105TH CONGRESS
2D SESSION
H. R. 4105
AN ACT
To establish a national policy against State and
local interference with interstate commerce on
the Internet, to exercise congressional jurisdic-
tion over interstate commerce by establishing a
moratorium on the imposition of exactions that
would interfere with the free flow of commerce
via the Internet, to establish a national policy
against Federal and State regulation of Internet
access and online services, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Internet Tax Freedom
Act’’.
SEC. 2. MORATORIUM ON CERTAIN TAXES.
(a) AMENDMENT.—Title 4 of the United States Code
is amended by adding at the end the following:
‘‘CHAPTER 6—MORATORIUM ON CERTAIN TAXES
‘‘Sec.
‘‘151. Moratorium.
‘‘152. Advisory commission on electronic commerce.
‘‘153. Legislative recommendations.
‘‘154. Expedited consideration of legislative recommendations.
‘‘155. Definitions.
‘‘§ 151. Moratorium
‘‘(a) MORATORIUM.—For a period of 3 years follow-
ing the date of the enactment of this chapter, neither any
State, nor any political subdivision thereof, shall impose,
assess, collect, or attempt to collect—
‘‘(1) taxes on Internet access;
‘‘(2) bit taxes; or
‘‘(3) multiple or discriminatory taxes on elec-
tronic commerce.
‘‘(b) EXCEPTION TO MORATORIUM.—(1) Subject to
paragraph (2), the moratorium in subsection (a)(1) shall
not apply to the following taxes (as applicable), as in effect
on the date of the enactment of this chapter, on Internet
access:
‘‘(A) STATE
OF
CONNECTICUT.—Section 12–
407(2)(i)(A) of the General Statutes of Connecticut.
‘‘(B) 
STATE
OF
WISCONSIN.—Section
77.52(2)(a)5 of the Wisconsin Statutes (1995–96).
‘‘(C) STATE OF IOWA.—Section 422.43(1) of
the Code of Iowa (1997).
‘‘(D) STATE OF NORTH DAKOTA.—North Da-
kota Century Code 57–39.2 and 57–34.
‘‘(E) STATE OF SOUTH DAKOTA.—South Da-
kota Codified Law Annotated 10–45–5.
‘‘(F) STATE
OF
NEW
MEXICO.—New Mexico
Statutes Annotated 7–9–3.
‘‘(G) STATE OF TENNESSEE.—Tennessee Code
Annotated 67–6–221, 67–6–102(23)(iii), and 67–6–
702(g).
‘‘(H) STATE OF OHIO.—Chapter 5739 of the
Ohio Revised Code.
‘‘(2)(A) Paragraph (1) shall apply with respect to a
tax referred to in such paragraph only if the referenced
State enacts, during the 1–year period beginning on the
date of the enactment of this chapter, a law to expressly
affirm that such tax is imposed on Internet access.
‘‘(B) A State that satisfies the requirement specified
in subparagraph (A) shall be deemed to have satisfied
such requirement immediately after the enactment of this
chapter, except that such State may not impute penalties
or interest on any tax accrued during the period beginning
on the date of the enactment of this Act and ending on
the date such State satisfies such requirement.
‘‘(c) APPLICATION OF MORATORIUM.—Subsection (a)
shall not apply with respect to the provision of Internet
access that is offered for sale as part of a package of serv-
ices that includes services other than Internet access, un-
less the service provider separately states that portion of
the billing that applies to such services on the user’s bill.
‘‘§ 152. 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 chap-
ter referred to as the ‘Commission’). The Commission
shall—
‘‘(1) be composed of 31 members appointed in
accordance with subsection (b), including the chair-
person who shall be selected by the members of the
Commission from among individuals specified in
subsection (b); and
‘‘(2) conduct its business in accordance with the
provisions of this chapter.
‘‘(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) Three representatives from the Fed-
eral Government comprised of the Attorney
General, 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: (i)
two representatives each from the National
Governors’ Association, the National Con-
ference of State Legislatures, the Council of
State Governments, the National Association of
Counties, the National League of Cities, and
the United States Conferences of Mayors; and
(ii) one representative each from the Inter-
national City/County Management Association
and the American Legislative Exchange Coun-
cil.
‘‘(C) Fourteen representatives of taxpayers
and business—
‘‘(i) seven of whom shall be appointed
jointly by the Speaker of the House of
Representatives and the majority leader of
the Senate, of whom three shall be individ-
uals employed by or affiliated with persons
engaged in providing Internet access or
communications or transactions that use
the Internet, three shall be individuals em-
ployed by or affiliated with persons en-
gaged in electronic commerce (including at
least one who is employed by or affiliated
with a person also engaged in mail order
commerce), and one shall be an individual
employed by or affiliated with a person en-
gaged in software publishing; and
‘‘(ii) seven of whom shall be appointed
jointly by the minority leader of the House
of Representatives and the minority leader
of the Senate, of whom three shall be indi-
viduals employed by or affiliated with per-
sons engaged in providing Internet access
or communications or transactions that use
the Internet, three shall be individuals em-
ployed by or affiliated with persons en-
gaged in electronic commerce (including at
commerce, that incorporates all manner of making
consumer payments, 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 pro-
portionate share of such taxes, including an exam-
ination of collection of sales or use tax by small vol-
ume remote sellers only in the State of origin;
‘‘(7) examining ways to simplify the interstate
administration of sales and use tax on remote com-
merce, including a review of the need for a single or
uniform tax registration, single or uniform tax re-
turns, simplified remittance requirements, and sim-
plified administrative procedures;
‘‘(8) examining the need for an independent
third party collection system that would utilize the
Internet to further simplify sales and use tax admin-
istration and collection;
‘‘(9) reviewing the efforts of States to collect
sales and use taxes owed on purchases from remote
sellers, as well as review the appropriateness of in-
creased activities by States to collect sales and use
taxes directly from customers of remote sellers;
‘‘(10) examining the level of contacts sufficient
to permit a State to impose a sales or use tax on
remote commerce that would subject a remote seller
to collection obligations imposed by the State, in-
cluding—
‘‘(A) the definition of a level of contacts
below which a State may not impose collection
obligations on a remote seller;
‘‘(B) whether or not such obligations are
applied in a nondiscriminatory manner with re-
spect to nonremote transactions; and
‘‘(C) the impact of such obligation on
small business remote sellers;
‘‘(11) examining making permanent the tem-
porary moratorium described in section 151 with re-
spect to Internet access as well as such other taxes
that the Commission deems appropriate;
‘‘(12) examining ways to simplify State and
local taxes imposed on the provision of telecommuni-
cations services;
‘‘(13) requiring the Commission to hold a pub-
lic hearing to provide an opportunity for representa-
tives of the general public, taxpayer groups, con-
sumer groups, State and local government officials,
and tax-supported institutions to testify; and
‘‘(14) examining other State and local tax
issues that are relevant to the duties of the Commis-
sion.
‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—The
Federal Advisory Committee Act shall not apply with re-
spect to the Commission.
‘‘§ 153. Legislative recommendations
‘‘(a) TRANSMISSION OF PROPOSED LEGISLATION.—
Not later than 2 years after the date of the enactment
of this chapter, the Commission shall transmit to the
President and the Congress proposed legislation reflecting
any findings concerning the matters described in such sec-
tion.
‘‘(b) CONTENTS OF PROPOSED LEGISLATION.—The
proposed legislation submitted under subsection (a) by the
Commission shall have been agreed to by at least 19 mem-
bers of the Commission and may—
‘‘(1) define with particularity the level of con-
tacts between a State and remote seller that the
Commission considers sufficient to permit a State to
impose collection obligations on the remote seller
and the level of contacts which is not sufficient to
impose collection obligations on remote sellers;
‘‘(2) provide that if, and only if, a State has
adopted a single sales and use tax rate for remote
commerce and established a method of distributing
to its political subdivisions their proportionate share
of such taxes, and adopted simplified procedures for
the administration of its sales and use taxes, includ-
ing uniform registration, tax returns, remittance re-
quirements, and filing procedures, then such State
should be authorized to impose on remote sellers a
duty to collect sales or use tax on remote commerce;
‘‘(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 remote
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 morato-
rium described in section 151 with respect to Inter-
net access, as well as such other taxes (including
those described in section 151) that the Commission
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.
‘‘(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 Congress such policy rec-
ommendations as the President deems necessary or expe-
dient.
‘‘§ 154. Expedited consideration of legislative rec-
ommendations
‘‘(a) Not later than 90 legislative days after the
transmission to the Congress by the Commission of the
proposed legislation described in section 153, such legisla-
tion 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.
‘‘§ 155. Definitions
‘‘For the purposes of this chapter:
‘‘(1) BIT TAX.—The term ‘bit tax’ means any
tax on electronic commerce expressly imposed on or
measured by the volume of digital information trans-
mitted electronically, or the volume of digital infor-
mation per unit of time transmitted electronically,
but does not include taxes imposed on the provision
of telecommunications services.
‘‘(2) COMPUTER SERVER.—The term ‘computer
server’ means a computer that functions as a cen-
tralized provider of information and services to mul-
tiple recipients.
‘‘(3) DISCRIMINATORY
TAX.—The term ‘dis-
criminatory tax’ means—
‘‘(A) any tax imposed by a State or politi-
cal subdivision thereof on electronic commerce
that—
‘‘(i) is not generally imposed and le-
gally collectible by such State or such polit-