S 2775 IS

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.

June 22, 2000

Mr. DORGAN (for himself, Mr. ENZI, Mr. VOINOVICH, Mr. BREAUX, Mr. GRAHAM, Mr. HUTCHINSON, Mrs. LINCOLN, Mr. BENNETT, Mr. BRYAN, Mr. CLELAND, and Mr. THOMAS) introduced the following bill; which was read twice and referred to the Committee on Finance

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 Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Internet Tax Moratorium and Equity Act'.

SEC. 2. FINDINGS.

The Congress makes the following findings:

(1) The moratorium of the Internet Tax Freedom Act on new taxes on Internet access and on multiple and discriminatory taxes on electronic commerce 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 systems 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 MORATORIUM 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 the Congress that States and localities should work together, with the advice of the National Conference of Commissioners on Uniform State Laws, to develop a streamlined sales and use tax system that addresses the following in the context of remote sales:

(1) A centralized, one-stop, multi-state registration system for sellers.

(2) Uniform definitions for goods or services, whose sale 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 designation and identification of purchasers exempt from sales and use taxes; and

(B) immunization 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) Uniform bad debt rules.

(7) A uniform format for tax returns and remittance forms.

(8) Consistent electronic filing and remittance methods.

(9) State administration of all State and local sales and use taxes.

(10) Uniform audit procedures, including a provision giving a seller the option to be subject to no more than a single audit per year using those procedures; provided that if the seller does not comply with the procedures to elect a single audit, any States can conduct an audit using those procedures.

(11) Reasonable compensation for tax collection by sellers.

(12) Exemption from use tax collection requirements for remote sellers falling below a de minimis threshold of $5,000,000 in gross annual sales.

(13) Appropriate protections for consumer privacy.

(14) Such other features that the States deem warranted to promote simplicity, uniformity, neutrality, efficiency, and fairness.

(b) NO UNDUE BURDEN- The 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 technologies in any material way.

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), the 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 Compact Disapproved-

(1) ADOPTING STATES TO TRANSMIT- Upon the 20th State becoming a signatory to the Compact, the adopting States shall transmit a copy of the Compact to Congress.

(2) CONGRESSIONAL ACTION- The consent of the Congress to the Compact is withdrawn if the 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 it to the Congress.

SEC. 6. AUTHORIZATION TO SIMPLIFY STATE USE-TAX RATES THROUGH AVERAGING.

(a) IN GENERAL- A State 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 effect if such rate is no greater than the weighted average of the sales tax rates actually imposed by a State and its local jurisdictions during the second calendar year 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 in a prior calendar year only if, had such rate been assessed during such prior calendar year on all sales on which a sales tax was actually assessed by such State and its local jurisdictions, such rate would not have yielded a greater total assessment of taxes than the total taxes actually assessed on such sales during such year.

(d) ANNUAL OPTION TO COLLECT ACTUAL TAX- Notwithstanding subsection (a), a remote seller has the annual option of collecting applicable State and local use taxes throughout a State.

SEC. 7. AUTHORIZATION TO REQUIRE COLLECTION OF USE TAXES.

(a) Grant of Authority-

(1) STATES THAT ADOPT THE SYSTEM MAY REQUIRE COLLECTION- Any State that has adopted the system described in the Compact is authorized, notwithstanding any other provision of law, to require all sellers not qualifying for the de minimis exception 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 imposed by virtue of authority granted by subsection (a)(1) or denied by subsection (a)(2) shall be considered in determining 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 related 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 licensing requirements of a State or political subdivision thereof, nor shall anything in this Act be construed as affecting the application of such taxes or requirements or enlarging or reducing the authority of any State or political 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.

(3) REMOTE SALE- The term `remote sale' means a sale in interstate commerce of goods or services attributed, under the rules established pursuant to section 4(a)(3) of this Act, to a particular taxing jurisdiction that could not, except for the authority granted by this Act, require that the seller of such goods or services collect and remit sales or use taxes on such sale.

(4) LOCUS OF REMOTE SALE- The term `particular taxing jurisdiction', when used with respect to the location of a remote sale means a remote sale of goods or services attributed, under the rules established pursuant to section 4(a)(3) of this Act, to a particular taxing jurisdiction.

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