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 simpli-
fying 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.
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 Morato-
rium and Equity Act’’.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) The moratorium of the Internet Tax Free-
dom Act on new taxes on Internet access and on
multiple and discriminatory taxes on electronic com-
merce should be extended.
(2) States should be encouraged to simplify
their sales and use tax systems.
(3) As a matter of economic policy and basic
fairness, similar sales transactions should be treated
equally, without regard to the manner in which sales
are transacted, whether in person, through the
mails, over the telephone, on the Internet, or by
other means.
(4) Congress may facilitate such equal taxation
consistent with the United States Supreme Court’s
decision in Quill Corp. v. North Dakota.
(5) States that adequately simplify their tax
systems should be authorized to correct the present
inequities in taxation through requiring sellers to
collect taxes on sales of goods or services delivered
in-state, without regard to the location of the seller.
(6) The States have experience, expertise, and
a vital interest in the collection of sales and use
taxes, and thus should take the lead in developing
and implementing sales and use tax collection sys-
tems that are fair, efficient, and non-discriminatory
in their application and that will simplify the process
for both sellers and buyers.
(7) Online consumer privacy is of paramount
importance to the growth of electronic commerce
and must be protected.
SEC. 3. EXTENSION OF INTERNET TAX FREEDOM ACT MOR-
ATORIUM THROUGH 2005.
Section 1101(a) of the Internet Tax Freedom Act (47
U.S.C. 151 note) is amended by striking ‘‘3 years after
the date of the enactment of this Act—’’ and inserting
‘‘on December 31, 2005:’’.
SEC. 4. STREAMLINED SALES AND USE TAX SYSTEM.
(a) DEVELOPMENT OF STREAMLINED SYSTEM.—It is
the sense of Congress that States and localities should
work together to develop a streamlined sales and use tax
system that addresses the following in the context of re-
mote sales:
(1) A centralized, one-stop, multi-state registra-
tion system for sellers.
(2) Uniform definitions for goods or services,
the sale of which may, by State action, be included
in the tax base.
(3) Uniform rules for attributing transactions
to particular taxing jurisdictions.
(4) Uniform procedures for—
(A) the treatment of purchasers exempt
from sales and use taxes; and
(B) relief from liability for sellers that rely
on such State procedures.
(5) Uniform procedures for the certification of
software that sellers rely on to determine sales and
use tax rates and taxability.
(6) A uniform format for tax returns and re-
mittance forms.
(7) Consistent electronic filing and remittance
methods.
(8) State administration of all State and local
sales and use taxes.
(9) Uniform audit procedures, including a pro-
vision giving a seller the option to be subject to no
more than a single audit per year using those proce-
dures; except that if the seller does not comply with
the procedures to elect a single audit, any State can
conduct an audit using those procedures.
(10) Reasonable compensation for tax collection
by sellers.
(11) Exemption from use tax collection require-
ments for remote sellers falling below a de minimis
threshold of $5,000,000 in gross annual sales.
(12) Appropriate protections for consumer pri-
vacy.
(13) Such other features that the States deem
warranted to promote simplicity, uniformity, neu-
trality, efficiency, and fairness.
(b) NO UNDUE BURDEN.—Congress finds that, if
adopted, the system described in subsection (a) will not
place an undue burden on interstate commerce or burden
the growth of electronic commerce and related tech-
nologies in any material way.
(c) STUDY.—It is the sense of Congress that a joint,
comprehensive study should be commissioned by State and
local governments and the business community to deter-
mine the cost to all sellers of collecting and remitting
State and local sales and use taxes on sales made by sell-
ers under the law as in effect on the date of enactment
of this Act and under the system described in subsection
(a) to assist in determining what constitutes reasonable
compensation.
SEC. 5. INTERSTATE SALES AND USE TAX COMPACT.
(a) AUTHORIZATION AND CONSENT.—In general, the
States are authorized to enter into an Interstate Sales and
Use Tax Compact. Subject to subsection (c), Congress
consents to their entry into that Compact. The Compact
shall describe a uniform, streamlined sales and use tax
system consistent with section 4(a), and shall provide that
States joining the Compact must adopt that system.
(b) EXPIRATION.—The authorization and consent in
subsection (a) shall expire if the Compact has not been
formed before January 1, 2006.
(c) CONGRESSIONAL CONSENT WITHDRAWN IF COM-
PACT DISAPPROVED.—
(1) ADOPTING
STATES
TO
TRANSMIT.—Upon
the 20th State becoming a signatory to the Com-
pact, the adopting States shall transmit a copy of
the Compact to Congress.
(2) CONGRESSIONAL ACTION.—The consent of
Congress to the Compact is withdrawn if Congress,
by law, disapproves the Compact within 120 days
(computed in accordance with section 154 of the
Trade Act of 1974 (19 U.S.C. 2194)) after the
adopting States transmit the Compact to Congress.
SEC. 6. AUTHORIZATION TO SIMPLIFY STATE USE-TAX
RATES THROUGH AVERAGING.
(a) IN GENERAL.—Subject to the exception in sub-
section (e), a State that adopts the Compact authorized
under section 5 and that levies a use tax shall impose a
single, uniform State-wide use-tax rate on all remote sales
on which it assesses a use tax for any calendar year for
which the State meets the requirements of subsection (b).
(b) AVERAGING REQUIREMENT.—A State meets the
requirements of this subsection for any calendar year in
which the single, uniform State-wide use-tax rate is in ef-
fect if such rate is no greater than the weighted average
of the sales tax rates actually imposed by the State and
its local jurisdictions during the 12-month period ending
on June 30 prior to such calendar year.
(c) COMPUTATION
OF RATE NO GREATER THAN
WEIGHTED AVERAGE.—For purposes of subsection (b), a
State-wide use-tax rate is no greater than the weighted
average of the sales tax rates imposed during a 12-month
period described in subsection (b) only if, had such rate
been assessed during such period on all sales subject to
the sales and use tax by such State and its local jurisdic-
tions, such rate would not have yielded a greater total as-
sessment of taxes than the total taxes actually assessed
on such sales during such period.
(d) ANNUAL OPTION TO COLLECT ACTUAL TAX.—
Notwithstanding subsection (a), a remote seller may elect
annually to collect the actual applicable State and local
use taxes on each sale made in the State.
(e) ALTERNATIVE SYSTEM.—A State that adopts the
dramatically simplified sales and use tax system described
in the Compact authorized under section 5 so that remote
sellers can use information provided by the State to iden-
tify the single applicable rate for each sale, may require
a remote seller to collect the actual applicable State and
local sales or use tax due on each sale made in the State
if the State provides such seller relief from liability to the
State for relying on such information provided by the
State.
SEC. 7. AUTHORIZATION TO REQUIRE COLLECTION OF USE
TAXES.
(a) GRANT OF AUTHORITY.—
(1) STATES THAT ADOPT THE SYSTEM MAY RE-
QUIRE COLLECTION.—Any State that has adopted
the system described in the Compact is authorized,
notwithstanding any other provision of law, to re-
quire all sellers not qualifying for the de minimis ex-
ception to collect and remit sales and use taxes on
remote sales to purchasers located in such State
after the expiration of the 120 day period described
by section 5(c)(2) unless the Compact is disapproved
under section 5(c).
(2) STATES THAT DO NOT ADOPT THE SYSTEM
MAY
NOT
REQUIRE
COLLECTION.—Paragraph (1)
does not extend to any State that does not adopt the
system described in the Compact.
(b) NO EFFECT ON NEXUS, ETC.—No obligation im-
posed by virtue of authority granted by subsection (a)(1)
or denied by subsection (a)(2) shall be considered in deter-
mining whether a seller has a nexus with any State for
any other tax purpose. Except as provided in subsection
(a), nothing in this Act permits or prohibits a State—
(1) to license or regulate any person;
(2) to require any person to qualify to transact
intrastate business; or
(3) to subject any person to State taxes not re-
lated to the sale of goods or services.
SEC. 8. LIMITATION.
In general, nothing in this Act shall be construed as
subjecting sellers to franchise taxes, income taxes, or li-
censing requirements of a State or political subdivision
thereof, nor shall anything in this Act be construed as af-
fecting the application of such taxes or requirements or
enlarging or reducing the authority of any State or polit-
ical subdivision to impose such taxes or requirements.
SEC. 9. DEFINITIONS.
In this Act:
(1) STATE.—The term ‘‘State’’ means any
State of the United States of America and includes
the District of Columbia.
(2) GOODS OR SERVICES.—The term ‘‘goods or
services’’ includes tangible and intangible personal
property and services.