(1) by striking ‘‘taxes during the period begin-
ning on October 1, 1998, and ending 3 years after
the date of the enactment of this Act—’’ and insert-
ing ‘‘taxes after September 30, 1998:’’;
(2) by striking paragraph (1) of subsection (a)
and inserting the following:
‘‘(1) Taxes on Internet access.’’,
(3) by striking ‘‘multiple’’ in paragraph (2) of
subsection (a) and inserting ‘‘Multiple’’;
(4) by striking subsection (d); and
(5) by redesignating subsections (e) and (f) as
subsections (d) and (e), respectively.
(b) CONFORMING AMENDMENT.—Section 1104(10)
of the Internet Tax Freedom Act (47 U.S.C. 151 note)
is amended by striking ‘‘unless’’ and all that follows
through ‘‘1998’’.
SEC. 3. JURISDICTIONAL STANDARDS FOR THE IMPOSI-
TION OF STATE AND LOCAL BUSINESS ACTIV-
ITY TAXES ON INTERSTATE COMMERCE.
Title I of the Act entitled ‘‘An Act relating to the
power of the States to impose net income taxes on income
derived from interstate commerce, and authorizing studies
by congressional committees of matters pertaining there-
to’’, approved on September 14, 1959 (Public Law 86–
272; 15 U.S.C. 381 et seq.), is amended to read as follows:
‘‘TITLE I—JURISDICTIONAL
STANDARDS
‘‘SEC. 101. IMPOSITION OF STATE AND LOCAL BUSINESS AC-
TIVITY TAXES ON INTERSTATE COMMERCE.
‘‘(a) IN GENERAL.—No State or subdivision thereof
shall have power to impose, for any taxable year ending
after the date of enactment of this title, a business activity
tax on any person relating to such person’s activities that
affect interstate commerce, unless such person has a sub-
stantial physical presence in such State or subdivision. A
substantial physical presence is not established if the only
business activities within such State or subdivision by or
on behalf of such person during such taxable year are any
or all of the following:
‘‘(1) The solicitation of orders or contracts by
such person or such person’s representative in such
State or subdivision for sales of tangible or intan-
gible personal property or services, which orders or
contracts are approved or rejected outside the State,
or subdivision and, if approved, are fulfilled by ship-
ment or delivery of such property from a point out-
side the State or subdivision or by the performance
of such services outside the State or subdivision.
‘‘(2) The solicitation of orders or contracts by
such person or such person’s representative in such
State or subdivision in the name of or for the benefit
of a prospective customer of such person, if orders
or contracts by such customer to such person to en-
able such customer to fill orders or contracts result-
ing from such solicitation are orders or contracts de-
scribed in paragraph (1).
‘‘(3) The presence or use of intangible personal
property in such State or subdivision, including pat-
ents, copyrights, trademarks, logos, securities, con-
tracts, licenses and permits issued by any govern-
mental agency or authority authorizing the holder to
conduct any business activity, money, deposits,
loans, electronic or digital signals, and web pages,
whether or not subject to licenses, franchises, or
other agreements.
‘‘(4) The use of the Internet to create or main-
tain a World Wide Web site accessible by persons in
such State or subdivision.
‘‘(5) The use of an Internet service provider,
on-line service provider, internetwork communication
service provider, or other Internet access service pro-
vider, or World Wide Web hosting services to main-
tain or take and process orders via a web page or
site on a computer that is physically located in such
State or subdivision.
‘‘(6) The use of any service provider for trans-
mission of communications, whether by cable, sat-
ellite, radio, telecommunications, or other similar
system.
‘‘(7) The leasing or owning of substantial prop-
erty in such State or subdivision for less than 30
days. Property in such State or subdivision for pur-
poses of being assembled, manufactured, processed,
or tested by a person or persons within such State
or subdivision for the benefit of the owner or lessee,
or used to furnish a service by a person or persons
within such State or subdivision to the owner or les-
see, shall be disregarded in determining whether
such 30-day limit has been exceeded.
‘‘(8) The assigning of employees, representa-
tives, or agents in such State or subdivision for less
than 30 days. Presence of employees, representatives
or agents for purposes directly relating to the pur-
chasing goods or services, gathering news and cov-
ering events, meeting with government officials, at-
tending conferences, seminars and similar functions,
and participating in charitable activities shall be dis-
regarded in determining whether such 30-day limit
has been exceeded.
‘‘(9) The affiliation with another person located
in the State or subdivision, unless—
‘‘(A) the other person located in the State
or subdivision is the person’s agent under the
terms and conditions of subsection (d); and
‘‘(B) the activity of the other person in the
State or subdivision constitutes substantial
physical presence under this subsection and is
performed to establish, enhance, or maintain
the market in the State or subdivision for the
person.
‘‘(10) The use of an unaffiliated representative
or independent contractor in such State or subdivi-
sion for the purpose of performing warranty or re-
pair services with respect to tangible or intangible
personal property sold by a person located outside
the State or subdivision.
‘‘(b) DOMESTIC CORPORATIONS; PERSONS DOMI-
CILED IN OR RESIDENTS OF A STATE.—The provisions
of subsection (a) shall not apply to the imposition of a
business activity tax by any State or subdivision thereof
with respect to—
‘‘(1) any corporation which is incorporated
under the laws of such State; or
‘‘(2) any individual who, under the laws of such
State, is domiciled in, or a resident of, such State.
‘‘(c) SALES OR SOLICITATION OF ORDERS OR CON-
TRACTS FOR SALES BY INDEPENDENT CONTRACTORS.—
For purposes of subsection (a), a person shall not be con-
sidered to have engaged in business activities within a
State or subdivision thereof during any taxable year mere-
ly by reason of sales of tangible or intangible personal
property or services in such State or subdivision, or the
solicitation of orders or contracts for such sales in such
State or subdivision, on behalf of such person by one or
more independent contractors, or by reason of the mainte-
nance of an office in such State or subdivision by one or
more independent contractors whose activities on behalf
of such person in such State or subdivision consist solely
of making such sales, or soliciting orders or contracts for
such sales.
‘‘(d) ATTRIBUTION
OF
ACTIVITIES
AND
PRES-
ENCE.—For purposes of this section, the substantial phys-
ical presence of any person shall not be attributed to any
other person absent the establishment of an actual agency
relationship between such persons that—
‘‘(1) results from the consent by both persons
that one person act on behalf and subject to the con-
trol of the other; and
‘‘(2) relates to the activities of the person with-
in the State or subdivision thereof.
‘‘(e) DEFINITIONS.—For purposes of this title:
‘‘(1) BUSINESS ACTIVITY TAX.—The term ‘busi-
ness activity tax’ means a tax imposed on, or meas-
ured by, net income, a business license tax, a busi-
ness and occupation tax, a franchise tax, a single
business tax or a capital stock tax, or any similar
tax or fee imposed by a State or subdivision thereof
on a business for the right to do business within the
State or subdivision or which is measured by the
amount of such business or related activity.
‘‘(2) INDEPENDENT
CONTRACTOR.—The term
‘independent contractor’ means a commission agent,
broker, or other independent contractor who is en-
gaged in selling, or soliciting orders or contracts for
the sale of, tangible or intangible personal property
or services for more than one principal and who
holds himself or herself out as such in the regular
course of his or her business activities.
‘‘(3) INTERNET.—The term ‘Internet’ means
collectively the myriad of computer and tele-
communications facilities, including equipment and
operating software, which comprise the inter-
connected world-wide network of networks that em-
ploy the Transmission Control Protocol/Internet
Protocol, or any predecessor or successor protocols
to such Protocol.
‘‘(4) INTERNET
ACCESS.—The term ‘Internet
access’ means a service that enables users to access
content, information, electronic mail, or other serv-
ices offered over the Internet, and may also include
access to proprietary content, information, and other
services as a part of a package of services offered to
users.
‘‘(5) REPRESENTATIVE.—The term ‘representa-
tive’ does not include an independent contractor.
‘‘(6) SOLICITATION
OF
ORDERS
OR
CON-
TRACTS.—The term ‘solicitation of orders or con-
tracts’ includes activities normally ancillary to such
solicitation.
‘‘(7) STATE.—The term ‘State’ means any of
the several States, the District of Columbia, or any
territory or possession of the United States.
‘‘(8) WORLD
WIDE
WEB.—The term ‘World
Wide Web’ means a computer server-based file ar-
chive accessible, over the Internet, using a hypertext
transfer protocol, file transfer protocol, or other
similar protocols.
‘‘(f) APPLICATION OF SECTION.—This section shall
not be construed to limit, in any way, constitutional re-
strictions otherwise existing on State or local taxing au-
thority.
‘‘SEC. 102. ASSESSMENT OF BUSINESS ACTIVITY TAXES.
‘‘(a) LIMITATIONS.—No State or subdivision thereof
shall have power to assess after the date of enactment of
this title any business activity tax which was imposed by
such State or subdivision for any taxable year ending on
or before such date, on or measured by the business activ-
ity within such State that affect interstate commerce, if
the imposition of such tax for a taxable year ending after
such date is prohibited by section 101.
‘‘(b) COLLECTIONS.—The provisions of subsection
(a) shall not be construed—
‘‘(1) to invalidate the collection on or before the
date of enactment of this title of any business activ-
ity tax imposed for a taxable year ending on or be-
fore such date; or
‘‘(2) to prohibit the collection after such date of
any business activity tax which was assessed on or
before such date for a taxable year ending on or be-
fore such date.
‘‘SEC. 103. TERMINATION OF SUBSTANTIAL PHYSICAL PRES-
ENCE.
‘‘If a State or subdivision thereof has imposed a busi-
ness activity tax on a person as described in section 101,
and the person so obligated no longer has a substantial
physical presence in that State or subdivision, the obliga-
tion to pay a business activity tax applies only for the pe-
riod in which the person has a substantial physical pres-
ence.
‘‘SEC. 104. SEPARABILITY.
‘‘If any provision of this title or the application of
such provision to any person or circumstance is held in-
valid, the remainder of this title or the application of such
provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.’’.
Æ