I
105TH CONGRESS
2D SESSION
H. R. 3849
To amend the Communications Act of 1934 to establish a national policy
against Federal and State regulation of Internet access and online serv-
ices, and to exercise congressional jurisdiction over interstate and foreign
commerce by establishing a moratorium on the imposition of exactions
that would interfere with the free flow of commerce conducted over
the Internet, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 12, 1998
Mr. COX of California (for himself and Mr. WHITE) introduced the following
bill; which was referred to the Committee on Commerce, and in addition
to the Committees on Ways and Means, the Judiciary, and Rules, for a
period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the com-
mittee concerned
A BILL
To amend the Communications Act of 1934 to establish
a national policy against Federal and State regulation
of Internet access and online services, and to exercise
congressional jurisdiction over interstate and foreign
commerce by establishing a moratorium on the imposi-
tion of exactions that would interfere with the free flow
of commerce conducted over the Internet, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Internet Tax Freedom
Act’’.
SEC. 2. PROVISION OF INTERNET ACCESS AND ONLINE
SERVICES.
Title II of the Communications Act of 1934 is
amended by inserting after section 230 (47 U.S.C. 230)
the following new section:
‘‘SEC. 231. PROHIBITION ON REGULATION OF INTERNET AC-
CESS AND ONLINE SERVICES.
‘‘(a) The Commission shall have no authority or juris-
diction under this title or section 4(i) of the Communica-
tions Act of 1934, as amended (47 U.S.C. 154(i)), nor
shall any State commission have any authority or jurisdic-
tion, to regulate the prices or charges paid by subscribers
for Internet access or online services.
‘‘(b) PRESERVATION
OF AUTHORITY.—Nothing in
this subsection shall limit or otherwise affect—
‘‘(1) the Commission’s or State Commission’s
implementation of the Telecommunications Act of
1996 (Public Law 104–104) or the amendments
made by such Act; and
‘‘(2) the Commission’s or State Commission’s
authority to regulate common carriers that offer
Internet access or online services in conjunction with
the provision of any telephone toll, telephone ex-
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change, or exchange access services as such terms
are defined in title I.
‘‘(c) DEFINITIONS.—As used in this section:
‘‘(1) INTERNET.—The term ‘Internet’ means
the combination of computer facilities and electro-
magnetic transmission media, and related equipment
and software, comprising the interconnected world-
wide network of computer networks that employ the
Transmission Control Protocol/Internet Protocol, or
any predecessor or successor protocol, to transmit
information.
‘‘(2) INTERNET
ACCESS.—The term ‘Internet
access’ means a service that enables users to access
content, information, and other services offered over
the Internet.
‘‘(3) ONLINE SERVICE.—The term ‘online serv-
ice’ means the offering or provision of content or in-
formation services to a user as part of a package of
services that are combined with Internet access.’’.
SEC. 3. FEDERAL REGULATORY FEES.
(a) NO REGULATORY FEES.—Title II of the Commu-
nications Act of 1934 is amended by inserting in section
9(h) (47 U.S.C. 159(h)) after ‘‘47 C.F.R. Part 97’’ ‘‘; or
(3) providers of Internet access or online service’’.
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(b) CONFORMING AMENDMENT.—Section 9(h) of the
Communications Act of 1934 (47 U.S.C. 159(h)) is
amended by striking ‘‘or’’ that appears before ‘‘(2)’’.
(c) DETERMINATION.—Not later than 1 year after
the date of the enactment of this Act, the National Tele-
communications and Information Administration shall de-
termine whether any direct or indirect Federal regulatory
fees, other than the fees identified in subsection (a), are
imposed on providers of Internet access or online services,
and if so, make recommendations to the Congress regard-
ing whether such fees should be modified or eliminated.
SEC. 4. REPORT ON FOREIGN COMMERCE.
(a) CONTENTS OF REPORT.—In order to promote
electronic commerce, the Secretary of Commerce, in con-
sultation with appropriate committees of the Congress,
shall undertake an examination of—
(1) barriers imposed in foreign markets on
United States providers of property, goods, services,
or information engaged in electronic commerce and
on United States providers of telecommunications
services;
(2) how the imposition of such barriers will af-
fect United States consumers, the competitiveness of
United States citizens providing property, goods,
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service, or information in foreign markets, and the
growth and maturing of the Internet; and
(3) what measures the Government should pur-
sue to foster, promote, and develop electronic com-
merce in the United States and in foreign markets.
(b) PUBLIC COMMENT.—For purposes of this section,
the Secretary of Commerce shall give all interested per-
sons an opportunity to comment on the matters identified
in subsection (a) through written or oral presentations of
data, views, or arguments.
(c) TRANSMITTAL TO THE PRESIDENT.—Not later
than 18 months after the date of the enactment of this
Act, the Secretary of Commerce shall transmit to the
President a report containing the results of the examina-
tion undertaken in accordance with subsection (a).
(d) RECOMMENDATIONS OF THE PRESIDENT.—Not
later than 2 years and 45 days after the date of the enact-
ment of this Act, the President shall review the report de-
scribed in subsection (c) and submit to the appropriate
committees of Congress such policy recommendations as
the President deems necessary or expedient.
SEC. 5. MORATORIUM ON CERTAIN TAXES.
(a) MORATORIUM.—For a period of 3 years following
the date of the enactment of this Act, neither any State,
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nor any political subdivision thereof, shall impose, assess,
collect, or attempt to collect—
(1) taxes on Internet access or online services;
(2) bit taxes; or
(3) multiple or discriminatory taxes on elec-
tronic commerce.
(b) EXCEPTION TO MORATORIUM.—(1) The morato-
rium in subsection (a)(1) shall not apply to taxes on Inter-
net access or online services generally imposed and actu-
ally enforced under State law before March 1, 1998.
(2) Subsection (b)(1) shall be enforceable only if a
State enacts a law to expressly impose such tax within
one year from the date of enactment. Failure of a State
to act does not affect liabilities for taxes accrued and en-
forced prior to March 1, 1998 nor does it affect ongoing
litigation relating to such assessments.
(c) APPLICATION OF MORATORIUM.—Subsection (a)
shall not apply with respect to the provision of Internet
access or online services that are offered for sale as part
of a package of services that includes services other than
Internet access or online services, unless the service pro-
vider separately states that portion of the billing that ap-
plies to such services on the user’s bill.
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SEC. 6. ADVISORY COMMISSION ON ELECTRONIC COM-
MERCE.
(a) ESTABLISHMENT OF COMMISSION.—There is es-
tablished a temporary commission to be known as the Ad-
visory Commission on Electronic Commerce (in this Act
referred to as the ‘‘Commission’’). The Commission
shall—
(1) be composed of 29 members, which includes
2 chairpersons selected in accordance with sub-
section (b); and
(2) conduct its business in accordance with the
provisions of this Act.
(b) MEMBERSHIP.—
(1) IN
GENERAL.—The Commissioners shall
serve for the life of the Commission. The member-
ship of the Commission shall be as follows:
(A) Two representatives from the Federal
Government comprised of the Secretary Of
Commerce and the Secretary of the Treasury,
or their respective representatives.
(B) Fourteen representatives from State,
local, and county governments comprised of 2
representatives each from the National gov-
ernors’ Association, the National Conference of
State Legislatures, the Council of State Govern-
ments, the National Association of Counties,
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(c) ACCEPTANCE OF GIFTS AND GRANTS.—The Com-
mission may accept, use, and dispose of gifts or grants
of services or property, both real and personal, for pur-
poses of aiding or facilitating the work of the Commission.
Gifts or grants not used at the expiration of the Commis-
sion 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 Commerce and
the Department of the Treasury. The Commission shall
also have reasonable access to use the facilities of the De-
partment of the Commerce and Department of the Treas-
ury for purposes of conducting meetings.
(e) SUNSET.—The existence of the Commission shall
terminate—
(1) when the last of the committees of jurisdic-
tion referred to in section 8 concludes consideration
of the legislation proposed under section 7; or
(2) 3 years after the date of the enactment of
this Act;
whichever occurs first.
(f) RULES OF THE COMMISSION.—
(1) Fifteen members of the Commission shall
constitute a quorum for conducting the business of
the Commission.
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(2) Any meetings held by the Commission shall
be duly noticed at least 14 days in advance and shall
be open to the public.
(3) The Commission may adopt other rules as
needed.
(g) DUTIES OF THE COMMISSION.—The Commission,
in consultation with the National Tax Association Commu-
nications and Electronic Commerce Tax Project, and other
interested parties, shall—
(1) identify the taxes, fees, and charges im-
posed on electronic commerce within the United
States that could impede the development of such
commerce;
(2) propose a uniform system of definitions of
electronic commerce that may be subject to sales
and use tax within each State;
(3) propose a simplified system for sales and
use tax for electronic commerce that would provide
for a single statewide sales or use tax rate (which
rate may be zero), and would establish a method of
distributing to political subdivisions within each
State their proportionate share of such taxes;
(4) examine ways to simplify the interstate ad-
ministration of sales and use tax on electronic com-
merce, including a review of the need for a single or
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uniform tax registration, single or uniform tax re-
turns, simplified remittance requirements, and sim-
plified administrative procedures;
(5) examine the need for an independent third
party collection system that would utilize the Inter-
net to further simplify sales and use tax administra-
tion and collection;
(6) examine the level of contacts sufficient to
permit a State to impose a sales or use tax on elec-
tronic commerce that would subject a remote seller
to collection obligations imposed by the State, in-
cluding the definition of a level of contacts below
which a State may not impose collection obligations
on a remote seller;
(7) examine the level of contacts sufficient to
permit a State to impose sales or use tax on trans-
actions not involving electronic commerce, and
whether collection obligations imposed by a State are
applied in a nondiscriminatory manner with respect
to electronic commerce and such transactions;
(8) examine ways to simplify State and local
taxes imposed on the provision of telecommuni-
cations services; and
(9) examine other issues that the Commission
determines to be relevant.
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(h) FEDERAL ADVISORY COMMITTEE ACT.—The
Federal Advisory Committee Act (5 U.S.C. App.) shall not
apply with respect to the Commission.
SEC. 7. LEGISLATIVE RECOMMENDATIONS.
(a) TRANSMISSION OF PROPOSED LEGISLATION.—
Not later than 2 years after the date of the enactment
of this Act, the Commission described in section 6 shall
transmit to the President and the Congress proposed legis-
lation reflecting any findings concerning the matters de-
scribed in such section.
(b) CONTENTS OF PROPOSED LEGISLATION.—The
proposed legislation submitted under subsection (a) by the
Commission shall have been agreed to by at least 18 mem-
bers of the Commission and shall—
(1) define with particularity the level of con-
tacts between a State and remote seller that the
Commission considers should be sufficient to permit
a State to impose collection obligations on the re-
mote seller;
(2) provide that if, and only if, a State has
adopted a single sales and use tax rate for electronic
commerce, and adopted simplified procedures for the
administration of its sales and use taxes, including
uniform registration, tax returns, remittance re-
quirements, and filing procedures, then such State
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should be authorized to impose on remote sellers a
duty to collect sales or use tax on electronic com-
merce;
(3) provide that, effective upon the expiration
of a 4-year period beginning on the date of the en-
actment of such legislation, a State that does not
have in effect a single sales and use tax rate and
simplified administrative procedures shall be deemed
to have in effect a sales and use tax rate on elec-
tronic commerce equal to zero, until such time as
such State does adopt a single sales and use tax rate
and simplified administrative procedures;
(4) include uniform definitions of categories of
property, goods, services, or information subject to,
or exempt from, sales and use taxes;
(5) make permanent the temporary moratorium
described in section 5 with respect to Internet access
and online services, as well as such other taxes (in-
cluding those described in section 5) that the Com-
mission deems appropriate;
(6) provide a mechanism for the resolution of
disputes between States regarding matters involving
multiple taxation; and
(7) include other provisions that the Commis-
sion deems necessary.
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(c) RECOMMENDATIONS OF THE PRESIDENT.—Not
later than 45 days after the receipt of the Commission’s
legislative proposals, the President shall review such pro-
posals and submit to the appropriate committees of the
Congress such policy recommendations as the President
deems necessary or expedient.
SEC. 8. EXPEDITED CONSIDERATION OF LEGISLATIVE REC-
OMMENDATIONS.
(a) Not later than 90 legislative days after the trans-
mission to the Congress of the proposed legislation de-
scribed in section 7, such legislation shall be considered
by the respective committees of jurisdiction within the
House of Representatives and the Senate, and, if reported,
shall be referred to the proper calendar on the floor of
each House for final action.
(b) For purposes of this section, the 90-day period
shall be computed by excluding—
(1) the days on which either House is not in
session because of an adjournment of more than 3
days to a day certain or an adjournment of the Con-
gress sine die; and
(2) any Saturday and Sunday, not excluded
under paragraph (1), when either House is not in
session.