Internet Tax Freedom Act

SECTION 1. SHORT TITLE.

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

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) As a massive global network spanning not only State but 
        international borders, the Internet is inherently a matter of 
        interstate and foreign commerce within the jurisdiction of the 
        United States Congress under Article I, Section 8 of the United 
        States Constitution.
            (2) Even within the United States, the Internet does not 
        respect State lines and operates independently of State 
        boundaries. Addresses on the Internet are designed to be 
        geographically indifferent. Internet transmissions are 
        insensitive to physical distance and can have multiple 
        geographical addresses.
            (3) Because transmissions over the Internet are made 
        through packet-switching, it is impossible to determine with 
        any degree of certainty the precise geographic route or 
        endpoints of specific Internet transmissions, and infeasible to 
        separate intrastate from interstate, and domestic from foreign, 
        Internet transmissions.
            (4) Inconsistent and unadministrable taxes imposed on 
        Internet activity by State and local governments threaten not 
        only to subject consumers, businesses, and other users engaged 
        in interstate and foreign commerce to multiple, confusing, and 
        burdensome taxation, but also to restrict the growth and 
        continued technological maturation of the Internet itself, and 
        to call into question the continued viability of this dynamic 
        medium.
            (5) Because the tax laws and regulations of so many 
        jurisdictions were established before the Internet or 
        interactive computer services, their application to this new 
        medium in unintended and unpredictable ways threatens every 
        Internet user, access provider, vendor, and interactive 
        computer service provider.
            (6) The electronic marketplace of services, products, and 
        ideas available through the Internet or interactive computer 
        services can be especially beneficial to senior citizens, the 
        physically challenged, citizens in rural areas, and small 
        businesses. It also offers a variety of uses and benefits for 
        educational institutions and charitable organizations.
            (7) Consumers, businesses, and others engaging in 
        interstate and foreign commerce through the Internet or 
        interactive computer services could become subject to more than 
        30,000 separate taxing jurisdictions in the United States 
        alone.
            (8) The consistent and coherent national policy regarding 
        taxation of Internet activity that is needed to avoid burdening 
        this evolving form of interstate and foreign commerce can best 
        be achieved by the United States exercising its authority under 
        Article I, Section 8, Clause 3 of the United States 
        Constitution.

SEC. 3. MORATORIUM ON IMPOSITION OF TAXES ON INTERNET OR INTERACTIVE 
              COMPUTER SERVICES.

    (a) Moratorium.--Except as otherwise provided in this section, no 
State or local government (including any political subdivision) may 
impose, assess, or attempt to collect any tax or fee directly or 
indirectly on--
            (1) the Internet or interactive computer services; or
            (2) the use of the Internet or interactive computer 
        services.
    (b) Preservation of State and Local Taxing Authority.--Subsection 
(a)--
            (1) does not apply to taxes imposed on and measured by net 
        income derived from the Internet or interactive computer 
        services;
            (2) does not apply to fairly apportioned business license 
        taxes applied to businesses that have a business location in 
        the taxing jurisdiction, and
            (3) does not affect the authority of a State, or political 
        subdivision thereof, to impose a sales or use tax on sales or 
        other transactions effected by use of the Internet or 
        interactive computer services if--
                    (A) the tax is the same as the tax imposed and 
                collected by that State, or political subdivision 
                thereof, on sales or interstate transactions effected 
                by mail order, telephone, or other remote means within 
                its taxing jurisdiction; and
                    (B) the obligation to collect the tax from sales or 
                other transactions effected by use of the Internet or 
                interactive computer services is imposed on the same 
                person or entity as in the case of sales or 
                transactions effected by mail order, telephone, or 
                other remote means.

SEC. 4. ADMINISTRATION POLICY RECOMMENDATIONS TO CONGRESS.

    (a) Consultative Group.--The Secretaries of the Treasury, Commerce, 
or State, in consultation with appropriate committees of the Congress, 
consumer and business groups, States and political subdivisions 
thereof, and other appropriate groups, shall--
            (1) undertake an examination of United States domestic and 
        international taxation of the Internet and interactive computer 
        services, as well as commerce conducted thereon; and
            (2) jointly submit appropriate policy recommendations 
        concerning United States domestic and foreign policies toward 
        taxation of the Internet and interactive computer services, if 
        any, to the President within 18 months after the date of 
        enactment of this Act.
    (b) President.--Not later than 2 years after the date of enactment 
of this Act, the President shall transmit to the appropriate committees 
of Congress policy recommendations on the taxation of sales and other 
transactions effected on the Internet or through interactive computer 
services.
     (c) Recommendations to Be Consistent With Telecommunications Act 
of 1996 Policy Statement.--The Secretaries and the President shall take 
care to ensure that any such policy recommendations are fully 
consistent with the policy set forth in paragraphs (1) and (2) of 
section 230(b) of the Communications Act of 1934 (47 U.S.C. 230(b)).

SEC. 5. BAN ON REGULATION OF INTERNET PRICES BY THE FEDERAL 
              COMMUNICATIONS COMMISSION.

    (a) Prohibition on Commission Regulation of Computer Services.--
Section 230 of the Communications Act of 1934 (47 U.S.C. 230) is 
amended--
            (1) by redesignating subsections (d) and (e) as subsections 
        (e) and (f), respectively; and
            (2) by inserting after subsection (c) the following new 
        subsection:
    ``(d) Prohibition on Commission Regulation of Computer Services.--
The Commission shall have no authority or jurisdiction under this Act, 
nor shall any State commission have any authority or jurisdiction, to 
regulate the prices or charges paid by subscribers for interactive 
computer services, or information services transmitted through the 
Internet, except for the requirement in section 254(h) that such 
services be provided at affordable rates to rural health care 
providers, schools, and libraries.''.
    (b) Conforming Amendment.--Section 223(h)(2) of the Communications 
Act of 1934 (47 U.S.C. 223(h)(2)) is amended by striking ``230(e)(2)'' 
and inserting ``230(f)(2)''.

SEC. 6. DECLARATION THAT THE INTERNET BE FREE OF FOREIGN TARIFFS, TRADE 
              BARRIERS, AND OTHER RESTRICTIONS.

    It is the sense of the Congress that the President should seek 
bilateral and multilateral agreements through the World Trade 
Organization, the Organization for Economic Cooperation and 
Development, the Asia Pacific Economic Cooperation Council, or other 
appropriate international fora to establish activity on the Internet 
and interactive computer services is free from tariff and taxation.

SEC. 7. DEFINITIONS.

    For purposes of this Act--
            (1) Internet; interactive computer service.--The terms 
        ``Internet'' and ``interactive computer service'' have the 
        meaning given such terms by paragraphs (1) and (2), 
        respectively, of section 230(e) of the Communications Act of 
        1934 (47 U.S.C. 230(e)).
            (2) Tax.--The term ``tax'' includes any tax, license, or 
        fee that is imposed by any governmental entity and the 
        imposition on the seller of an obligation to collect and remit 
        a tax imposed on the buyer.

Summary: Internet Tax Freedom Act - Prohibits a State or local government from imposing, assessing, or attempting to collect any tax or fee on the Internet or interactive computer services (ICs) or on their use. Preserves State and local taxing authority with respect to income, license, and sales taxes. Directs the Secretaries of the Treasury, Commerce, or State to: (1) undertake an examination of US and international taxation of the Internet and ICs, as well as commerce conducted thereon. And (2) jointly submit to the President appropriate policy recommendations concerning such taxation. Directs the President to transmit to the appropriate congressional committees policy recommendations on the taxation of sales and other transactions effected on the Internet or through ICs. Requires all such recommendations to be consistent with policy statements of the Telecommunications Act of 1996. Amends the Communications Act of 1934 to state that the Federal Communications Commission or any equivalent State commission shall have no regulatory authority or jurisdiction with respect to charges paid by subscribers for ICs or information services transmitted through the Internet, except for the requirement that such services be provided at affordable rates to rural health care providers, schools, and libraries. Expresses the sense of the Congress that the President should seek bilateral and multilateral agreements through various international forums to establish that activity on the Internet and ICs be free from tariff and taxation.