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(1) IN GENERAL.--Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C. 1395x(s)(2)(J))
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(2) CONFORMING AMENDMENTS.--
(A) Section 1832 of the Social Security Act (42 U.S.C. 1395k) (as amended by section 227(b) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-354), as enacted into law by section 1000(a)(6) of Public Law 106-113) is amended--
(i) by striking subsection (b); and
(ii) by redesignating subsection (c) as subsection (b).
(B) Subsections (c) and (d) of section 227 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-355), as enacted into law by section 1000(a)(6) of Public Law 106-113, are repealed.
(3) EFFECTIVE DATE.--The amendments made by this subsection shall apply to drugs furnished on or after the date of enactment of this Act.
(b) EXTENSION OF CERTAIN SECONDARY PAYER REQUIREMENTS.--Section 1862(b)(1)(C) of the Social Security Act (42 U.S.C. 1395y(b)(1)(C)) is amended by adding at the end the following: ``With regard to immunosuppressive drugs furnished on or after the date of enactment of the Comprehensive Immunosuppressive Drug Coverage for Transplant Patients Act of 2000, this subparagraph shall be applied without regard to any time limitation.''.
By Mr. GREGG (for himself and Mr. KOHL):
S. 2401. A bill to provide jurisdictional standards for imposition of State and local business activity, sales , and use tax obligations on interstate commerce, and for other purposes; to the Committee on Finance.
THE NEW ECONOMY TAX SIMPLIFICATION ACT
Mr. GREGG. Mr. President, I rise today with Senator KOHL to introduce the New Economy Tax Simplification Act or NETSA. Electronic commerce is reshaping our society. In many ways, the strong economic conditions we currently enjoy are a result of the convenience, lower costs, and global connections provided by the internet . The question for us as a nation is how to manage this new enterprise so that it continues to benefit our nation's economy, particularly in regard to the taxation of e-commerce.
So far, the government's hands-off approach is working. Our nation's unemployment and inflation rates are at record lows and higher paying jobs are being created at a tremendous rate. Many financial experts attribute the record low inflation rates to the Internet . A University of Texas study found that the Internet economy grew an astounding 68% rate in the past 12 months.
Another sign of the good times is the surplus revenue flowing into federal and state treasuries all over the nation. The federal government's budget is balanced for the first time in a generation and the 50 states ended 1998 with a collective surplus of $11 billion. States are seeing revenue increases of more than 5 percent a year through the 1990's. This hardly seems like a compelling rationale for levying taxes on the Internet. Yet a heated debate is raging between those who want to keep the internet free of taxes and state and local governments who seek to impose widespread taxes on internet sales.
The Advisory Commission on Electronic Commerce (ACEC), set up by Congress last year to develop recommendations on Internet taxes, recently concluded its final meeting but failed to reach the required supermajority to make any formal recommendations. Notably, it did agree by a simple majority vote to extend the current moratorium on Internet taxes for five years.
The Commission is set to deliver it's report to Congress tomorrow. It will recommend that we extend the internet tax moratorium for another five years and I fully support this. The Commission will also ask Congress to establish nexus safeguards--to make clear when a State or municipality has the power to levy taxes. Our legislation establishes these important nexus safeguards.
Currently, online sales are governed by the very same tax rules that govern mail order sales. The existing rules of the road are based upon two prior Supreme Court decisions--National Bellas Hess case in 1967, and the Quill case in 1992. Both decisions established the power of state tax authority to be limited by nexus--or the scope of a company's connection to the taxing state.
Local sales taxes are incredibly complex. There are 7,600 different tax jurisdictions across the country--within these systems about 600-700 rate changes occur per year. There are 46 different sets of rules (45 states and the District of Columbia have state sales tax) . If forced to comply with these rules, companies would be filing 425 tax returns each month or 5,100 a year.
The Gregg/Kohl bill, the New Economy Tax Simplification Act (NETSA), codifies these mail order tax rules as outlined in the Quill decision, updating this decision for the 21st century.
Sales/ use tax nexus rules are court-based, and income tax nexus rules are based upon a 1950s federal statute that applies only to tangible goods. The Gregg/Kohl plan would codify nexus standards across the board. This legislation would update and strengthen the nexus standards for the 21st Century economy--ensuring that intangible sales, web pages and servers do not cause nexus. It maintains current constitutional principles and keeps state powers within their jurisdictions, and does not try to pre-empt a state's tax authority within its own borders.
I ask unanimous consent that the full text of the bill be printed in the RECORD.
There being no objection, the bill was ordered to be printed in the RECORD, as follows:
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 ``The New Economy Tax Simplification Act (NETSA)''.
SEC. 2. JURISDICTIONAL STANDARDS FOR THE IMPOSITION OF STATE AND LOCAL BUSINESS ACTIVITY, SALES, AND USE TAX OBLIGATIONS 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 thereto'', approved on September 14, 1959 (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 ACTIVITY, SALES, AND USE TAX OBLIGATIONS ON INTERSTATE COMMERCE.
``(a) IN GENERAL.--No State shall have power to impose, for any taxable year ending after the date of enactment of this title, a business activity tax or a duty to collect and remit a sales or use tax on the income derived within such State by any person from interstate commerce, unless such person has a substantial physical presence in such State. A substantial physical presence is not established if the only business activities within such State 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 for sales of tangible or intangible personal property or services, which orders or contracts are approved or rejected outside the State, and, if approved, are fulfilled by shipment or delivery of such property from a point outside the State or the performance of such services outside the State.
``(2) The solicitation of orders or contracts by such person or such person's representative in such State 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 enable such customer to fill orders or contracts resulting from such solicitation are orders or contracts described in paragraph (1).
``(3) The presence or use of intangible personal property in such State, including patents, copyrights, trademarks, logos, securities, contracts, 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 maintain a World Wide Web site accessible by persons in such State.
``(5) The use of an Internet service provider, on-line service provider, internetwork communication service provider, or other Internet access service provider, or World Wide Web hosting services to maintain or take and process orders via a web page or site on a computer that is physically located in such State.
``(6) The use of any service provider for transmission of communications, whether by cable, satellite, radio, telecommunications, or other similar system.
``(7) The affiliation with a person located in the State, unless--
``(A) the person located in the State is the person's agent under the terms and conditions of subsection (d); and
``(B) the activity of the agent in the State constitutes substantial physical presence under this subsection.
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``(8) The use of an unaffiliated representative or independent contractor in such State for the purpose of performing warranty or repair services with respect to tangible or intangible personal property sold by a person located outside the State.
``(b) DOMESTIC CORPORATIONS; PERSONS DOMICILED IN OR RESIDENTS OF A STATE.--The provisions of subsection (a) shall not apply to the imposition of a business activity tax or a duty to collect and remit a sales or use tax by any State 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 CONTRACTS FOR SALES BY INDEPENDENT CONTRACTORS.--For purposes of subsection (a), a person shall not be considered to have engaged in business activities within a State during any taxable year merely by reason of sales of tangible or intangible personal property or services in such State, or the solicitation of orders or contracts for such sales in such State, on behalf of such person by one or more independent contractors, or by reason of the maintenance of an office in such State by one or more independent contractors whose activities on behalf of such person in such State consist solely of making such sales, or soliciting orders or contracts for such sales.
``(d) ATTRIBUTION OF ACTIVITIES AND PRESENCE.--For purposes of this section, the substantial physical presence of any person shall not be attributed to any other person absent the establishment of an agency relationship between such persons that--
``(1) results from the consent by both persons that one person act on behalf and subject to the control of the other; and
``(2) relates to the activities of the person within the State.
``(e) DEFINITIONS.--For purposes of this title--
``(1) BUSINESS ACTIVITY TAX< /b>.--The term `business activity tax' means a tax imposed on, or measured by, net income, a business license tax, a business 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.
``(2) INDEPENDENT CONTRACTOR.--The term `independent contractor' means a commission agent, broker, or other independent contractor who is engaged 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< /b>.--The term `Internet' means collectively the myriad of computer and telecommunications facilities, including equipment and operating software, which comprise the interconnected world-wide network of networks that employ 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 services 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 `representative' does not include an independent contractor.
``(6) SALES TAX< /b>.--The term `sales tax' means a tax that is--
``(A) imposed on or incident to the sale of tangible or intangible personal property or services as may be defined or specified under the laws imposing such tax; and
``(B) measured by the amount of the sales price, cost, charge, or other value of or for such property or services.
``(7) SOLICITATION OF ORDERS OR CONTRACTS.--The term `solicitation of orders or contracts' includes activities normally ancillary to such solicitation.
``(8) STATE.--The term `State' means any of the several States, the District of Columbia, or any territory or possession of the United States, or any political subdivision thereof.
``(9) USE TAX< /b>.--The term `use tax' means a tax that is--
``(A) imposed on the purchase, storage, consumption, distribution, or other use of tangible or intangible personal property or services as may be defined or specified under the laws imposing such tax; and
``(B) measured by the purchase price of such property or services.
``(10) WORLD WIDE WEB.--The term `World Wide Web' means a computer server-based file archive 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 restrictions otherwise existing on State taxing authority.
``SEC. 102. ASSESSMENT OF BUSINESS ACTIVITY TAXES.
``(a) LIMITATIONS.--No State shall have power to assess after the date of enactment of this title any business activity tax which was imposed by such State or political subdivision for any taxable year ending on or before such date, on the income derived for activities 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 activity tax imposed for a taxable year ending on or before 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 before such date.
``SEC. 103. TERMINATION OF SUBSTANTIAL PHYSICAL PRESENCE.
``If a State has imposed a business activity tax or a duty to collect and remit a sales or use tax on a person as described in section 101, and the person so obligated no longer has a substantial physical presence in that State, the obligation to pay a business activity tax or to collect and remit a sales or use tax on behalf of that State applies only for the period in which the person has a substantial physical presence.
``SEC. 104. SEPARABILITY.
``If any provision of this title or the application of such provision to any person or circumstance is held invalid, 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.''.
Mr. KOHL. Mr. President, today Senator GREGG and I are introducing legislation, the New Economy Tax Simplification Act, to ask government to step out of the way of the growing Internet economy and take a middle ground approach to taxation of Internet commerce. Our legislation does not stop any one State from forcing Internet companies within its borders to collect the sales taxes collected by any other business within its borders. But it does stop every one of the over 7000 local taxing jurisdictions from imposing every one of their unique rules, regulations, and rates on every business that sells over the Internet or through the mail.
We are not here today to ask for special treatment for companies that sell on the Internet. We simply want to make sure that businesses that are tackling the market with 21st century technology are not bled to death by the Byzantine local tax system.
All companies--regardless of whether they now sell over the Internet or not--benefit from the economic boom and consumer convenience provided by computer commerce. If you don't sell over the Internet now; you probably buy there. If you don't work for a company whose economic fortune is tied to Internet sales or information, your spouse, child, or neighbor probably does. If you haven't invested in one of these successful Internet businesses, they have probably invested in you: in the charities in your community, in the jobs that are growing our economy everywhere; in the State programs financed by the taxes these companies rightly pay to the States in which they have a physical presence.
Our bill provides a clear set of standards for businesses operating across state lines through mail-order sales or the Internet. And--very significantly--it also protects the rights of state and local officials to determine tax policy within their own jurisdictions.
Some have called for a complete ban on sales taxes on Internet goods. Still others have claimed that companies should collect sales taxes on all of their products without regard to the point of sale or the state or residence of the consumer.
We strike a balance between these two extremes. Just as my Wisconsin constituents should not have to pay local sales taxes for schools and sewers in Texas, Nebraska, or New York; it also makes sense that a Wisconsin business should not be forced to collect taxes to support fire and police protection in the other states. Businesses should collect the sales taxes that support the government services they receive.
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