I

107TH CONGRESS

1ST SESSION H. R. 1410

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 HOUSE OF REPRESENTATIVES

APRIL 4, 2001

Mr. ISTOOK (for himself, Mr. DELAHUNT, Mr. BACHUS, Mr. CAPUANO, Mr.

CONYERS, Mr. HUTCHINSON, Mr. FOLEY, Mr. FROST, Mr. ISAKSON, Mr.

GORDON, Mr. LAHOOD, and Mr. MATSUI) introduced the following bill;

which was referred to the Committee on the Judiciary

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 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 Congress that States and localities should

15 work together to develop a streamlined sales and use tax

16 system that addresses the following in the context of re17 mote sales:

18 (1) A centralized, one-stop, multi-state registra19 tion system for sellers.

20 (2) Uniform definitions for goods or services,

21 the sale of which may, by State action, be included

22 in the tax base.

23 (3) Uniform rules for attributing transactions

24 to particular taxing jurisdictions.

25 (4) Uniform procedures for—
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1 (A) the treatment of purchasers exempt

2 from sales and use taxes; and

3 (B) relief from liability for sellers that rely

4 on such State procedures.

5 (5) Uniform procedures for the certification of

6 software that sellers rely on to determine sales and

7 use tax rates and taxability.

8 (6) A uniform format for tax returns and re9 mittance forms.

10 (7) Consistent electronic filing and remittance

11 methods.

12 (8) State administration of all State and local

13 sales and use taxes.

14 (9) Uniform audit procedures, including a pro15 vision giving a seller the option to be subject to no

16 more than a single audit per year using those proce17 dures; except that if the seller does not comply with

18 the procedures to elect a single audit, any State can

19 conduct an audit using those procedures.

20 (10) Reasonable compensation for tax collection

21 by sellers.

22 (11) Exemption from use tax collection require23 ments for remote sellers falling below a de minimis

24 threshold of $5,000,000 in gross annual sales.
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1 (12) Appropriate protections for consumer pri2 vacy.

3 (13) Such other features that the States deem

4 warranted to promote simplicity, uniformity, neu5 trality, efficiency, and fairness.

6 (b) NO UNDUE BURDEN.—Congress finds that, if

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

8 place an undue burden on interstate commerce or burden

9 the growth of electronic commerce and related tech10 nologies in any material way.

11 (c) STUDY.—It is the sense of Congress that a joint,

12 comprehensive study should be commissioned by State and

13 local governments and the business community to deter14 mine the cost to all sellers of collecting and remitting

15 State and local sales and use taxes on sales made by sell16 ers under the law as in effect on the date of enactment

17 of this Act and under the system described in subsection

18 (a) to assist in determining what constitutes reasonable

19 compensation.

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

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

22 States are authorized to enter into an Interstate Sales and

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

24 consents to their entry into that Compact. The Compact

25 shall describe a uniform, streamlined sales and use tax
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1 system consistent with section 4(a), and shall provide that

2 States joining the Compact must adopt that system.

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

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

5 formed before January 1, 2006.

6 (c) CONGRESSIONAL CONSENT WITHDRAWN IF COM7 PACT DISAPPROVED.—

8 (1) ADOPTING STATES TO TRANSMIT.—Upon

9 the 20th State becoming a signatory to the Com10 pact, the adopting States shall transmit a copy of

11 the Compact to Congress.

12 (2) CONGRESSIONAL ACTION.—The consent of

13 Congress to the Compact is withdrawn if Congress,

14 by law, disapproves the Compact within 120 days

15 (computed in accordance with section 154 of the

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

17 adopting States transmit the Compact to Congress.

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

19 RATES THROUGH AVERAGING.

20 (a) IN GENERAL.—Subject to the exception in sub21 section (e), a State that adopts the Compact authorized

22 under section 5 and that levies a use tax shall impose a

23 single, uniform State-wide use-tax rate on all remote sales

24 on which it assesses a use tax for any calendar year for

25 which the State meets the requirements of subsection (b).
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1 (b) AVERAGING REQUIREMENT.—A State meets the

2 requirements of this subsection for any calendar year in

3 which the single, uniform State-wide use-tax rate is in ef4 fect if such rate is no greater than the weighted average

5 of the sales tax rates actually imposed by the State and

6 its local jurisdictions during the 12-month period ending

7 on June 30 prior to such calendar year.

8 (c) COMPUTATION OF RATE NO GREATER THAN

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

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

11 average of the sales tax rates imposed during a 12-month

12 period described in subsection (b) only if, had such rate

13 been assessed during such period on all sales subject to

14 the sales and use tax by such State and its local jurisdic15 tions, such rate would not have yielded a greater total as16 sessment of taxes than the total taxes actually assessed

17 on such sales during such period.

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

19 Notwithstanding subsection (a), a remote seller may elect

20 annually to collect the actual applicable State and local

21 use taxes on each sale made in the State.

22 (e) ALTERNATIVE SYSTEM.—A State that adopts the

23 dramatically simplified sales and use tax system described

24 in the Compact authorized under section 5 so that remote

25 sellers can use information provided by the State to iden-
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1 tify the single applicable rate for each sale, may require

2 a remote seller to collect the actual applicable State and

3 local sales or use tax due on each sale made in the State

4 if the State provides such seller relief from liability to the

5 State for relying on such information provided by the

6 State.

7 SEC. 7. AUTHORIZATION TO REQUIRE COLLECTION OF USE

8 TAXES.

9 (a) GRANT OF AUTHORITY.—

10 (1) STATES THAT ADOPT THE SYSTEM MAY RE11 QUIRE COLLECTION.—Any State that has adopted

12 the system described in the Compact is authorized,

13 notwithstanding any other provision of law, to re14 quire all sellers not qualifying for the de minimis ex15 ception to collect and remit sales and use taxes on

16 remote sales to purchasers located in such State

17 after the expiration of the 120 day period described

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

19 under section 5(c).

20 (2) STATES THAT DO NOT ADOPT THE SYSTEM

21 MAY NOT REQUIRE COLLECTION.—Paragraph (1)

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

23 system described in the Compact.

24 (b) NO EFFECT ON NEXUS, ETC.—No obligation im25 posed by virtue of authority granted by subsection (a)(1)
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1 or denied by subsection (a)(2) shall be considered in deter2 mining whether a seller has a nexus with any State for

3 any other tax purpose. Except as provided in subsection

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

5 (1) to license or regulate any person;

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

7 intrastate business; or

8 (3) to subject any person to State taxes not re9 lated to the sale of goods or services.

10 SEC. 8. LIMITATION.

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

12 subjecting sellers to franchise taxes, income taxes, or li13 censing requirements of a State or political subdivision

14 thereof, nor shall anything in this Act be construed as af15 fecting the application of such taxes or requirements or

16 enlarging or reducing the authority of any State or polit17 ical subdivision to impose such taxes or requirements.

18 SEC. 9. DEFINITIONS.

19 In this Act:

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

21 State of the United States of America and includes

22 the District of Columbia.

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

24 services’’ includes tangible and intangible personal

25 property and services.
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1 (3) REMOTE SALE.—The term ‘‘remote sale’’

2 means a sale in interstate commerce of goods or

3 services attributed, under the rules established pur4 suant to section 4(a)(3), to a particular taxing juris5 diction that could not, except for the authority

6 granted by this Act, require that the seller of such

7 goods or services collect and remit sales or use taxes

8 on such sale.

9 (4) LOCUS OF REMOTE SALE.—The term ‘‘par10 ticular taxing jurisdiction’’, when used with respect

11 to the location of a remote sale, means a remote sale

12 of goods or services attributed, under the rules es13 tablished pursuant to section 4(a)(3), to a particular

14 taxing jurisdiction.

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