Internet Tax Reform and Reduction Act of 2000

Summary: Sets forth specified Internet-and telecommunication-related factors that shall not be sufficient to create a jurisdictional tax nexus respecting a seller and purchaser who are not present in the same State.
Expresses the sense of the Congress respecting: (1) development of a Uniform Sales and Use Tax Act; and (2) elimination of the excessive telecommunications tax burden.
Establishes an Advisory Commission on Uniform Sales and Use Tax.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internet Tax Reform and Reduction 
Act of 2000''.

SEC. 2. MORATORIUM AMENDMENT TO THE INTERNET TAX FREEDOM ACT.

    (a) Moratorium Amendment.--Section 1101(a) of title XI of division 
C of Public Law 105-277 (112 Stat. 2681-719; 47 U.S.C. 151 note) is 
amended to read as follows:
    ``(a) Moratoria on State and Local Taxes on the Internet.--No State 
or political subdivision thereof shall impose any of the following 
taxes:
            ``(1) Taxes on Internet access.
            ``(2) During the period beginning on October 1, 1998, and 
        ending on October 21, 2006, multiple or discriminatory taxes on 
        electronic commerce.
            ``(3) During the period beginning on the date of the 
        enactment of the Internet Tax Reform and Reduction Act of 2000 
        and ending on October 21, 2006, taxes on sales of digitized 
        goods and products (and their counterparts).''.
    (b) Technical Amendments.--Section 1101 of title XI of division C 
of Public Law 105-277 (112 Stat. 2681-719; 47 U.S.C. 151 note) is 
amended--
            (1) by striking subsection (b); and
            (2) by redesignating subsections (c) through (h) as 
        subsections (b) through (g), respectively.
    (c) Liabilities and Pending Cases.--Nothing in the amendments made 
by this section affects--
            (1) liability for taxes accrued and enforced before the 
        date of enactment of this Act; or
            (2) ongoing litigation relating to such taxes.

SEC. 3. OTHER AMENDMENTS TO THE TAX FREEDOM ACT.

    Title XI of division C of Public Law 105-277 (112 Stat. 2681-719; 
47 U.S.C. 151 note) is amended--
            (1) by redesignating section 1104 as section 1107; and
            (2) by inserting after section 1103 the following:

``SEC. 1104. DETERMINATION OF JURISDICTIONAL NEXUS.

    ``(a) Collecting Taxes.--The following factors shall not be 
sufficient, separately or collectively, to empower a State to impose on 
a seller that is not physically present in such State an obligation to 
collect a tax payable to such State by a purchaser that is physically 
present in such State:
            ``(1) The use by such seller of an Internet service 
        provider that is physically present in such State.
            ``(2) The placement of digital data by such seller on a 
        server located in such State.
            ``(3) The use of telecommunications service provided to 
        such seller by a telecommunications provider that is physically 
        present in such State.
            ``(4) The use or presence in such State of intangible 
        property owned by such seller.
            ``(5) The presence in such State of persons that purchase 
        from such seller.
            ``(6) The affiliation of such seller with a person that is 
        physically present in such State and that pays any tax imposed 
        by such State or by a political subdivision of such State.
            ``(7) The performance of repair or warranty services in 
        such State by or on behalf of such seller with respect to 
        property sold by such seller if such seller is not physically 
        present in such State except to perform such services.
            ``(8) The existence of a contract between such seller and a 
        person that is physically present in such State to the extent 
        that such contract provides for the return to such person of 
        goods purchased from such seller by means of the Internet or of 
        a nonelectronic catalog.
            ``(9) The advertisement of the business location, telephone 
        number, or Internet address of such seller.
    ``(b) Payment of Income Taxes.--The following factors shall not be 
sufficient, separately or collectively, to empower a State to require a 
seller to meet the business activity and income tax reporting and 
payment obligations of such State:
            ``(1) Any of the factors specified in paragraphs (1) 
        through (9) of subsection (a).
            ``(2) The registration relating to sales or use taxes in 
        effect in such State, by such seller with such State.
            ``(3) The collection or remittance of use taxes by such 
        seller to such State.

``SEC. 1105. DEVELOPMENT OF UNIFORM SALES AND USE TAX ACT.

    ``It is the sense of the Congress that, not later than October 21, 
2004, States and political subdivisions of States should work 
cooperatively with the National Conference of Commissioners on Uniform 
State Laws (in this section referred to as the `Conference') to develop 
and draft a Uniform Sales and Use Tax Act that--
            ``(1) reflects a simplified synthesis of the sales and use 
        tax policies of States and political subdivisions of States, 
        applicable to sellers described in paragraph (2);
                                 
            ``(2) creates and maintains parity of collection costs (net 
        of vendor discounts) between--
                    ``(A) sellers that are not physically present in a 
                State and that sell goods to purchasers that are 
                physically present in such State; and
                    ``(B) sellers that are physically present in a 
                State and that sell goods to purchasers that are 
                physically present in such State; and
            ``(3) contains, among other matters--
                    ``(A) uniform tax base definitions;
                    ``(B) a uniform vendor discount;
                    ``(C) uniform and simple sourcing rules;
                    ``(D) a single sale and use tax rate per State and 
                a uniform limitation on any change in such rate;
                    ``(E) uniform audit procedures;
                    ``(F) uniform forms for preparation by sellers to 
                determine and report the amount of tax payable or 
                remittable to a State;
                    ``(G) uniform electronic filing and remittance 
                methods;
                    ``(H) uniform rules for the determination of the 
                exempt status of sellers, and for the creation, 
                distribution, and maintenance of a database containing 
                the identities of sellers that have such status);
                    ``(I) a methodology for approving computer software 
                that sellers may rely on to determine State sales and 
                use tax rates; and
                    ``(J) a methodology for maintaining revenue 
                neutrality in overall sales and use tax collections 
                within each State (such as reducing the Statewide sales 
                tax rate) to account for any increase in revenue that 
                is payable (on a voluntary basis or otherwise) with 
                respect to sales to purchasers that are physically 
                present in such State made by sellers that are not 
                physically present in such State.

``SEC. 1106. ADVISORY COMMISSION ON UNIFORM SALES AND USE TAX.

    ``(a) Establishment.--There is established the Advisory Commission 
on Uniform Sales and Use Tax (in this section referred to as the 
`Commission'). The Commission shall--
            ``(1) be composed of 19 members appointed in accordance 
        with subsection (b), including the chairperson who shall be 
        selected by the members of the Commission from among 
        themselves; and
            ``(2) conduct its business in accordance with the 
        provisions of this section.
    ``(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) 3 representatives from the Federal 
                Government, comprised of the Secretary of Commerce, the 
                Secretary of the Treasury, and the United States Trade 
                Representative (or their respective delegates).
                    ``(B) 8 representatives from State and local 
                governments (1 such representative shall be from a 
                State or local government that does not impose a sales 
                tax and 1 representative shall be from a State that 
                does not impose an income tax).
                    ``(C) 8 representatives of the electronic commerce 
                industry (including small business), telecommunications 
                carriers, local retail businesses, and consumer groups, 
                comprised of--
                            ``(i) 3 individuals appointed by the 
                        Majority Leader of the Senate;
                            ``(ii) 1 individual appointed by the 
                        Minority Leader of the Senate;
                            ``(iii) 3 individuals appointed by the 
                        Speaker of the House of Representatives; and
                            ``(iv) 1 individual appointed by the 
                        Minority Leader of the House of 
                        Representatives.
            ``(2) Appointments.--Appointments to the Commission shall 
        be made not later than 45 days after the date of the enactment 
        of the Internet Tax Reform and Reduction Act of 2000. The 
        chairperson shall be selected not later than 60 days after the 
        date of the enactment of the Internet Tax Reform and Reduction 
        Act of 2000.
            ``(3) Vacancies.--Any vacancy in the Commission shall not 
        affect its powers, but shall be filled in the same manner as 
        the original appointment.
    ``(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, the Department of 
State, the Department of the Treasury, and the Office of the United 
States Trade Representative. The Commission shall also have reasonable 
access to use the facilities of any such Department or Office for 
purposes of conducting meetings.
    ``(e) Sunset.--The Commission shall terminate 60 days after the 
Commission submits the report required by subsection (g).
    ``(f) Rules of the Commission.--
            ``(1) Quorum.--Nine members of the Commission shall 
        constitute a quorum for conducting the business of the 
        Commission.
            ``(2) Meetings.--Any meetings held by the Commission shall 
        be duly noticed at least 14 days in advance and shall be open 
        to the public.
            ``(3) Opportunities to testify.--The Commission shall 
        provide opportunities for representatives of the general 
        public, taxpayer groups, consumer groups, and State and local 
        government officials to testify.
            ``(4) Additional rules.--The Commission may adopt other 
        rules as needed.
            ``(5) No finding or recommendation shall be included in the 
        report required by subsection (g) unless agreed to by at least 
        two-thirds of the members of the Commission serving at the time 
        the finding or recommendation is made.
    ``(g) Duties of the Commission.--The duties are--
            ``(1) to monitor the progress of the Conference in carrying 
        out the activities described in section 1105; and
            ``(2) not later than 180 days after the Conference carries 
        out the activities described in section 1105, submit to the 
        Congress a report containing the following:
                    ``(A) The findings of the Commission regarding--
                            ``(i) the growth of electronic commerce;
                            ``(ii) the impact of electronic commerce on 
                        traditional retailers; and
                            ``(iii) the impact of sales to purchasers 
                        that are physically present in a State made by 
                        sellers that are not physically present in such 
                        State, on the revenue of States and political 
                        subdivisions of States;
                during the 5-year period ending on December 31, 2004.
                    ``(B) An assessment of whether the Uniform Sales 
                and Use Tax Act drafted by the Conference, as provided 
                in section 1105, contains the matters described in 
                section 1105(3).
                    ``(C) An assessment of whether the enactment by 
                States of such Uniform Sales and Use Tax Act would 
                result in equal tax collection burdens (net of vendor 
                discounts)--
                            ``(i) for sellers that are not physically 
                        present in a State and that sell goods to 
                        purchasers that are physically present in such 
                        State; and
                            ``(ii) sellers that are physically present 
                        in a State and that sell goods to purchasers 
                        that are physically present in such State.
                    ``(D) An assessment of whether requiring sellers 
                that are not physically present in a State to collect 
                and remit sales and use taxes to any such State that 
                has not enacted such Uniform Sales and Use Tax Act, 
                would impose any unreasonable burden on interstate 
                commerce or would have any other adverse impact on 
                economic growth and activity through remote electronic 
                channels.
                    ``(E) A recommendation regarding whether any State 
                that enacts such Uniform Sales and Use Tax Act should 
                be permitted by the Congress to collect sales and use 
                taxes from all sellers that are not physically present 
                in such State and that sell goods to purchasers that 
                are physically present in such State.
                    ``(F) Any other recommendations as required to 
                address the findings of the Commission's report.''.

SEC. 4. CONFORMING AMENDMENTS.

    (a) Cross Reference in the Trade Act of 1974.--Section 181(d) of 
the Trade Act of 1974 (19 U.S.C. 2241(d)) is amended by striking 
``section 1104(3)'' and inserting ``1107(3)''.
    (b) Other Cross Reference.--Section 1203(c) of division C of Public 
Law 105-277 (112 Stat. 2681-727; 19 U.S.C. 2241 note) by striking 
``section 1104(3)'' and inserting ``1107(3)''.

SEC. 5. SENSE OF THE CONGRESS REGARDING DEVELOPMENT OF UNIFORM 
              TELECOMMUNICATIONS STATE AND LOCAL EXCISE TAX ACT.

    (a) Development of Uniform Telecommunications State and Local 
Excise Tax Act.--It is the sense of the Congress that, not later than 
October 21, 2003, States and political subdivisions of States should 
work cooperatively with the National Conference of Commissioners on 
Uniform State Laws (in this section referred to as the `Conference') to 
develop and draft a Uniform Telecommunications State and Local Excise 
Tax Act under the terms of which States and political subdivisions of 
States may impose on telecommunications only a simplified tax described 
in paragraph (1) or (2) of subsection (b).
    (b) Simplified Tax.--(1) Except as provided in paragraph (2), the 
simplified tax referred to in subsection (a) that may be imposed by a 
State shall--
            (A) allow only 1 State transaction tax;
            (B) require each telecommunications provider to file only 1 
        tax return per reporting period per State;
            (C) allow only 1 audit at the State level;
            (D) establish nationwide uniform sourcing rules;
            (E) establish nationwide uniform definitions; and
            (F) provide for 120 days lead time for implementing tax 
        base and rate changes.
    (2) If, on the effective date of this section, political 
subdivisions of a State are authorized by State law to impose a tax on 
telecommunications, then the simplified tax referred to in subsection 
(a) that may be imposed by such State and such political subdivisions 
shall--
            (A) allow only 1 State transaction tax;
            (B) require each telecommunications provider to file only 1 
        tax return per reporting period per State;
            (C) allow only 1 audit at the State level;
            (D) establish nationwide uniform sourcing rules;
            (E) establish nationwide uniform definitions;
            (F) provides for 120 days lead time for implementing tax 
        base and rate changes; and
            (G) require with respect to such political subdivisions 
        that--
                    (i) tax base and exemptions conform to the 
                simplified tax as imposed by such State;
                    (ii) a single tax return be filed with the State 
                tax return and with State distribution of funds;
                    (iii) a unified audit be conducted at the State 
                level;
                    (iv) there be maintained a State-administered 
                address, jurisdiction, and rate database in a 
                nationwide uniform format to assign addresses to the 
                appropriate taxing jurisdiction and to provide the 
                appropriate rate;
                    (v) telecommunications providers that rely on such 
                database be immune to liability to such political 
                subdivisions for such simplified tax; and
                    (vi) there be provided a vendor's compensation.

SEC. 6. SENSE OF THE CONGRESS REGARDING ELIMINATION OF EXCESSIVE TAX 
              BURDEN ON TELECOMMUNICATIONS.

    It is the sense of the Congress that States and political 
subdivisions of States should eliminate the excessive tax burden on 
telecommunications by--
            (1) eliminating telecommunications industry-specific and 
        higher transaction tax rates;
            (2) eliminating the excessive tax burdens on 
        telecommunication real, tangible, and intangible property; and
            (3) affording similar tax treatment of telecommunications 
        infrastructure by States that exempt from sales and use taxes 
        purchases of certain types of business equipment.

SEC. 7. ENACTMENT BY STATES.

    It is the sense of the Congress that States should establish, 
jointly, a deadline for--
            (1) enacting the Uniform Telecommunications State and Local 
        Excise Tax Act drafted under section 5; and
            (2) removing excess and multiple taxation of 
        telecommunications.

SEC. 8. PENALTY.

    It is the sense of the Congress that Federal requirements against 
adverse discrimination by a State in taxation of telecommunications 
services, property, or providers in relation to other services, 
property, and providers in such State should apply to any State that 
fails to enact, before October 21, 2004, the Uniform Telecommunications 
State and Local Excise Tax Act drafted under section 5.