basis), without a 
        credit (for example, a resale exemption certificate) 
        for taxes paid in other jurisdictions. The term does 
        not include a sales or use tax imposed by a state and 
        one or more political subdivisions thereof pursuant to 
        a law referred to in section 151(b)(1) on the same 
        electronic commerce or a tax on persons engaged in 
        electronic commerce which also may have been subject to 
        a sales or use tax thereon. For purposes of this 
        definition, ``sales or use tax'' means a tax that is 
        imposed on or incident to the sale, purchase, storage, 
        consumption, distribution, or other use of tangible 
        personal property or services as may be defined by laws 
        imposing such tax and which is measured by the amount 
        of the sales price or other charge for such property or 
        service; or (B) any tax on Internet access if the state 
        or political subdivision thereof classifies such 
        Internet access as telecommunications or communications 
        services under state law and such state or political 
        subdivision thereof has also imposed a tax on the 
        purchase or use of the underlying telecommunications 
        services that are used to provide such Internet access 
        without allowing a credit for other taxes paid, a sale 
        for resale exemption, or other mechanism for 
        eliminating duplicate taxation.
          (9) remote commerce--which means the sale, lease, 
        license, offer, or delivery of property, goods, 
        services, or information by a seller in one state to a 
        purchaser in another state.
          (10) remote seller--which means a person who sells, 
        leases, licenses, offer, or delivers property, goods, 
        services, or information from one state to a purchaser 
        in another state.
          (11) State--which means any of the several states, 
        the District of Columbia, or any territory or 
        possession of the United States.
          (12) tax--which means any obligation to pay or to 
        collect and remit any levy, fee, or charge imposed by 
        any governmental entity solely for the purpose of 
        generating revenues for governmental purposes and not: 
        (A) in return for a specific privilege, service, or 
        benefit conferred on a person or entity; (B) to support 
        public regulatory commissions; or (C) to support 
        special purpose telecommunications service programs. 
        ``Tax'' does not include any franchise fees or similar 
        fees imposed by a state or local franchising authority, 
        referred to in section 622 or 653 or the Communications 
        Act of 1934, as amended.
          (13) telecommunications services--which has the 
        meaning given such term in section 3(46) of the 
        Communications Act of 1934, as amended.
    Subsection 2(b) of H.R. 3529 contains a conforming 
amendment to title 4, United States Code, amending the table of 
chapters reflecting the addition of a new chapter 6 entitled 
``Moratorium on Certain Taxes''.

Section 3. No expansion of tax authority

    This section provides that nothing in the Act shall be 
construed to expand the duty of any person to collect or pay 
taxes beyond that which existed immediately before the date of 
enactment.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (new matter is printed 
in italic and existing law in which no change is proposed is 
shown in roman):

                      TITLE 4, UNITED STATES CODE

Chap.                                                               Sec.
      The Flag.........................................................1
     * * * * * * *
      Moratorium on Certain Taxes....................................151
     * * * * * * *

                 CHAPTER 6--MORATORIUM ON CERTAIN TAXES

Sec.
151. Moratorium.
152. Advisory commission on electronic commerce.
153. Legislative recommendations.
154. Expedited consideration of legislative recommendations
155. Definitions.

Sec. 151. Moratorium

  (a) Moratorium.--For a period of 3 years following the date 
of the enactment of this chapter, neither any State, nor any 
political subdivision thereof, shall impose, assess, collect, 
or attempt to collect--
          (1) taxes on Internet access;
          (2) bit taxes; or
          (3) multiple or discriminatory taxes on electronic 
        commerce.
  (b) Exception to Moratorium.--(1) Subject to paragraph (2), 
the moratorium in subsection (a)(1) shall not apply to the 
following taxes (as applicable), as in effect on the date of 
the enactment of this chapter, on Internet access:
          (A) State of connecticut.--Section 12-407(2)(i)(A) of 
        the General Statutes of Connecticut.
          (B) State of wisconsin.--Section 77.52(2)(a)5 of the 
        Wisconsin Statutes (1995-96).
          (C) State of iowa.--Section 422.43(1) of the Code of 
        Iowa (1997).
          (D) State of north dakota.--North Dakota Century Code 
        57-39.2 and 57-34.
          (E) State of south dakota.--South Dakota Codified Law 
        Annotated 10-45-5.
          (F) State of new mexico.--New Mexico Statutes 
        Annotated 7-9-3.
          (G) State of tennessee.--Tennessee Code Annotated 67-
        6-221, 67-6-102(23)(iii), and 67-6-702(g).
          (H) State of ohio.--Chapter 5739 of the Ohio Revised 
        Code.
  (2)(A) Paragraph (1) shall apply with respect to a tax 
referred to in such paragraph only if the referenced State 
enacts, during the 1-year period beginning on the date of the 
enactment of this chapter, a law to expressly affirm that such 
tax is imposed on Internet access.
  (B) A State that satisfies the requirement specified in 
subparagraph (A) shall be deemed to have satisfied such 
requirement immediately after the enactment of this chapter, 
except that such State may not impute penalties or interest on 
any tax accrued during the period beginning on the date of the 
enactment of this Act and ending on the date such State 
satisfies such requirement.
  (c) Application of Moratorium.--Subsection (a) shall not 
apply with respect to the provision of Internet access that is 
offered for sale as part of a package of services that includes 
services other than Internet access, unless the service 
provider separately states that portion of the billing that 
applies to such services on the user's bill.

Sec. 152. Advisory Commission on Electronic Commerce

  (a) Establishment of Commission.--There is established a 
temporary commission to be known as the Advisory Commission on 
Electronic Commerce (in this chapter referred to as the 
``Commission''). The Commission shall--
          (1) be composed of 31 members appointed in accordance 
        with subsection (b), including the chairperson who 
        shall be selected by the members of the Commission from 
        among individuals specified in subsection (b); and
          (2) conduct its business in accordance with the 
        provisions of this chapter.
  (b) Membership.--
          (1) In general.--The Commissioners shall serve for 
        the life of the Commission. The membership of the 
        Commission shall be as follows:
                  (A) Three representatives from the Federal 
                Government comprised of the Attorney General, 
                the Secretary of Commerce, and the Secretary of 
                the Treasury, or their respective 
                representatives.
                  (B) Fourteen representatives from State, 
                local, and county governments comprised of 2 
                representatives each from the National 
                Governors' Association, the National Conference 
                of State Legislatures, the Council of State 
                Governments, the National Association of 
                Counties, the National League of Cities, and 
                the United States Conferences of Mayors; and 1 
                representative each from the International 
                City/County Managers Association and the 
                American Legislative Exchange Council.
                  (C) Fourteen representatives of taxpayers and 
                business--
                          (i) 7 of whom shall be appointed 
                        jointly by the Speaker of the House of 
                        Representatives and the majority leader 
                        of the Senate, of whom 3 shall be 
                        individuals employed by or affiliated 
                        with persons engaged in providing 
                        Internet access or communications or 
                        transactions that use the Internet, 3 
                        shall be individuals employed by or 
                        affiliated with persons engaged in 
                        electronic commerce (including at least 
                        1 who is employed by or affiliated with 
                        a person also engaged in mail order 
                        commerce), and 1 shall be an individual 
                        employed by or affiliated with a person 
                        engaged in software publishing; and
                          (ii) 7 of whom shall be appointed 
                        jointly by the minority leader of the 
                        House of Representatives and the 
                        minority leader of the Senate, of whom 
                        3 shall be individuals employed by or 
                        affiliated with persons engaged in 
                        providing Internet access or 
                        communications or transactions that use 
                        the Internet, 3 shall be individuals 
                        employed by or affiliated with persons 
                        engaged in electronic commerce 
                        (including at least 1 who is employed 
                        by or affiliated with a person also 
                        engaged in mail order commerce), and 1 
                        shall be an individual employed by or 
                        affiliated with a person engaged in 
                        software publishing.
          (2) Appointments.--Appointments to the Commission 
        shall be made not later than 45 days after the date of 
        enactment of this chapter. The chairperson shall be 
        selected not later than 60 days after the date of the 
        enactment of this chapter.
  (c) Acceptance of Gifts and Grants.--The Commission may 
accept, use, and dispose of gifts or grants of services or 
property, both real and personal, for purposes of aiding or 
facilitating the work of the Commission. Gifts or grants not 
used at the expiration of the Commission shall be returned to 
the donor or grantor.
  (d) Other Resources.--The Commission shall have reasonable 
access to materials, resources, data, and other information 
from the Department of Justice, the Department of Commerce, and 
the Department of the Treasury. The Commission shall also have 
reasonable access to use the facilities of the Department of 
Justice, the Department of Commerce, and the Department of the 
Treasury for purposes of conducting meetings.
  (e) Sunset.--The existence of the Commission shall 
terminate--
          (1) when the last of the committees of jurisdiction 
        referred to in section 154 concludes consideration of 
        the legislation proposed under section 153; or
          (2) 3 years after the date of the enactment of this 
        chapter;
whichever occurs first.
  (f) Rules of the Commission.--
          (1) Sixteen members of the Commission shall 
        constitute a quorum for conducting the business of the 
        Commission.
          (2) Any meetings held by the Commission shall be duly 
        noticed at least 14 days in advance and shall be open 
        to the public.
          (3) The Commission may adopt other rules as needed.
  (g) Duties of the Commission.--The duties of the Commission, 
to be carried out in consultation with the National Tax 
Association Communications and Electronic Commerce Tax Project, 
and other interested persons, may include--
          (1) conducting a thorough study of State and local 
        taxation of transactions using the Internet and 
        Internet access;
          (2) examining the collection and administration of 
        consumption taxes on remote commerce in other countries 
        and the United States, and the impact of such 
        collection on the global economy;
          (3) examining the advantages and disadvantages of 
        authorizing States and local governments to require 
        remote sellers to collect and remit sales and use 
        taxes;
          (4) proposing a uniform system of definitions of 
        remote and electronic commerce that may be subject to 
        sales and use tax within each State;
          (5) examining model State legislation relating to 
        taxation of transactions using the Internet and 
        Internet access, including uniform terminology, 
        definitions of the transactions, services, and other 
        activities that may be subject to State and local 
        taxation, procedural structures and mechanisms 
        applicable to such taxation, and a mechanism for the 
        resolution of disputes between States regarding matters 
        involving multiple taxation;
          (6) examining a simplified system for administration 
        and collection of sales and use tax for remote 
        commerce, that incorporates all manner of making 
        consumer payments, that would provide for a single 
        statewide sales or use tax rate (which rate may be 
        zero), and would establish a method of distributing to 
        political subdivisions within each State their 
        proportionate share of such taxes, including an 
        examination of collection of sales or use tax by small 
        volume remote sellers only in the State of origin;
          (7) examining ways to simplify the interstate 
        administration of sales and use tax on remote commerce, 
        including a review of the need for a single or uniform 
        tax registration, single or uniform tax returns, 
        simplified remittance requirements, and simplified 
        administrative procedures;
          (8) examining the need for an independent third party 
        collection system that would utilize the Internet to 
        further simplify sales and use tax administration and 
        collection;
          (9) reviewing the efforts of States to collect sales 
        and use taxes owed on purchases from remote sellers, as 
        well as review the appropriateness of increased 
        activities by States to collect sales and use taxes 
        directly from customers of remote sellers;
          (10) examining the level of contacts sufficient to 
        permit a State to impose a sales or use tax on remote 
        commerce that would subject a remote seller to 
        collection obligations imposed by the State, 
        including--
                  (A) the definition of a level of contacts 
                below which a State may not impose collection 
                obligations on a remote seller;
                  (B) whether or not such obligations are 
                applied in a nondiscriminatory manner with 
                respect to nonremote transactions; and
                  (C) the impact of such obligation on small 
                business remote sellers;
          (11) examining making permanent the temporary 
        moratorium described in section 151 with respect to 
        Internet access as well as such other taxes that the 
        Commission deems appropriate;
          (12) examining ways to simplify State and local taxes 
        imposed on the provision of telecommunications 
        services;
          (13) requiring the Commission to hold a public 
        hearing to provide an opportunity for representatives 
        of the general public, taxpayer groups, consumer 
        groups, State and local government officials, and tax-
        supported institutions to testify; and
          (14) examining other issues that the Commission 
        determines to be relevant.
  (h) Federal Advisory Committee Act.--The Federal Advisory 
Committee Act shall not apply with respect to the Commission.

Sec. 153. Legislative recommendations

  (a) Transmission of Proposed Legislation.--Not later than 2 
years after the date of the enactment of this chapter, the 
Commission shall transmit to the President and the Congress 
proposed legislation reflecting any findings concerning the 
matters described in such section.
  (b) Contents of Proposed Legislation.--The proposed 
legislation submitted under subsection (a) by the Commission 
shall have been agreed to by at least 19 members of the 
Commission and may--
          (1) define with particularity the level of contacts 
        between a State and remote seller that the Commission 
        considers sufficient to permit a State to impose 
        collection obligations on the remote seller and the 
        level of contacts which is not sufficient to impose 
        collection obligations on remote sellers;
          (2) provide that if, and only if, a State has adopted 
        a single sales and use tax rate for remote commerce and 
        established a method of distributing to its political 
        subdivisions their proportionate share of such taxes, 
        and adopted simplified procedures for the 
        administration of its sales and use taxes, including 
        uniform registration, tax returns, remittance 
        requirements, and filing procedures, then such State 
        should be authorized to impose on remote sellers a duty 
        to collect sales or use tax on remote commerce;
          (3) provide that, effective upon the expiration of a 
        4-year period beginning on the date of the enactment of 
        such legislation, a State that does not have in effect 
        a single sales and use tax rate and simplified 
        administrative procedures shall be deemed to have in 
        effect a sales and use tax rate on remote commerce 
        equal to zero, until such time as such State does adopt 
        a single sales and use tax rate and simplified 
        administrative procedures;
          (4) include uniform definitions of categories of 
        property, goods, services, or information subject to, 
        or exempt from, sales and use taxes;
          (5) make permanent the temporary moratorium described 
        in section 151 with respect to Internet access, as well 
        as such other taxes (including those described in 
        section 151) that the Commission deems appropriate;
          (6) provide a mechanism for the resolution of 
        disputes between States regarding matters involving 
        multiple taxation; and
          (7) include other provisions that the Commission 
        deems necessary.
  (c) Recommendations of the President.--Not later than 45 days 
after the receipt of the Commission's legislative proposals, 
the President shall review such proposals and submit to the 
Congress such policy recommendations as the President deems 
necessary or expedient.

Sec. 154. Expedited consideration of legislative recommendations

  (a) Not later than 90 legislative days after the transmission 
to the Congress by the Commission of the proposed legislation 
described in section 153, such legislation shall be considered 
by the respective committees of jurisdiction within the House 
of Representatives and the Senate, and, if reported, shall be 
referred to the proper calendar on the floor of each House for 
final action.
  (b) For purposes of this section, the 90-day period shall be 
computed by excluding--
          (1) the days on which either House is not in session 
        because of an adjournment of more than 3 days to a day 
        certain or an adjournment of the Congress sine die; and
          (2) any Saturday and Sunday, not excluded under 
        paragraph (1), when either House is not in session.

Sec. 155. Definitions

  For the purposes of this chapter:
          (1) Bit tax.--The term ``bit tax'' means any tax on 
        electronic commerce expressly imposed on or measured by 
        the volume of digital information transmitted 
        electronically, or the volume of digital information 
        per unit of time transmitted electronically, but does 
        not include taxes imposed on the provision of 
        telecommunications services.
          (2) Computer server.--The term ``computer server'' 
        means a computer that functions as a centralized 
        provider of information and services to multiple 
        recipients.
          (3) Discriminatory tax.--The term ``discriminatory 
        tax'' means--
                  (A) any tax imposed by a State or political 
                subdivision thereof on electronic commerce 
                that--
                          (i) is not generally imposed and 
                        legally collectible by such State or 
                        such political subdivision on 
                        transactions involving similar 
                        property, goods, services, or 
                        information accomplished through other 
                        means;
                          (ii) is not generally imposed and 
                        legally collectible at the same rate by 
                        such State or such political 
                        subdivision on transactions involving 
                        similar property, goods, services, or 
                        information accomplished through other 
                        means, unless the rate is lower as part 
                        of a phase-out of the tax over not more 
                        than a 5-year period;
                          (iii) imposes an obligation to 
                        collect or pay the tax on a different 
                        person or entity than in the case of 
                        transactions involving similar 
                        property, goods, services, or 
                        information accomplished through other 
                        means; or
                          (iv) establishes a classification of 
                        Internet access provider for purposes 
                        of establishing a higher tax rate to be 
                        imposed on such providers than the tax 
                        rate generally applied to providers of 
                        similar information services delivered 
                        through other means; or
                  (B) any tax imposed by a State or political 
                subdivision thereof, if--
                          (i) the mere use of a computer server 
                        by a remote seller to create or 
                        maintain a site on the Internet is 
                        considered a factor in determining a 
                        remote seller's tax collection 
                        obligation; or
                          (ii) the display of a remote seller's 
                        information or content on the computer 
                        server of a provider of Internet 
                        access, or the processing of orders 
                        through the computer server of a 
                        provider of Internet access, is 
                        considered a factor in determining 
                        whether the provider of Internet access 
                        is deemed to be the agent of the remote 
                        seller for tax collection purposes.
          (4) Electronic commerce.--The term ``electronic 
        commerce'' means any transaction conducted over the 
        Internet or through Internet access, comprising the 
        sale, lease, license, offer, or delivery of property, 
        goods, services, or information, whether or not for 
        consideration, and includes the provision of Internet 
        access.
          (5) Information services.--The term ``information 
        services'' has the meaning given such term in section 
        3(20) of the Communications Act of 1934 as amended from 
        time to time.
          (6) Internet.--The term ``Internet'' means the 
        combination of computer facilities and electromagnetic 
        transmission media, and related equipment and software, 
        comprising the interconnected worldwide network of 
        computer networks that employ the Transmission Control 
        Protocol/Internet Protocol, or any predecessor or 
        successor protocol, to transmit information.
          (7) 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 
        part of a package of services offered to consumers. 
        Such term does not include telecommunications services.
          (8) Multiple tax.--The term ``multiple tax'' means--
                  (A) any tax that is imposed by one State or 
                political subdivision thereof on the same or 
                essentially the same electronic commerce that 
                is also subject to another tax imposed by 
                another State or political subdivision thereof 
                (whether or not at the same rate or on the same 
                basis), without a credit (for example, a resale 
                exemption certificate) for taxes paid in other 
                jurisdictions (The term ``multiple tax'' shall 
                not include a sales or use tax imposed by a 
                State and 1 or more political subdivisions 
                thereof pursuant to a law referred to in 
                section 151(b)(1) on the same electronic 
                commerce or atax on persons engaged in 
electronic commerce which also may have been subject to a sales or use 
tax thereon. For purposes of this subparagraph, the term ``sales or use 
tax'' means a tax that is imposed on or incident to the sale, purchase, 
storage, consumption, distribution, or other use of tangible personal 
property or services as may be defined by laws imposing such tax and 
which is measured by the amount of the sales price or other charge for 
such property or service); or
                  (B) any tax on Internet access if the State 
                or political subdivision thereof classifies 
                such Internet access as telecommunications or 
                communications services under State law and 
                such State or political subdivision thereof has 
                also imposed a tax on the purchase or use of 
                the underlying telecommunications services that 
                are used to provide such Internet access 
                without allowing a credit for other taxes paid, 
                a sale for resale exemption, or other mechanism 
                for eliminating duplicate taxation.
          (9) Remote commerce.--The term ``remote commerce'' 
        means the sale, lease, license, offer, or delivery of 
        property, goods, services, or information by a seller 
        in 1 State to a purchaser in another State.
          (10) Remote seller.--The term ``remote seller'' means 
        a person who sells, leases, licenses, offers, or 
        delivers property, goods, services, or information from 
        one State to a purchaser in another State.
          (11) State.--The term ``State'' means any of the 
        several States, the District of Columbia, or any 
        territory or possession of the United States.
          (12) Tax.--The term ``tax'' means any obligation to 
        pay or to collect and remit any levy, fee, or charge 
        imposed by any governmental entity solely for the 
        purpose of generating revenues for governmental 
        purposes and not--
                  (A) in return for a specific privilege, 
                service, or benefit conferred on a person or 
                entity;
                  (B) to support public regulatory commissions; 
                or
                  (C) to support special purpose 
                telecommunications service programs.
        Such term does not include any franchise fees or 
        similar fees imposed by a State or local franchising 
        authority, referred to in section 622 or 653 of the 
        Communications Act of 1934, as amended from time to 
        time.
          (13) Telecommunications services.--The term 
        ``telecommunications services'' has the meaning given 
        such term in section 3(46) of the Communications Act of 
        1934, as amended from time to time.