HomeMy WebLinkAboutCOM 0855.000 1996-1998
OJNYY Of M, Y
AL SMITH Phone: (808) 961-8267
Virc Chairman FAX: (808) 969-3291
1rF oi'M~'!'
COUNTY COUNCIL
County of Hawaii
Hawaii County Buildinv
25 Aupuni Stretl
Hilo, Hawaii 967,20
May 14, 1998
TO: Chairman Arakaki and Members
of the Hawai'i County Council
FROM: Al Smith 410f -
SUBJECT: RESOLUTION SUPPORTING THE PROPOSED AMENDMENT TO THE INTERNET TAX
FREEDOM AC 1,
Attached for your consideration is a resolution supporting a proposed amendment to the Internet Tax Freedom Act
that is currently being considered before the United States Congress. In addition as supplemental information,
please find a copy of the proposed amendment as offered by the Honorable Christopher Cox (R-.Calif) and
supporting materials from the National Association of Counties (NACo).
NACo has gone on record opposing federal preemption of state and local taxing authority and opposing the
establishment of an unlimited moratorium on state and local taxation of electronic commerce. NACo has urged a
delay of federal legislation until a thorough and impartial study is completed on the taxation of electronic commerce
and its impact on local businesses. NACo is supporting the Cox amendment.
The purpose of this resolution is to express Hawai'i County's support of the Cox amendment to the Internet Tax
Freedom Act and to support NACo's position on this matter. This matter is also being considered as a position of
the Hawat'i State Association of Counties (HSAC)_
Attach.
KCS. 175'
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AMENDMENT IN THE NATURE OF A SUBSTITUTE
To H.R.1054
OFFERED BY MR. COX OF CALIFORNIA
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
2 This Act may be cited as the "Internet Tax Freedom
3 Act".
4 SEC. 2. P'mmGs.
5 The Congress finds the following:
6 (1) As a massive global network spanning not
7 only State but international borders, the Internet
8 and the related provision of online services and
9 Internet access are matters involving interstate and
10 foreign commerce within the jurisdiction of the Unit-
11 ed States Congress under Article I, section 8, clause
12 3 of the United States Constitution
I3 (2) Even within the United States, the Internet
14 does not respect State lines and operates independ-
15 ently of State boundaries. Addresses on the Internet
16 are designed to be geographically, indif(erent_
17 Internet transmissions are insensitive to physical
18 distance and can have multiple geographical address-
19 es.
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1 (3) Because transmissions over the Internet are
2 made using computer protocols, in particular the
3 Transmission Control ProtocoVlnternet Protocol,
4 that utilize packet switching technology, it is impos-
5 sible to determine in advance the precise geographic
6 route over which individual Internet transmissions
7 will travel; and it is therefore infeasible to separate
8 domestic intrastate Internet transmissions from
9 interstate and foreign Internet transmissions.
10 (4) Consumers, businesses, and others engaging
11 in interstate and foreign commerce through online
12 services and the Internet could become subject to
13 new taxes imposed by thousands of separate taxing
14 jurisdictions in the United States alone.
15 (5) Inconsistent and inadministerable taxes im-
16 posed on the Internet, Internet access, and online
17 services by Federal, State, and local governments
18 would subject consumers, businesses, and other
19 users engaged in interstate and foreign commerce to
20 multiple, confusing, and burdensome taxation, and
21 restrict the growth and continued technological mat-
22 uration of the Internet itself
23 (6) The Federal Government does not pres-
24 ently, and as a matter of national policy should not
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1 in the future, tag the Internet, Internet access, on-
2 line services, or electronic commerce.
3 (7) The twenty-first century marketplace re-
4 quires a twenty-first century sales tax system that is
5 more uniform, consistent, and streamlined. Not only
6 will tag simplification make businesses more com-
7 petitive, but it will make government more efficient,
8 resulting in personal benefits to every consumer and
9 citizen.
10 (8) Because the tax laws and regulations of so
11 many jurisdictions were established long before the
12 advent of the Internet, their application to this new
13 medium in unintended and unpredictable ways could
14 prove to he an unacceptable burden on the interstate
15 and foreign commerce of the Nation.
16 (9) The electronic marketplace of services,
17 products, and ideas available through the Internet
18 can be especially beneficial to senior citizens, the
19 - - physically challenged, citizens in rural areas, and
20 small businesses. It also offers a variety of uses and
21 benefits for educational institutions and charitable
22 organizations.
23 (10) A consistent and coherent national policy
24 regarding taxation of electronic commerce conducted
25 over the Internet, and the concomitant uniformity,
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4
1 simplicity, and fairness that is needed to avoid bur-
2 dening this evolving form of interstate and foreign
3 commerce, can best be achieved by the United States
4 exercising its authority under Article 1, section 8,
5 clause 3 of the United States Constitution to eneour-
6 age a cooperative solution among Federal, State,
7 and local levels of government.
8 SEC- 3_ MORATORIUM ON CERTAIN TAXES.
9 (a) ExTF,NT aNn DNxnTIoN of MoRAToFxux-For
10 a period of three years following the enactment of this Act,
11 neither any State nor any political subdivision thereof
12 shall impose, assess, collect, or attempt to collect any of
13 the following specified taxes:
14 (1) Taxes on Internet access-
15 (2) Taxes on online services.
16 (3) Bit taxes.
17 (4) Bandwidth taxes-
18 (5) Multiple taxes on electronic commerce.
19-- - ---(6) Discriminatory taxes on electronic com-
20 merce.
21 (b) E%CgmoN.-The prohibition in subsection (a)
22 shall not apply to taxes on Internet access or online serv-
23 ices generally imposed and actually enforced prior to
24 March 1, 1998: Provided, That the rate of such tax may
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5
1 not be increased beyond the rate imposed on Mardi 1,
2 1998.
3 SEC_ 4_ CONSULTATIVE GROUP ON THE IN ERNAITONAL
4 TAXATION OF ELECTRONIC COMMERCE.
5 (a) CONSULTATIVE GROUP.-The Secretaries of the
6 Treasury, State, and Commerce, in consultation with ap-
7 propriate committees of the Congress, States and political
8 subdivisions thereof, consumer and business groups, and
9 other appropriate groups, shall undertake an examination
10 of the international taxation of-
11 (1) domestic and international communications
12 and transactions using the Internet;
13 (2) goods and services imported to and exported
14 from the United States using the Internet;
15 (3) goods and services imported to and exported
16 from the United States by means in competition
17 with the Internet, including mail order sales;
18 (4) Internet access; and
19 (5) the telecommunications infrxstrueture used
20 by the Internet, online services, and Internet access.
21 (b) PREsmF.NT. Not later than 2 years from the
22 date of enactment of this Act, the President shall, to the
23 extent and in the form the President deev^W appropriate,
24 transmit to the appropriate eommittees of Congress policy
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6
1 recommendations on the international taxation of commu-
2 nications and transactions using the Internet.
3 SEC. s. COMMISSION oN nwmRNEr COMMERCE.
4 (a) ESTABLLSIIIaxT of CobtnusgioN.-There is es-
5 tablished a commission to be known as the Commission
6 on Internet Commerce, hereinafter referred to as the
7 "Commission". The Commission shall-
8 (1) be composed of 29 members, including the
9 Chairman, in accordance with subsection (b); and
10 (2) conduct its business in accordance with the
11 provisions of this Act.
12 (b) MEMBEBS1nP.-
13 (1) IN GE-vERAL.-The Commissioners shall
14 serve for the life of the Commission. The member-
15 ship of the Commission shall be as follows:
16 (A) The Seeretary of the Treasury and the
17 Secretary of Commerce.
18 (B) Two representatives each from the Na-
19 tional Governors' Association, the National
20 Conference of State Legislatures, the Council of
21 State Governments, the National Association of
22 Counties, the National League of Cities, the
23 United States Conference of Mayors, and the
24 International City/County Managers Associa-
25 tion_
March 16. 1888 (1228 p.m-)
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1 (C) Twelve representatives of consumers
2 and business, of which two each shall be ap-
3 pointed by the President, the Senate majority
4 leader, the Senate minority leader, the Speaker
5 of the House, the House majority leader, and
6 the House minority leader.
7 (2) Cain Exsox-The Chairperson of the
8 Commission shall be appointed upon the joint rec-
9 ommendation of the Senate majority leader, the Sen-
10 ate minority leader, the Speaker of the House, the
11 Rouse majority leader, and the House minority lead-
12 er, based on nominations from the National Gov-
13 ernors' Association.
14 (3) APPonxTME\7s.-Appointments to the
0 Commission shall be made within 45 days of enact--
16 meet of this Act.
17 (e) QIA)Ri71L-b'ifteen members of the Commission
18 shall constitute a quorum for c ondueting the business of
-19 the mmisslon.
20 (d) DLrTiEs of THE CoMMms1oN.-The Commission
21 shall, in consultation with the National Tax Association
22 Communications and Electronic Commerce Tax Project
23 and other appropriate groups, undertake an exAmir'ation
24 of-
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1 (1) a uniform system of definitions of remote
2 commerce subject to sales and use tax within each
3 State;
4 (2) a simplified system for sales and use taxes
5 that provides for a single statewide sales or use tax
6 rate on all remote commerce, which rate may be
7 zero, and establishes a method of distributing to po-
8 lineal subdivisions within each State their propor-
9 tionate share of such taxes;
10 (3) silmificant simplifications in the interstate
11 administration of the sales and use tax, including
12 uniform tax registration, tax returns, remittance re-
13 quirements, and filing procedures;
14 (4) an independent third party collection system
15 that would utilize the technology of the Internet to
16 further simplify sales and use tax administration
17 and collection; and
18 (5) the level of contacts between a State impos-
19 ing sales or use tax on remote commerce that should
20 be considered sufficient to subject the remote seller
21 to collection obligations imposed by the State, in-
22 eluding the definition of a level of contacts below
23 which a State way not impose on a remote seller the
24 obligation to collect sales or use talc.
March 18. 1998 (1226 P.m.)
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9
1 SEC. 6. LEGISLATIVE RECOMMENDATIONS.
2 (a) TIiANSJ' USSION OF PROPOSED LEGISLATION TO
3 THE PRF.smFvT.-Within 2 years from the date of enact-
4 ment of this Act, the Commission described in section 5
5 shall transmit to the President proposed legislation reflect-
6 ing its recommendations concerning the matters described
7 in section 7.
8 (b) CONTENTS OF PROPOSED LEGISLATION.-The
9 proposed legislation submitted by the Commission shall-
10 (1) define with particularity the level of con-
11 tarts between a State imposing sales or use tax on
12 remote commerce that will be considered sufficient
13 to subject the remote seller to collection obligations
14 imposed by the State;
15 (2) provide that if, and only if, a State has
16 adopted a single sales and use tax rate for remote
17 commerce, and adopted simplified procedures for the
18 administration of its sales and use taxes, including
19 uniform registration, tax returns, remittance re-
20 quiremeuts, and filing procedures, then such State
21 shall be authorized to impose on remote sellers a
22 duty to collect sales or use tax on remote commerce;
23 (3) provide that, of dive upon the expiration
24 of 4 years from the date of enactment of the legisla-
25 tion described in this section a State which elects
26 not to adopt a single sales and use tax rate and sim-
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10
1 plified mmistrative procedures shall be deemed to
2 have adopted a sales and use tax rate on remote
3 commerce equal to zero;
4 (4) include uniform definitions. of remote com-
5 merce subject to sales and use taxes;
6 (5) make permanent the temporary moratorium
7 described in section 3 on Internet access taxes, bit
8 taxes, and bandwidth taxes, and permanently ban
9 sueb other taxes on electronic commerce as the Com-
10 mission deems appropriate; and
11 (6) he consistent with the statement of policy
12 set forth in paragraphs (1) and (2) of section 230(b)
13 of the Communications Act of 1934, as amended.
14 (c) TRANSW.SSION OF PRoposm) LEGIM ATION TO
15 THE CONGRESS: Within 45 days after the transmission
16 to the President of the legislation proposed by the Com-
17 mission, the President shall transmit to the Congress a
18 report containing the President's approval or disapproval
19 of the legislative recommendations, and his reasons there-
20 for. Upon the expiration of 45 days after the transmission
21 to the President of the proposed legislation submitted by
22 the Commission., the Commission shall transmit such pro-
23 posed legislation to the Congress.
March 18, 1998 (1226 p.m.)
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ll
I SEC. T. EXPEDITED CONSIDERATION OF LEGISLATIVE REC-
2 OMMENDATIONS.
3 Within 90 legislative days after the transmission to
4 the Cons of the proposed legislation described in see-
5 tion 6(c), such legislation shall be discharged from the re-
6 spective committees of jurisdiction within the House of
7 Representatives and the Senate, and shall be referred to
8 the proper calendar on the floor of each House for final
9 action.
10 SEC. S. DECLARATION THAT THE INTERNET SHOULD BE
II FREE OF FOREIGN TARIFFS, TRADE BAR-
12 BIERS, AND OTHER RESTRICTIONS.
13 It is the sense of the Congress that the President
14 should seek bilateral and multilateral agreements through
15 the World Trade Organization, the Organization for Eco-
16 nomic Cooperation and Development, the Asia Paeific
17 Economic Cooperation Council, and other appropriate
18 international fora to establish that commercial trans-
----19 actions using -the Internet are free from tariff and tax
20 ation.
21 SEC. 9. DEFAYTCIONs.
22 For the purposes of this Act:
23 (1) INTEMNEET ---The term "Internet" shall
24 have the meaning set forth in section 230(c)(1) of
25 the Communications Act of 1934, as amended.
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1 (2) LvrERNET AccEss.-The terns "Internet
2 access" means the offering or provision of the stor-
3 age, computer processing, and transmission of infor-
4 mation that enables the user to make use of re-
5 sources found via the Internet.
6 (3) ON-uN'E sERvicE: ---The term "online serv-
7 ice" means the offering or provision of information,
8 information processing, and products or services to
9 a user as part of a package of services that are com-
10 bind with Internet access and offered to the user
11 for a single price.
12 (4) ELECTwNic (x)JSMERL'R -The term "elec-
13 tropic commerce" means any transaction comprising
14 the sale, offer, or delivery of goods or services (in-
15 eluding Internet access) via the Internet.
16 (5) REx(YrE coxmHwE.-The term "remote
17 commerce" means the sale and delivery of goods or
18 services by a person in one State to a purchaser in
19 another State.
20 (6) REmoT1; SELLER.-The term "remote sell-
21 er" means a person who sells goods or services from
22 one State to a purchaser in another State.
23 (7) TAIL.-The term "tax" means-
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1 (A) any levy, fee, or charge imposed under
2 governmental authority by any governmental
3 entity; and
4 (B) the imposition on the seller of an obli-
5 gation to collect and remit to a governmental
6 entity any such levy, fee, or charge imposed on
7 the buyer by a governmental entity.
8 (8) BIT TA%.-The term "bit tax" means any
9 transactional tax imposed on or measured by the
IO amount of digital information transmitted electroni-
11 tally, or any transactional tax imposed on or meas-
12 ured aecording to any of the technological or operat-
13 ing charaeteristies of the Internet.
14 (9) BANDWIDTH T.Sx.-The term "bandwidth
15 tax" means any transactional tax imposed on or
16 measured by the physical eapaeity of an available
17 signal to transmit digital information electronically.
18 (10) MULTIPLE TAX.-The term "multiple tax"
19 means any tax that is imposed by one State or polit-
20 ieal subdivision thereof on the same or essentially
21 the same electronic commerce that is also taxed by
22 any other State or political subdivision tbereof
23 whether or not at the same rate or on the sane
24 basis, and includes any tax that does not ensure that
25 the cost incurred in using telecommunications serv-
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14
1 ices to offer, sell, or provide electronic commerce is
2 not subject to taxation under the same tax at a dif-
3 ferent stage of the process of offering, selling, or
4 providing such electronic commerce.
5 (11) DISCR.n"ATORY TAm-The term "di-s-
6 criminatory tax" means any tax imposed by a State
7 or political subdivision thereof on electronic com-
b merce that is not generally imposed and legally eol-
9 lcetible at the same rate by that State or political
10 subdivision thereof on simil ar goods or services not
11 using the Internet, online services, or Internet ac-
12 cess, and includes
13 (A) any tax on electronic commerce that
14 imposes an obligation to collect or pay the tax
15 on a different person or entity than in the case
16 of similar goods or services not using the
17 Internet, online services, or Internet access;
18 (B) any tax imposed or levied by a State
19 or political subdivision thereof, where-
20 (i) the use of a computer server on
21 the Internet to create or maintain a World
22 Wide Web page or site by a remote seller
23 is considered as a factor in determining
24 whether the remote seller has a substantial
25 nexus; or
March 18. 1998 (1226 om.1
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In
1 (ii) an Internet access provider, online
2 service provider, or World Wide Web
3 hosting service provider is deemed to be
4 the agent or representative of a remote
5 seller as a result of the provider maintain-
6 ing or.talang orders via a web page or site
7 on a computer that is physically located
8 within a taxing jurisdiction;
9 Provided, That this definition does not include
10 a tax imposed or levied by a State where a re-
l I mote seller's interest in physical property such
12 as computer hardware (but not including data)
13 is considered as a factor in determining whether
14 a remote seller has a substantial nexus;
15 (C) any tax purportedly levied by any
16 State or political subdivision thereof on elee-
17 tronic mail services, Internet site selection, elee-
18 trome newsgroups and bulletin boards, Internet
19 relay chat, Internet search services, and other
20 online services that are either not taxed by such
21 jurisdiction when provided via means other than
22 the Internet or online services, or that by their
23 nature are so related to the Internet or online
24 services that substantially the same service is
25 not offered via means other than the Internet
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16
1 or online services within sueh State Or Political
2 subdivision; and
3 (D) any tax that establishes a classification
4 for providers or sellers of electronic. commerce
5 or online services for purposes of applying a tag
6 rate higher than the tax rate generally applied
7 to providers of similar goods or information
8 services not using the Internet.
9 SEC. 10. NO EXPANSION OF TAX AU rHORTIY_
10 Nothing in this Act shall be eonstrac d to expand the
11 duty of any person to collect or pay taxes beyond that
12 which existed on March 1, 1998.
NACo: Legislatiw Affairs - Fact Shits - Internet http://w .~.org/policy/factsrmterfs.ht
a;u
Legislative avgn
NACo Fact Sheets
Bulletin
LegislaUve Proposed Internet Taxation Bills
Priorffits
Two House subcommittees approved legislation in October to place a
six-year moratorium on any new state and local taxes on electronic
commerce, including the Internet. Many tax experts say that the latest
version of the bill (H.R. 1054), as approved by the House
Advocacy
Docuw,nts subcommittees, would also prohibit a number of existing
telecommunications, franchise, gross receipts, business and corporate
taxes. The full House Commerce and Judiciary Committees are not
R Bill Tracking expected to mark up legislation until next year.
f' NACo, The Senate Commerce Committee approved similar legislation (S. 442)
Lohwsts on November 4. While a number of Senators, including chairman John
McCain (R-Ariz.), indicated the bill needs more clarification before
f Steering going to the floor, the committee agreed by a 14 to 5 vote to report it.
Committees Senate Majority Leader Trent Lott (R-Miss.) has stated his concerns
about fairness and equity issues between "Main Street" businesses and
e America" companies on the internet who would be exempt from taxation. Lott
County urged that the legislation be redrafted to address many of the concerns
Platlomi raised by state, county and city officials about federal preemption of
state and local taxes.
NACo passed a resolution at the Annual Conference opposing federal
preemption of state and local taxing authority and establishment of an
unlimited moratorium on state and local taxation of electronic
commerce. NACo urged delay of federal legislation until a thorough and
impartial study is completed on the taxation of electronic commerce and
its impact on local businesses. A joint industry-government study under
the auspices of the National Tax Association is underway. The group
has met twice and will meet again in early February.
The following point and counterpoint is helpful in understanding some
of the arguments being made by some electronic and
telecommunications companies
Internet Taxation: Myths and Realities
MYTH: States and localities are looking to the Internet as a "cash
cow" to afford additional public expenditures.
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NACo: Legislative Affairs - Fact Sheets - Internet T -s http://v .taco.org/policy/fwtsfmterfs.hti
REALITY: States have lowered their tax revenues each year for the
past four years, and in 1997 alone, Connecticut, Florida, Georgia, Iowa,
Massachusetts and New York have each exempted the Internet from
taxation. Neither states nor localities are moving to enact new taxes on
the Internet. All levels of government are attempting to do more with
less.
MYTH: To ensure that states and local sales taxes are
non-discriminatory, such taxes should not be imposed on Internet
transactions because these sales are like mail order catalogue sales.
REALITY: The goal of a non-discriminatory sales tax would require
that all sales are treated the same, including "Main Street" retail sales,
mail order catalogue sales and Internet sales. Today, $4 billion of nearly
$150 billion in states sales tax collections are lost through mail order
catalogue sales. The expected explosive growth of the Internet will
doom the sales tax unless a genuinely non-discriminatory,
easy-to-administer sales tax can be developed with industry.
MYTH: 30,000 taxing jurisdictions will suffocate the Internet's
development.
REALITY: Transactions over the Internet are nearly always taxable on
the basis of the purchaser's jurisdiction, and transactions take place one
at a time. Thus, if any tax is due on a transaction, it can be easily traced
to a single jurisdiction.
MYTH: Small businesses hoping to use the Internet to sell their goods
or services have no reliable way of knowing what sales tax is due on a
particular sale.
REALITY: Small business are not liable to collect sales taxes on sales
made anywhere but in their home state, where they are likely to know
the applicable law. Only companies with operations in more than one
state must collect more taxes, and then only in states where they
operate. Only one state, Texas, requires out-of-state businesses that use
a server located within Texas to collect the Texas sales tax.
MYTH: States and localities can kill the Internet by seeking to tax
every transaction that moves through their jurisdiction. And since the
Internet moves products by packet switching, one never knows what
route the material has taken from seller to buyer.
REALITY: A so-called "bit tax," taxing the flow of bits through the
wires of the telecommunications companies located a jurisdiction, has
been discussed by academics in Europe, but the concept has not been
adopted either in the United States or abroad. The U.S. Constitution
would prohibit such a tax if a state or locality ever imposed it, as it
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•NACo: Legislative Afrain - Fact Sheets - latemet Tees httpl/www. .Org/pofcy/fwftrmterfs.htn
effectively operates as a border tax, an unfair burden on interstate
commerce.
MYTH: Congressional action is necessary to keep states and localities
from imposing new taxes on the Internet.
REALITY: Because states aren't enacting new taxes, no moratorium is
needed. In fact, states have joined a voluntary industry-government
effort, led by the National Tax Association and including local
government representatives, to develop mutually acceptable tax policy
to ensure that consistent and administrable tax policy for the Internet.
MYTH: As soon as a company's Web site appears on a computer in
another city or state, that company may be liable for taxes.
REALITY: United States courts have already determined that access
to a Web site in a jurisdiction does not permit any long-arm jurisdiction
over the company. The standard for sales tax jurisdiction is even higher.
Based on such precedents, no company has any rational basis to fear
that a state could assert sales tax jurisdiction merely because its Web
site was accessible there.
Contact: Ralph Tabor 202/942-4254 rtabor@naco.org January 1998
About NACo About Counties I Membership Benefits] Legislative Issues
Affiliates I Conferences Services for Counties I Publications
NACo Website Comments/Questions
®1997 National Association of Counties
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•Cwnty News-April 13, 1998 F" //wwwmeo.org/a,chive%~awc/98-04-(3lmtemet.hm
U.
National Association of Counties Washington, DC / Vol. 30, No. 7 April 12,
1998
Previous story Table of Contents I Next story
Internet tax bill to be marked up after
recess
By Ralph Tabor
associate legislative director
The House Commerce and Judiciary committees are expected to
mark up a revised Internet Tax Freedom Act soon after Congress
returns from the Easter recess.
NACo, along with other state and local organizations, has been
meeting with Commerce Committee Chairman Tom Bliley's (R-Va.)
staff to negotiate a substitute bill that would be used for a committee
markup. The latest draft basically follows the agreement reached last
month between Rep. Christopher Cox (R-Calif.) and the National
Governors' Association, NACo and other state and local groups.
The draft bill proposes a three-year moratorium or time-out on all new
state and local government taxes on Internet access fees and online
services. Existing taxes are grandfathered if they had been imposed
before March 1. The draft also places a three-year moratorium on all
multiple and discriminatory taxes on electronic commerce.
The draft bill would establish a 15-member commission on electronic
commerce - seven representing state and local government, six
representing business or consumers and the secretaries of Commerce
and Treasury. The state and local government members would be
selected by NACo and six other national organizations.
The commission would be charged with the responsibility to examine:
• Simplification of state and local sales and use taxes, including a
single rate per state with a proportionate share returned to
counties and cities, uniform definitions and simplified
administration.
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• Need for an independent third party collection system.
• Level of contacts or dollars of sales within a state necessary for
Internet businesses to collect sales and use taxes, including a
dollar threshold of sales.
The commission has two years to report its findings and to propose
federal legislation to implement its recommendations. States would
have four years after Congress acts to pass necessary enabling
legislation. If a state did not take such action, it would not be able to
require out-of-state sellers to collect sales and use taxes.
A number of key issues in the bill are still changing as the Commerce
Committee staff meets with other players in this legislation. The
following issues are likely to be raised in a markup:
• Length of the Internet tax moratorium: Some members of the
electronic commerce industry think three years is too short.
NACo contends that a longer period of time would make it
more difficult to enact further legislation on sales tax issues. The
focus should be on the work of the commission and
congressional adoption of its results.
• Grandfathering language: Some members of the industry oppose
any grandfathering of existing Internet taxes.
• Commission scope: The Bliley staff draft is written for
electronic commerce transactions and would not include other
remote sellers such as mail order and catalogue companies. It is
hoped that the bill considered by the Judiciary Committee will
expand this scope.
The House Judiciary Committee plans to mark up a different bill (H.R.
3529) sponsored by Rep. Steve Chabot (R-Ohio). This bill is similar to
the legislation negotiated with Reps. Cox and Bliley. His bill also has
been referred to the Ways and Means Committee.
In the Senate, Commerce Committee Chair John McCain (R-Ariz.) has
expressed some interest in the bill negotiated with state and local
groups. He has raised questions, however, about several provisions
including the grandfathering of existing Internet taxes.
Sens. Judd Gregg (R-N.H.) and Joseph Lieberman (D-Conn.)
introduced a new Internet bill (S. 1888), which provides for a
three-year moratorium on new Internet taxes.
Their bill envisions a commission to propose model legislation
regarding commercial transactions on the Internet but does not
address collection of sales taxes on remote sales.
Senate Majority Leader Trent Lott (R-Miss.) has stated clearly and
frequently that no legislation will be considered unless state and local
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governments agree to its provisions. The bill (S. 442) approved by the
Senate Commerce Committee is opposed by NACo and the other state
and local government groups.
Action Needed on Internet Bill
Urge House Commerce and Judiciary Committee members from your
state to support the substitute Internet Tax Freedom Act agreed to by
Rep. Cox, the National Governors' Association, NACo and other state
and local groups.
Ask them to oppose amendments to the Cox legislation that would:
• include existing state and local taxes in the moratorium
• lengthen the moratorium to more than three years; and
• confine the commission's study to Internet sales only, ignoring
the issue of other so-called "remote sales" such as catalog sales.
Following is a list of House Commerce and Judiciary Committee
members. You may access them through NACo's toll-free number:
888-LEG-NACo (I-888-534-6226), or via Internet at
http://www.house.gov.
House Commerce Committee House Judiciary Committee
Members Members
• Joe L. Barton • Bob Barr
• Brian P. Bilbray • Howard L. Berman
• Michael Bilirakis • Rick Boucher
• Tom Bliley • Ed Bryant
• Rick Boucher • Steve Buyer
• Sherrod Brown • Charles T. Canady
• Richard M. Burr • Christopher B. Cannon
• Tom Coburn • Steve Chabot
• Christopher Cox • Howard Coble
• Michael D. Crapo • John Conyers, Jr.
• Barbara Cubin • Bill Delahunt
• Nathan Deal • Barney Frank
• Diana DeGette • Elton Gallegly
• Peter Deutsch • George W. Gekas
• John D. Dingell • Robert W. Goodlatte
• Eliot L. Engel • Asa Hutchinson
• Anna G. Eshoo • Henry J. Hyde
• Elizabeth Furse • Bob Inglis
• Greg Ganske • Sheila Jackson-Lee
• Paul E. Gillmor • Bill Jenkins
• Bart Gordon • Zoe Lofgren
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• Gene Green • Bill McCollum
• James C. Greenwood • Martin T. Meehan
• Ralph M. Hall • Jerrold Nadler
• Dennis Hastert • Ed Pease
• Ron Klink • Steven R. Rothman
• Scott L. Klug • Charles E. Schumer
• Steve Largent • Robert C. Scott
• Rick A. Lazio • F. James Sensenbrenner, Jr.
• Thomas J. Manton • Lamar Smith
• Edward J. Markey • Maxine Waters
• Karen McCarthy • Melvin Watt
• Charlie Norwood • Robert Wexler
• Michael G. Oxley
• Frank Pallone, Jr.
• Bill Paxon
• James E. Rogan
• Bobby L. Rush
• Tom Sawyer
• Dan Schaefer
• John M. Shimkus
• Cliff Stearns
• Ted Strickland
• Bart Stupak
• W.J. "Billy" Tauzin
• Edolphus Towns
• Fred Upton
• Henry A. Waxman
• Rick White
• Edward Whitfield
• Albert R. Wynn
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