II

106TH CONGRESS

2D SESSION S. 2775

To foster innovation and technological advancement in the development of

the Internet and electronic commerce, and to assist the States in simplifying their sales and use taxes.

IN THE SENATE OF THE UNITED STATES

JUNE 22, 2000

Mr. DORGAN (for himself, Mr. ENZI, Mr. VOINOVICH, Mr. BREAUX, Mr.

GRAHAM, Mr. HUTCHINSON, Mrs. LINCOLN, Mr. BENNETT, Mr. BRYAN,

Mr. CLELAND, and Mr. THOMAS) introduced the following bill; which was

read twice and referred to the Committee on Finance

A BILL

To foster innovation and technological advancement in the

development of the Internet and electronic commerce,

and to assist the States in simplifying their sales and

use taxes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Internet Tax Morato5 rium and Equity Act’’.

6 SEC. 2. FINDINGS.

7 The Congress makes the following findings:
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1 (1) The moratorium of the Internet Tax Free2 dom Act on new taxes on Internet access and on

3 multiple and discriminatory taxes on electronic com4 merce should be extended.

5 (2) States should be encouraged to simplify

6 their sales and use tax systems.

7 (3) As a matter of economic policy and basic

8 fairness, similar sales transactions should be treated

9 equally, without regard to the manner in which sales

10 are transacted, whether in person, through the

11 mails, over the telephone, on the Internet, or by

12 other means.

13 (4) Congress may facilitate such equal taxation

14 consistent with the United States Supreme Court’s

15 decision in Quill Corp. v. North Dakota.

16 (5) States that adequately simplify their tax

17 systems should be authorized to correct the present

18 inequities in taxation through requiring sellers to

19 collect taxes on sales of goods or services delivered

20 in-state, without regard to the location of the seller.

21 (6) The States have experience, expertise, and

22 a vital interest in the collection of sales and use

23 taxes, and thus should take the lead in developing

24 and implementing sales and use tax collection sys25 tems that are fair, efficient, and non-discriminatory
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1 in their application and that will simplify the process

2 for both sellers and buyers.

3 (7) Online consumer privacy is of paramount

4 importance to the growth of electronic commerce

5 and must be protected.

6 SEC. 3. EXTENSION OF INTERNET TAX FREEDOM ACT MOR7 ATORIUM THROUGH 2005.

8 Section 1101(a) of the Internet Tax Freedom Act (47

9 U.S.C. 151 note) is amended by striking ‘‘3 years after

10 the date of the enactment of this Act—’’ and inserting

11 ‘‘on December 31, 2005:’’.

12 SEC. 4. STREAMLINED SALES AND USE TAX SYSTEM.

13 (a) DEVELOPMENT OF STREAMLINED SYSTEM.—It is

14 the sense of the Congress that States and localities should

15 work together, with the advice of the National Conference

16 of Commissioners on Uniform State Laws, to develop a

17 streamlined sales and use tax system that addresses the

18 following in the context of remote sales:

19 (1) A centralized, one-stop, multi-state registra20 tion system for sellers.

21 (2) Uniform definitions for goods or services,

22 whose sale may, by State action, be included in the

23 tax base.

24 (3) Uniform rules for attributing transactions

25 to particular taxing jurisdictions.
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1 (4) Uniform procedures for—

2 (A) the designation and identification of

3 purchasers exempt from sales and use taxes;

4 and

5 (B) immunization from liability for sellers

6 that rely on such State procedures.

7 (5) Uniform procedures for the certification of

8 software that sellers rely on to determine sales and

9 use tax rates and taxability.

10 (6) Uniform bad debt rules.

11 (7) A uniform format for tax returns and re12 mittance forms.

13 (8) Consistent electronic filing and remittance

14 methods.

15 (9) State administration of all State and local

16 sales and use taxes.

17 (10) Uniform audit procedures, including a pro18 vision giving a seller the option to be subject to no

19 more than a single audit per year using those proce20 dures; provided that if the seller does not comply

21 with the procedures to elect a single audit, any

22 States can conduct an audit using those procedures.

23 (11) Reasonable compensation for tax collection

24 by sellers.
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1 (12) Exemption from use tax collection require2 ments for remote sellers falling below a de minimis

3 threshold of $5,000,000 in gross annual sales.

4 (13) Appropriate protections for consumer pri5 vacy.

6 (14) Such other features that the States deem

7 warranted to promote simplicity, uniformity, neu8 trality, efficiency, and fairness.

9 (b) NO UNDUE BURDEN.—The Congress finds that,

10 if adopted, the system described in subsection (a) will not

11 place an undue burden on interstate commerce or burden

12 the growth of electronic commerce and related tech13 nologies in any material way.

14 SEC. 5. INTERSTATE SALES AND USE TAX COMPACT.

15 (a) AUTHORIZATION AND CONSENT.—In general, the

16 States are authorized to enter into an Interstate Sales and

17 Use Tax Compact. Subject to subsection (c), the Congress

18 consents to their entry into that Compact. The Compact

19 shall describe a uniform, streamlined sales and use tax

20 system consistent with section 4(a), and shall provide that

21 States joining the Compact must adopt that system.

22 (b) EXPIRATION.—The authorization and consent in

23 subsection (a) shall expire if the Compact has not been

24 formed before January 1, 2006.
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1 (c) CONGRESSIONAL CONSENT WITHDRAWN IF COM2 PACT DISAPPROVED.—

3 (1) ADOPTING STATES TO TRANSMIT.—Upon

4 the 20th State becoming a signatory to the Com5 pact, the adopting States shall transmit a copy of

6 the Compact to Congress.

7 (2) CONGRESSIONAL ACTION.—The consent of

8 the Congress to the Compact is withdrawn if the

9 Congress, by law, disapproves the Compact within

10 120 days (computed in accordance with section 154

11 of the Trade Act of 1974 (19 U.S.C. 2194)) after

12 the adopting States transmit it to the Congress.

13 SEC. 6. AUTHORIZATION TO SIMPLIFY STATE USE-TAX

14 RATES THROUGH AVERAGING.

15 (a) IN GENERAL.—A State that levies a use tax shall

16 impose a single, uniform State-wide use-tax rate on all re17 mote sales on which it assesses a use tax for any calendar

18 year for which the State meets the requirements of sub19 section (b).

20 (b) AVERAGING REQUIREMENT.—A State meets the

21 requirements of this subsection for any calendar year in

22 which the single, uniform State-wide use-tax rate is in ef23 fect if such rate is no greater than the weighted average

24 of the sales tax rates actually imposed by a State and its
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1 local jurisdictions during the second calendar year prior

2 to such calendar year.

3 (c) COMPUTATION OF RATE NO GREATER THAN

4 WEIGHTED AVERAGE.—For purposes of subsection (b), a

5 State-wide use tax rate is no greater than the weighted

6 average of the sales tax rates imposed in a prior calendar

7 year only if, had such rate been assessed during such prior

8 calendar year on all sales on which a sales tax was actually

9 assessed by such State and its local jurisdictions, such rate

10 would not have yielded a greater total assessment of taxes

11 than the total taxes actually assessed on such sales during

12 such year.

13 (d) ANNUAL OPTION TO COLLECT ACTUAL TAX.—

14 Notwithstanding subsection (a), a remote seller has the

15 annual option of collecting applicable State and local use

16 taxes throughout a State.

17 SEC. 7. AUTHORIZATION TO REQUIRE COLLECTION OF USE

18 TAXES.

19 (a) GRANT OF AUTHORITY.—

20 (1) STATES THAT ADOPT THE SYSTEM MAY RE21 QUIRE COLLECTION.—Any State that has adopted

22 the system described in the Compact is authorized,

23 notwithstanding any other provision of law, to re24 quire all sellers not qualifying for the de minimis ex25 ception to collect and remit sales and use taxes on
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1 remote sales to purchasers located in such State

2 after the expiration of the 120 day period described

3 by section 5(c)(2) unless the Compact is disapproved

4 under section 5(c).

5 (2) STATES THAT DO NOT ADOPT THE SYSTEM

6 MAY NOT REQUIRE COLLECTION.—Paragraph (1)

7 does not extend to any State that does not adopt the

8 system described in the Compact.

9 (b) NO EFFECT ON NEXUS, ETC.—No obligation im10 posed by virtue of authority granted by subsection (a)(1)

11 or denied by subsection (a)(2) shall be considered in deter12 mining whether a seller has a nexus with any State for

13 any other tax purpose. Except as provided in subsection

14 (a), nothing in this Act permits or prohibits a State—

15 (1) to license or regulate any person;

16 (2) to require any person to qualify to transact

17 intrastate business; or

18 (3) to subject any person to State taxes not re19 lated to the sale of goods or services.

20 SEC. 8. LIMITATION.

21 In general, nothing in this Act shall be construed as

22 subjecting sellers to franchise taxes, income taxes, or li23 censing requirements of a State or political subdivision

24 thereof, nor shall anything in this Act be construed as af25 fecting the application of such taxes or requirements or
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1 enlarging or reducing the authority of any State or polit2 ical subdivision to impose such taxes or requirements.

3 SEC. 9. DEFINITIONS.

4 In this Act:

5 (1) STATE.—The term ‘‘State’’ means any

6 State of the United States of America and includes

7 the District of Columbia.

8 (2) GOODS OR SERVICES.—The term ‘‘goods or

9 services’’ includes tangible and intangible personal

10 property and services.

11 (3) REMOTE SALE.—The term ‘‘remote sale’’

12 means a sale in interstate commerce of goods or

13 services attributed, under the rules established pur14 suant to section 4(a)(3) of this Act, to a particular

15 taxing jurisdiction that could not, except for the au16 thority granted by this Act, require that the seller

17 of such goods or services collect and remit sales or

18 use taxes on such sale.

19 (4) LOCUS OF REMOTE SALE.—The term ‘‘par20 ticular taxing jurisdiction’’, when used with respect

21 to the location of a remote sale means a remote sale

22 of goods or services attributed, under the rules es23 tablished pursuant to section 4(a)(3) of this Act, to

24 a particular taxing jurisdiction.

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