Order Code RL31929
Report for Congress
Received through the CRS Web
Internet Tax Bills in the 108th Congress
Updated June 4, 2003
Nonna A. Noto
Specialist in Public Finance
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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Internet Tax Bills in the 108th Congress
Summary
The Internet Tax Freedom Act moratorium, enacted in October 1998 and
extended for two years in November 2001, is scheduled to expire on November 1,
2003. The federal moratorium prohibits state and local governments from levying
new taxes on Internet access and any multiple or discriminatory taxes on electronic
commerce. Taxes on Internet access that were in place prior to October 1, 1998, are
protected by a grandfather clause.
Three bills introduced in the first session of the 108th Congress would (1) make
the Internet tax moratorium permanent and (2) remove the grandfather protection for
pre-existing access taxes provided under current law. These are the companion bills
H.R. 49 (Cox) and S. 52 (Wyden), both named the Internet Tax Nondiscrimination
Act, and S. 150 (Allen), named the Internet Tax Non-discrimination Act of 2003.
One bill, H.R. 1481 (Lofgren), the Internet Growth and Freedom Act of 2003, would
extend the current moratorium by five years, until November 1, 2008. The Bush
Administration supports extending the moratorium.
The House Judiciary Committee, Subcommittee on Commercial and
Administrative Law, held a hearing on H.R. 49 (Cox) on April 1, 2003. On May 22,
2003, the subcommittee considered and marked up the bill. A technical amendment
in the nature of a substitute was approved by voice vote. H.R. 49 (amended) was
forwarded to the full committee. The bill would permanently extend the moratorium
and eliminate the grandfathering protection. The issue of amending the definition of
Internet access remains to be discussed.
If the pattern set in the 106th and 107th Congresses is followed, legislation may
also be introduced in two related areas. One is streamlined sales taxes and remote
tax collection authority. This entails setting forth the conditions for simplifying state
and local sales and use taxes that could persuade Congress to grant states the
authority to require out-of-state sellers to collect use taxes on interstate sales to state
residents. These remote tax collection rules would apply to mail order and telephone
sales as well as to sales transacted over the Internet.
The other related area is codifying standards for determining nexus for state and
local business activity taxes (BATs). (Examples of business activity taxes include
corporate income taxes, franchise taxes, and business license taxes.) The task is to
set forth in federal law the conditions determining whether or not a state is entitled
to impose its business activity tax(es) on a company located outside the state but
involved in commerce within the state. Some support a new term “substantial
physical presence” as the standard to be required to establish BAT nexus in a
jurisdiction. Bills introduced in the 106th and 107th Congresses enumerated several
business relationships and uses of the Internet that would not establish substantial
physical presence. To keep the BAT and sales tax issues separate, past bills
addressing streamlined sales and use taxes commonly provided that requiring a
business to collect use taxes from customers in other states would not imply an
obligation for the business to pay business activity taxes to those states. This report
will be updated as legislative events warrant.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Extension of the Moratorium: Permanent, Temporary, or Sunset? . . . . . . . 2
Grandfathering of Existing Access Taxes: Continue or Not? . . . . . . . . . . . . 3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Streamlined Sales Taxes and Remote Collection Authority . . . . . . . . . . . . . 5
Business Activity Tax (BAT) Nexus Standards . . . . . . . . . . . . . . . . . . . . . . 7
Action in Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Internet Tax Bills Introduced in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . 8
House of Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
H.R. 49 (Cox) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
H.R. 1481 (Lofgren) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
S. 52 (Wyden) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
S. 150 (Allen) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
For Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Hearings in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CRS Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
List of Tables
Table 1. Comparison of Internet Tax Bills in the House . . . . . . . . . . . . . . . . . . . 9
Table 2. Comparison of Internet Tax Bills in the Senate . . . . . . . . . . . . . . . . . . . 9

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Internet Tax Bills in the 108th Congress
Background
The Internet Tax Freedom Act (ITFA) was enacted on October 21, 1998, as
Titles XI and XII of P.L. 105-277, the Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999. The ITFA placed a three-year moratorium
on the ability of state and local governments to (1) impose new taxes on Internet
access or (2) impose any multiple or discriminatory taxes on electronic commerce.
The Act grandfathered the state and local access taxes that were “...generally imposed
and actually enforced prior to October 1, 1998....”
The original Internet tax moratorium expired on October 21, 2001. The Internet
Tax Nondiscrimination Act, P.L. 107-75, was enacted on November 28, 2001. It
provided for a two-year extension of the prior moratorium, through November 1,
2003. It also continued the grandfathering protection for pre-existing Internet access
taxes. Thus, absent congressional action, the moratorium will expire in 2003, during
the first session of the 108th Congress.
Issues
The five main issues surrounding legislation to extend the Internet tax
moratorium are:
! Should the moratorium be extended temporarily, permanently, or
allowed to sunset?
! Should the grandfathering from the moratorium of existing taxes on
Internet access be continued or eliminated?
! Should the definitions of Internet access and discriminatory taxes be
amended?
! Will Congress consider granting states the authority to require
remote sellers to collect use taxes if the states adopt a streamlined
sales tax system?
! Will Congress codify guidelines for establishing whether or not a
business engaged in interstate commerce has nexus in a jurisdiction

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CRS-2
for purposes of business activity tax (BAT, e.g. corporate income
tax) liability?1
Extension of the Moratorium:
Permanent, Temporary, or Sunset?
The intent of the Internet Tax Freedom Act enacted in 1998 was to halt the
proliferation of taxes on Internet access, to guarantee that more than one jurisdiction
could not tax the same electronic commerce transaction, and to guarantee that
commerce over the Internet would not be singled out for discriminatory tax
treatment, that is taxation not applied to commerce in similar products but conducted
by other means. Supporters of the moratorium felt that the Internet should be
protected from the administrative and financial burdens of taxation in order to
encourage the advance and dissemination of Internet technology and the economic
activity developing around it. Opponents objected that a federal moratorium was an
infringement on the states’ independent authority to levy taxes and argued that taxes
specifically on the Internet were not proliferating.
Strong supporters of the original moratorium would generally like to see the
moratorium extended beyond 2003, preferably permanently. Those who acquiesced
to a temporary moratorium as a pause to evaluate the effects of the Internet and the
condition of state and local sales taxes might agree to another temporary moratorium,
accompanied by an agenda to be accomplished during the extension. Those who feel
that the states can be trusted to treat the Internet in a fair manner do not believe that
the federal moratorium needs to be extended and could be allowed to sunset.
A permanent extension of the moratorium would eliminate the need for
Congress to revisit the issues surrounding Internet taxation when a temporary
moratorium expired. Permanent extension would presumably also provide both the
producers and consumers of Internet services greater certainty about the absence of
future state and local taxation of the Internet.
In contrast, a temporary extension of the moratorium would set a future time for
Congress to review the conditions of the moratorium. The reassessment could be
made in the context of developments in computer technology and business
organization, as well as state and local government revenues. A temporary extension
would also provide an interval for the states to further simplify their sales and use
taxes. States could then hope that the next time an extension of the moratorium was
considered, Congress might consider granting states the authority to require remote
(out-of-state) sellers to collect use taxes from customers at the time of the sale. (See
discussion below on Streamlined Sales Taxes and Remote Collection Authority.)
1 The issues remain similar to those considered in 2001 when the Internet tax moratorium
was temporarily extended for two years. For a longer discussion of the extension of the
moratorium, grandfathering of existing access taxes, and collecting sales and use taxes on
interstate sales — in relation to bills introduced in the first session of the 107th Congress —
see CRS Report RL31177, Extending the Internet Tax Moratorium and Related Issues, by
Nonna A. Noto.

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CRS-3
Allowing the moratorium to sunset would permit the states to tax Internet
access. The trend in practice, however, has been for states to repeal their Internet
access taxes. With or without the moratorium, Congress would need to act before
states could gain the authority to require out-of-state sellers without physical
presence in the state to collect use taxes from consumers.
The Bush Administration supports extending the Internet tax moratorium before
the current moratorium ends on November 1, 2003.2
Grandfathering of Existing Access Taxes: Continue or Not?
The Internet Tax Freedom Act grandfathered from the moratorium taxes on
Internet access that were “...generally imposed and actually enforced prior to October
1, 1998....” When ITFA legislation was being considered in the spring of 1998, 10
states and the District of Columbia were applying their sales and use tax to Internet
access.3 Subsequently, Connecticut, Iowa, and the District of Columbia eliminated
their tax on Internet access, and South Carolina has not enforced the collection of its
tax during the federal moratorium. This left seven states imposing a sales and use tax
on Internet access as of April 2003: New Mexico, North Dakota, Ohio (on
businesses only, not consumers), South Dakota, Tennessee, Texas (on monthly
charges over $25), and Wisconsin.4 In addition, Hawaii levies its general excise tax,
New Hampshire its communications services tax (imposed on all two-way
communications equipment), and Washington state its business and occupation tax
(a gross receipts tax levied on business) on Internet access.
The grandfathering protection was continued when the ITFA moratorium was
extended for two years in 2001. The issue now is whether the grandfathering will be
continued if the moratorium is extended beyond 2003, either temporarily or
permanently.
Removing the grandfathering protection would, in effect, ban all state and local
taxes on Internet access. In its cost estimates for bills introduced in past years, the
Congressional Budget Office determined that eliminating the grandfathering
protection would impose an intergovernmental mandate as defined in the Unfunded
Mandates Reform Act (UMRA, P.L. 104-4, 2 U.S.C. 1501-1571).
In the 107th Congress, bills to temporarily extend the moratorium typically
extended the grandfathering protection. In contrast, bills to permanently extend the
moratorium were divided between those retaining the grandfathering and those
eliminating it.
2 Letter from Treasury Secretary John W. Snow and Commerce Secretary Donald L. Evans
to House Judiciary Committee Chairman F. James Sensenbrenner, Washington, May 14,
2003.
3 National Conference of State Legislatures, “Which States Tax Internet Access?” March
25, 1998, available online at [http://www.ncsl.org/programs/fiscal/intertax.htm].
4 Vertex, Inc., Tax Cybrary, available online at [http://www.vertexinc.com].

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Definitions
Taxation of Internet access most commonly refers to the application of state
and local sales taxes to the monthly charge that subscribers pay for access to the
Internet through Internet service providers (ISPs) such as America Online (AOL),
Microsoft Network (MSN), or EarthLink.
According to Section 1104(5) of the Internet Tax Freedom Act, “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 part of a package of
services offered to users. Such term does not include telecommunications services.”
The breadth of this definition gives rise to the concern that the tax-protection of
Internet access may extend to “bundled” products and services that might otherwise
be taxable if purchased on their own. This could include information services, cable
television, books, magazines, games, music, and movies. These types of products
and services can be offered online and sold together with Internet access service.
The ban on multiple taxes prohibits more than one state, or more than one local
jurisdiction at the same level of government (i.e., more than one county or one city)
from imposing a tax on the same transaction — unless a credit is offered for taxes
paid to another jurisdiction, in order to eliminate double taxation. However, the
state, county, and city in which an electronic commerce transaction takes place could
all levy their sales tax on the transaction. There has not been much controversy over
this definition.
In practice, the ban on discriminatory taxes on electronic commerce means that
transactions arranged over the Internet are to be taxed in the same manner as mail
order or telephone sales. Under the current judicial interpretation of nexus as applied
to mail-order sales, a state cannot require an out-of-state seller to collect a use tax
from the customer unless the seller has a physical presence in the taxing state.5 (A
use tax is the companion tax to the sales tax, applicable to interstate sales.) Congress
or the Supreme Court would need to act to grant or approve the states’ ability to
require out-of-state tax collection, whether the transaction was arranged over the
Internet or by mail-order, telephone, or other means.
The second part of the ITFA’s definition of discriminatory tax lists conditions
under which a remote seller’s use of a computer server, an Internet access service, or
online services does not establish nexus. These circumstances include the sole ability
to access a site on a remote seller’s out-of-state computer server; the display of a
remote seller’s information or content on the out-of-state computer server of a
provider of Internet access service or online services; and processing of orders
through the out-of-state computer server of a provider of Internet access service or
online services. Some businesses have taken advantage of these nexus limits in the
ITFA’s definition of discriminatory tax to establish what are referred to as Internet
kiosks or dot-com subsidiaries. The businesses claim that these Internet-based
5 For additional discussion, see CRS Report RS20577, State Sales Taxation of Internet
Transactions, by John R. Luckey.

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CRS-5
operations are free from sales and use tax collection requirements. Critics object that
these methods of business organization are an abuse of the definition of
discriminatory tax in the Act.
Streamlined Sales Taxes and Remote Collection Authority
In the past two Congresses, a major controversy surrounding the bills to extend
the original Internet tax moratorium involved the states’ quest for sales and use tax
collection authority. The issue was whether or not Congress was willing to indicate
its willingness to eventually grant states the authority to require remote (out-of-state)
sellers to collect use taxes on interstate sales. To possibly earn that authority, states
would need to simplify their state and local sales and use tax systems to an acceptable
degree.
Under current law, sellers with nexus (defined as physical presence) in a state
are already required to collect state (and local) tax on their sales arranged over the
Internet (or by telephone, mail order, or other means) to customers in that state. In-
state sellers are required to collect sales taxes from the buyer. Out-of-state sellers
with a physical presence in the state (such as a warehouse or retail store) are required
to collect use taxes from the buyer. (A use tax is complementary to a sales tax. It is
levied on purchases made outside the state for use within the state.) In contrast, out-
of-state sellers without nexus in the state are not required to collect the use tax.
Some of these sellers may collect use tax voluntarily. If the out-of-state seller does
not collect the use tax, it is technically the buyer’s obligation to pay the tax to his
home state. In practice, however, use tax compliance by non-business purchasers is
low.

Aware of this low consumer compliance, many states have long wanted to be
able to require out-of-state sellers without physical presence in the state (referred to
as remote sellers) to collect the use tax from the customer and remit it to the
customer’s home state. This would apply to all interstate sales, whether arranged
over the Internet or by other means. Whether or not there is an Internet tax
moratorium, separate congressional action would be needed in order for states to
obtain the authority to require remote sellers to collect use taxes from customers at
the time of the sale.
In its 1967 National Bellas Hess6 decision, and again in its 1992 Quill decision,7
the U.S. Supreme Court denied states the ability to require a seller to collect use taxes
on interstate mail-order sales unless the seller had a physical presence in the taxing
state. The Court concluded that the complexity of the state and local sales tax
systems imposed an undue burden on interstate commerce.
Acknowledging administrative complexity as an obstacle to remote collection,
the states began a serious effort at state and local sales and use tax simplification
through the Streamlined Sales Tax Project (SSTP). The project commenced in
6 National Bellas Hess, Inc., v. Illinois Department of Revenue, 386 U.S. 753 (1967).
7 Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

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March 2000, midway through the initial ITFA moratorium (October 1998 - October
2001).
The SSTP continued its work after the moratorium was extended in November
2001. On November 12, 2002, 34 states and the District of Columbia approved a
model interstate agreement to simplify their sales tax systems, known as the
Streamlined Sales and Use Tax Agreement. The agreement establishes uniform
definitions for taxable goods and services. It would require participating states and
local governments to have only one statewide tax rate for each type of product
effective in 2006. Each state would retain the power to determine which products are
taxed or exempt and the rate of tax for the state. The agreement provides for
streamlined tax administration and audit requirements for sellers.
During their 2003 sessions, individual state legislatures are considering
legislation to bring their own state and local sales tax laws into conformity with the
model tax agreement. For the agreement to come into effect, at least 10 states
representing at least 20% of the combined population of the 45 states with a state
sales tax must petition for membership into the agreement and be found to be in
conformance with the agreement. (There is some question about whether in order to
qualify as conforming 10 states must simply approve the agreement or must actually
change the administration of their sales tax system to conform with the agreement.)
As of May 22, 2003, 11 states had enacted conforming legislation or regulatory
changes to conform, but the conforming states do not yet represent the required 20%
of the population. In addition, conforming legislation had been introduced in 17
other states.8
Separately, a coalition of a few nationwide sellers reached agreements with 38
states and the District of Columbia to begin collecting their use tax voluntarily,
starting February 3, 2003, in exchange for amnesty on previously uncollected taxes.
Among the retailers participating initially were Wal-Mart Stores Inc., Target Corp.,
and Toys R Us Inc. Other retailers have entered into similar voluntary agreements.
In the 106th and 107th Congresses, bills were introduced that enumerated criteria
for a simplified sales and use tax system as well as procedures for Congress to grant
tax collection authority — in conjunction with an extension of the moratorium.9
Similar language may be reintroduced in the 108th Congress — either in combination
with or independently from language to extend the moratorium.
8 Streamlined Sales Tax Project, State Legislative Status of Streamlined Sales and Use Tax
Agreement (As of May 22, 2003). Available online at [http://www.streamlinedsalestax.org]
under St. Legislative Status. See also, Dolores W. Gregory and Galit Allemeir, States Begin
Enacting Legislation to Bring Laws Into Compliance With Streamlined Sales Agreement,
Daily Tax Report, Bureau of National Affairs (BNA), no. 98, May 21, 2003, pp. J-1 to J-8.
9 In the 106th Congress, the bills addressing sales tax simplification and tax collection
authority were H.R. 3709 (Cox) which passed the House, H.R. 4267 (Hyde and Conyers,
representing the majority on the Advisory Commission on Electronic Commerce (ACEC)),
H.R. 4460 (Hyde and Conyers, representing the ACEC minority), H.R. 4462 (Bachus), and
S. 2775 (Dorgan). In the 107th Congress, the bills addressing sales tax simplification and
tax collection authority were the companion bills H.R. 1410 (Istook)/S. 512 (Dorgan), S. 288
(Wyden), S. 1542 (Enzi), S. 1567 (Enzi), and S.Amdt. 2155 (Enzi-Dorgan) to H.R. 1552.

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Business Activity Tax (BAT) Nexus Standards
The states’ efforts to expand sellers’ interstate collection responsibilities for
sales and use taxes has heightened another interstate tax concern of business. For
several years some representatives of business have urged Congress to clarify the
determinants of nexus for state and local business activity taxes (BATs) in the
context of interstate commerce. (Business activity taxes are commonly thought of
as corporate income taxes, but may also include franchise taxes, business license
taxes, business and occupation taxes, apportionable gross receipts taxes, value-added
taxes, single business taxes, and capital stock taxes.) The issue is whether and how
to codify in federal law conditions that would not establish the nexus required for a
state to be able to impose its business activity taxes (BAT) on a company located
outside the state but involved in certain types of commercial relationships within the
state.
Some businesses feel that states have become too aggressive in trying to tax
them based on an indirect, transitory (short-term), or Internet-based presence in the
state. Bills were introduced in the 106th and 107th Congresses that set forth the new
term of “substantial physical presence” as the nexus requirement for business activity
taxes. The bills enumerated several situations that would not establish substantial
physical presence in a jurisdiction. These included certain non-agent business
relationships, uses of the Internet or communications, techniques for advertizing and
soliciting sales, and the presence of intangible property. In some bills the same nexus
criteria were applied to sales and use tax collection responsibility as to BAT liability.
Representatives of state and local governments objected that enacting the
proposed nexus guidelines would seriously restrict the ability of states to levy their
corporate income taxes (or other BATs) on business activities being conducted in
their state by companies located or headquartered in other states. Critics cited
Internet kiosks located in a retail store, warranty services offered in the state, and the
ability to return products ordered over the Internet to retail stores as examples of
activities that were evidence of a company’s physical presence in a state, even if the
business activities were conducted in the name of the company’s “dot.com”
subsidiary.
To help keep the BAT nexus issue separate from the sales tax issue, the bills
in earlier Congresses that addressed streamlined sales taxes and remote collection
authority typically provided that a business’s being required to collect sales and use
taxes from customers from other states would not imply an obligation to pay business
activity taxes to those other states.
In the 106th and 107th Congresses, nexus language was introduced both
independently from and in combination with an extension of the Internet Tax
Freedom Act moratorium.10 Similar efforts may be made in the 108th Congress.
10 In the 106th Congress, BAT nexus guidelines were included as part of H.R. 4267 (Hyde
and Conyers, representing the majority opinion of the Advisory Commission on Electronic
Commerce) and were the main purpose of S. 2401(Gregg and Kohl). The BAT nexus bills
(continued...)

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Action in Congress
Thus far, four Internet tax bills have been introduced in the first session of the
108th Congress. Three would make the moratorium permanent and remove the
grandfathering protection offered under current law to states that had Internet access
taxes in place prior to October 1, 1998. These are the companion bills H.R. 49 (Cox)
and S. 52 (Wyden), named the Internet Tax Nondiscrimination Act, and S. 150
(Allen), named the Internet Tax Non-discrimination Act of 2003. The fourth bill
would extend the current moratorium for five years — H.R. 1481 (Lofgren), the
Internet Growth and Freedom Act of 2003.
The House Judiciary Committee, Subcommittee on Commercial and
Administrative Law, held a hearing on H.R. 49 (Cox) on April 1, 2003.
Subcommittee consideration and markup were held on May 22, 2003. A technical
amendment in the nature of a substitute was approved by voice vote. H.R. 49
(amended) was forwarded to the full committee by voice vote.
Three other amendments were proposed but withdrawn in the subcommittee,
with the hope by the sponsors that the issues they raised would be considered again.
The Delahunt amendment addressed the interstate sales tax collection issue.
Subcommittee Chairman Christopher B. Cannon had agreed at the April 1 hearing
to hold a separate hearing on the sales tax collection issue. The Watt amendment
addressed the tax protection for Internet access delivered in variously bundled
service packages and for different forms of telecommunications used to access the
Internet (e.g., DSL). Chairman Cannon agreed to work with Representative Watt on
the effort to further define Internet access before the full committee takes up the bill.
The Baldwin amendment would have preserved the grandfathering protection. The
grandfathering issue may be revisited before the bill reaches the House floor.
If the pattern of the 106th and 107th Congresses is followed, additional
legislation is likely to be introduced in the two areas related to the Internet tax
moratorium discussed in the Issues section above. One is streamlining state and local
sales and use taxes as a precursor to remote tax collection authority on interstate
sales. The other is establishing BAT nexus standards.
Internet Tax Bills Introduced in the 108th Congress
Table 1 succinctly compares the bills introduced thus far in the House of
Representatives and Table 2 the bills introduced in the Senate. Each bill is described
in more detail in the subsequent text.
10 (...continued)
in the 107th Congress were H.R. 2526 (Goodlatte and Boucher) and S. 664 (Gregg and
Kohl).

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Table 1. Comparison of Internet Tax Bills in the House
Bill Number
Extension of
Grandfathering of
Other Internet or Interstate
(Sponsor)
Moratorium
Existing Internet
Tax Issues
Access Taxes
H.R. 49
Permanent
No
—
(Cox)
H.R. 1481
5 years, until
Yes
—
(Lofgren)
Nov. 1, 2008
Table 2. Comparison of Internet Tax Bills in the Senate
Bill Number
Extension of
Grandfathering of
Other Internet or Interstate
(Sponsor)
Moratorium
Existing Internet
Tax Issues
Access Taxes
S. 52
Permanent
No
—
(Wyden)
S. 150
Permanent
No
—
(Allen)
House of Representatives
H.R. 49 (Cox). Internet Tax Nondiscrimination Act. H.R. 49 would
permanently extend the moratorium imposed by the Internet Tax Freedom Act.
Would remove the grandfathering protection for taxes on Internet access that were
generally imposed and actually enforced prior to October 1, 1998, by removing from
the ITFA the grandfather clause and the definition of generally imposed and actually
enforced taxes. Companion to S. 52 (Wyden). Introduced January 7, 2003. Referred
to the Committee on the Judiciary. Referred to the Subcommittee on Commercial
and Administrative Law on March 6, 2003. Hearing held on April 1, 2003.
Subcommittee consideration and markup session held on May 22, 2003. A technical
amendment in the nature of a substitute approved by voice vote. Three other
amendments proposed but withdrawn in the subcommittee. H.R. 49 (amended)
forwarded to the full committee by voice vote.
H.R. 1481 (Lofgren). Internet Growth and Freedom Act of 2003. H.R. 1481
would temporarily extend the moratorium imposed by the Internet Tax Freedom Act
by five years, until November 1, 2008. Would continue the grandfather protection
for pre-existing Internet access taxes. Introduced March 27, 2003. Referred to the
Committee on the Judiciary.

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Senate
S. 52 (Wyden). Internet Tax Nondiscrimination Act. S. 52 would
permanently extend the moratorium imposed by the Internet Tax Freedom Act.
Would remove the grandfathering protection for taxes on Internet access that were
generally imposed and actually enforced prior to October 1, 1998, by removing from
the ITFA the grandfather clause and the definition of generally imposed and actually
enforced taxes. Companion to H.R. 49 (Cox). Introduced January 7, 2003. Referred
to the Committee on Commerce, Science, and Transportation.
S. 150 (Allen). Internet Tax Non-discrimination Act of 2003. S. 150 would
permanently extend the moratorium imposed by the Internet Tax Freedom Act.
Would remove the grandfathering protection for taxes on Internet access that were
generally imposed and actually enforced prior to October 1, 1998. Would remove
the reference in the ITFA to the moratorium beginning on October 1, 1998. Would
remove from the ITFA the definition of Internet access (which includes the
grandfather clause) but would retain the definition of generally imposed and actually
enforced taxes. Introduced January 13, 2003. Referred to the Committee on
Commerce, Science, and Transportation.
For Additional Information
Hearings in the 108th Congress
U.S. Congress. House. Committee on the Judiciary. Subcommittee on Commercial
and Administrative Law. Internet Tax Nondiscrimination Act. Hearing on H.R.
49. 108th Congress, 1st Session, April 1, 2003. (Not yet published).
CRS Reports
CRS Electronic Briefing Book, Taxation, Internet Taxation, “Taxing Internet
Transactions,” available at [http://www.congress.gov/brbk/html/ebtxr70.html].
CRS Report RL31177, Extending the Internet Tax Moratorium and Related Issues,
January 17, 2002, by Nonna A. Noto. (Addresses issues raised in the 107th
Congress.)
CRS Report RL31252, Internet Commerce and State Sales and Use Taxes, by Steven
Maguire.
CRS Report RL31158, Internet Tax Bills in the 107th Congress: A Brief Comparison,
December 6, 2001, by Nonna A. Noto.

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