Internet Taxation

Welcome to the Center’s campaign to keep the Internet free from new and discriminatory taxes. This section will provide you with an in-depth analysis of the debate over Internet taxation, complete with a detailed background of the issue, and the Center’s activities. We also provide you with the ability to communicate with your elected officials in Washington.

INDEX:
Recent Developments • From our Side • Center's Activities • Background • Legislation in the 107th Congress • In Their Own Words • Contact Congress

Recent Developments INDEX

Keep Internet Tax Issues Separate

By U.S. Senator George Allen: (Reprinted with permission from Roll Call) In the Fall of 2001, the Senate extended by two years a moratorium on Internet-access taxes — monthly fees imposed in addition to your Internet service provider bill.  At the same time, we extended a moratorium on taxes that discriminate against the Internet as a form of commerce.  However, what should have been an uncontroversial moratorium was temporarily held hostage because some wanted to chainlink it to much more controversial and complex issues regarding how to collect and remit taxes on purchases made on the Internet. To download the complete story, click here.

Legislation Introduced to Extend Internet Tax Moratorium, PERMANENTLY!

On January 7, the first day of the 108th Congress, Representative Christopher Cox (R-CA) and Senator Ron Wyden (D-OR) introduced companion legislation (The Internet Tax Nondiscrimination Act) that, if passed, will make permanent the Internet tax moratorium...[more]

States Vote to Streamline Collection of Internet Sales Taxes

A coalition of lawmakers and tax collectors from more than 30 states gathered together in Chicago on November 12 to approve the final draft of an interstate agreement to “simplify” their tax laws and make it easier for budget-strapped legislators to collect sales and use taxes on Internet purchases...[more]

States Clamoring to Tax E-Commerce (Again!)

As state budgets dwindle, due in part to the nation’s lingering economic slump, Governors around the country are once again chomping at the bit to fill state coffers with tax money collected from e-commerce. However, they argue it’s a difficult task; one they hope Congress might make a little easier -- and more popular -- for them...[more]

President Bush Signs Extension of Internet Tax Moratorium Into Law

On Wednesday, President Bush signed into law H.R. 1552, a two year extension of the Internet tax moratorium passed by the Senate on November 15. The House approved the measure in October...[more]

Despite Political Obstructionism, Senate Extends Internet Tax Moratorium

At last, the principle of lower taxes and less government prevailed in preserving the economic engine of tomorrow over revenue-hungry state governors and Congress’ "Internet Tax Man."...[more]

Key Members in Congress Trying to Stop the "Internet Tax Man"

In an effort to resurrect an extension of the Internet tax moratorium, blocked by Senator Dorgan (D-ND) just a few days after its expiration on October 21, several members in Congress are engaged in an intensive push to obtain Senate approval on a "clean," two-year extension of the moratorium...[more]

House Limits Internet Tax Moratorium to Two Years; Senate Allows it to Expire

With the Senate failing to act on extending the Internet tax moratorium and lawmakers not returning to session before its October 21 expiration, the moratorium on new and discriminatory Internet taxes and the ban on Internet access taxes will lapse, opening the door to "economic mischief" by local and state taxing authorities and implanting further uncertainty in the already crippled technology market...[more]

House Judiciary Committee Approves Two-Year Extension of Internet Tax Moratorium

On October 10, the House Judiciary Committee voted 19-15 to extend the Internet tax moratorium until November 1, 2003, significantly scaling back the version of H.R. 1552 passed by the Commercial and Administrative Law Subcommittee in August...[more]

Legislation Introduced in Senate for Limited Extension of ITFA

With the Internet tax moratorium set to expire in less than three weeks, several bills have been introduced in the U.S. Senate calling for limited extensions to the ban on new and discriminatory taxes on the Internet and Internet access taxes . . .While these bills do not specifically include the burdensome sales tax "simplification" issues that have thus far thwarted progress on adequately extending or making permanent the moratorium, a limited extension of two years or less will do nothing to provide much-needed stability to the Internet and e-commerce. Instead, these bills would hamper the prospects for future growth in the new economy by implanting further uncertainty in an already crippled and bludgeoned technology market...[more]

Governor Gray Davis Signs California Internet Tax Freedom Act
Extends Current Moratorium for Two Years

On September 25, Governor Gray Davis extended the state moratorium on new and discriminatory taxes on the Internet by signing into law SB 394, the California Internet Tax Freedom Act (ITFA). The current moratorium was set to expire in December...[more]

Capitol Hill Agenda Significantly Altered in Wake of 9-11 Terrorist Attacks

A House Judiciary Committee mark-up scheduled for September 13 on H.R. 1552, the Internet Tax Nondiscrimination Act, has been postponed until further notice. However, Chairman James Sensenbrenner (R-Wisconsin) has suggested that he still plans to hold hearings on the issue. [more]

Owens Counters Fellow Governors’ Plea Urges Congress to Extend Internet Tax Moratorium

In a move meant to counter his fellow governors’ plea for Congressional authority to shift states’ sales and use tax collection burdens to remote businesses, Colorado Governor Bill Owens is urging Congress to extend the three-year Internet tax moratorium set to expire in October... [more]

Extension of Internet Tax Moratorium Held Hostage by Nation’s Governors

It is unfortunate that our nation’s governors and their supporters on Capitol Hill are holding hostage an extension of the Internet tax moratorium set to expire in October. Apparently, more than 40 governors are sending a letter to Congress urging them not to extend the ban on new Internet taxes unless states are granted permission to shift their sales and use tax collection burden to out-of state merchants... [more]

House Judiciary Subcommittee Passes Internet Tax Nondiscrimination Act

On August 2, the House Judiciary Commercial and Administrative Law Subcommittee passed H.R. 1552, the Internet Tax Nondiscrimination Act... [more]

House Energy and Commerce Committee to Consider New Internet Tax Measure

House Energy and Commerce Committee Chairman Billy Tauzin (R-Louisiana) recently announced the committee’s intention to consider a new Internet tax measure in July. The new bill, being drafted by Representative Cliff Stearns (R-Florida), would exempt digital items (i.e. music, software and other intangible goods) sold over the Internet from sales taxes — even if Congress allows states to collect taxes from other online sales... [more]

President Bush Expresses Support for Extension of Internet Tax Moratorium

The Bush administration recently expressed its support for extending the moratorium on Internet taxation. During a press briefing at the White House, Bush spokesperson Ari Fleischer reiterated the President’s campaign pledge to support an extension, and added that the president favors a permanent ban on all Internet access taxes.[more]

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"Simplification" Is Not the Easy Answer

The Internet tax moratorium is set to expire in October, and the debate over its extension is being clouded by a coalition of states that fear an eroded tax base, as more consumers shop online. Some of these states are in the process of enacting model legislation that includes a "simplified and streamlined" sales tax system with the hopes of getting congressional approval to force remote merchants to collect and remit sales taxes on purchases made by their citizens...But the "simplifications" ...are anything but simple... [more]

Internet Tax Animation

Produced by PolicyCounsel.Com:

"The U.S. Supreme Court has held that it would burden the national economy to let one state collect tax from a business in another state because that business sent products into the state." To view the flash presentation in its entirety, click here.

Virginia Governor James Gilmore
Testimony before the House Subcommittee on Commercial and Administrative Law

June 26, 2001

". . . America's response to the Internet revolution should NOT be to tax it or all the people - the individual taxpayers, consumers and small businesses - who have been empowered by it. In my view, the history of the 20th Century was about bigger government built at the expense of hardworking people. But the 21st Century offers the promise of smaller, more efficient government and a proportionate increase in the economic freedom and liberty of individual people who are permitted to keep more of their own money." To read the full text of Governor Gilmore’s testimony, click here.

Representative Christopher Cox
Testimony before the House Subcommittee on Commercial and Administrative Law

June 26, 2001

"Extending the moratorium is especially important at a time when so many high-tech and e-commerce companies are struggling to raise capital and make ends meet. Failure to renew the moratorium will tell the high-tech sector of our economy that it is "open season" for special Internet taxes, and send a message to state and local tax authorities that new, multiple, and discriminatory Internet taxes may be levied with impunity." To read the full text of Representative Cox’s testimony, click here.

Commerce Clause in Cyberspace

In a world without borders, the Internet facilitates an explosion of online retail opportunities, as more commerce is moving onto the Internet. Despite the borderless nature of the Internet, hundreds of laws concerning the Internet and e-commerce have been passed over the last few years. This patchwork of state, national and international laws and regulations threaten continued growth of e-commerce. Many of these statutes on their face discriminate against out-of-state commerce and place a burdensome "chilling effect" on interstate and international e-commerce. The problems facing e-commerce suggest the extreme need for a cautious approach to state and national regulation of commercial Internet activity. [more]

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In a letter to Senator George Allen (R-VA), the Center expressed strong support for his legislation to make permanent the moratorium on multiple and discriminatory taxes on electronic commerce and taxes on Internet access.  Furthermore, the Center applauds his efforts to repeal current taxes on Internet access in those states that were grandfathered when Congress originally passed the Internet Tax Freedom Act in 1998.

To read the Center’s letter, click here.

Center Urges Immediate Senate Action on House-Passed Two-Year Extension of the Internet Tax Moratorium

In a letter to Senate Majority Leader Tom Daschle (D- SD) and Minority Leader Trent Lott (R-MS), the Center for Individual Freedom urged immediate Senate passage of H.R. 1552, the House-approved two-year extension of the Internet tax moratorium. Senate failure to pass the moratorium before its expiration on October 21, has opened the door to the type of "economic mischief" by state and local taxing authorities that Congress sought to prevent when it overwhelmingly approved the Internet Tax Freedom Act in 1998. Click here to view the letter.

Center Runs Ad Labeling Senator Byron Dorgan the Internet Tax Man

With state and local taxing authorities and tax-hungry governors standing by to impose new and discriminatory taxes on the Internet and taxes on Internet access, Congress failed to pass an extension of the Internet tax moratorium before it expired on October 21. On October 16, the House of Representatives passed a limited two-year extension of the moratorium, but the Senate failed to follow suit after Senator Byron Dorgan (D-North Dakota) prevented a vote on the measure. When taxpayers get their first Internet tax bill and want to know who’s responsible, thank Senator Byron Dorgan, the Internet tax man.

To view the Center’s ad which ran in the October 23 edition of the Washington Times, click here.

CIF Launches Advertising Campaign to Extend Internet Tax Moratorium--September 4, 2001

The Center for Individual Freedom (CIF) today launched a television advertising campaign urging Congress to extend the Internet tax moratorium and oppose efforts by states to force out-of-state merchants to collect sales and use taxes on Internet purchases. To read the full press release, click here. To view the commercial, click here.

Center Applauds Representative Bob Goodlatte’s Introduction of Internet Tax Fairness Act of 2001

In a letter to Representative Bob Goodlatte (R-Virginia), the Center expressed its strong support for the introduction and swift passage of the Internet Tax Fairness Act of 2001. Goodlatte’s legislation makes permanent the current Internet tax moratorium and establishes much needed bright-line nexus standards for states’ imposition of business activity taxes. Click here to view letter

Center Urges Support for S. 664, the New Economy Tax Fairness Act

In a letter to all members of the Senate Finance Committee, the Center for Individual Freedom expressed its support for S.664, the New Economy Tax Fairness Act, or NET FAIR. NET FAIR is a commonsense solution to a complicated issue, as it simply applies the nexus standards that currently govern catalogue sales to sales over the Internet. Such clear and uniform nexus standards will reinforce the constitutional protections afforded to remote vendors under the Commerce Clause by precluding states from forcing vendors to collect sales taxes for a state in which they do not have a physical presence. Click here to view letter

Center Announces Support for Making Internet Tax Moratorium Permanent

In a letter to Senators George Allen, Conrad Burns, John Warner and Judd Gregg, the Center for Individual Freedom expressed its ardent support for S. 777, the Internet Tax Non-Discrimination Act. The new bill would make permanent the moratorium on Internet taxes adopted by Congress in 1998. The current moratorium is set to expire in October. Click here to view letter

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Internet Tax Freedom Act

In 1998, Congress passed the Internet Tax Freedom Act, which prohibits Internet access taxes, multiple taxation of a single transaction by more than on taxing jurisdiction, and discriminatory taxes that do not apply to offline purchases. To view a copy of the law, click here.

Advisory Commission on Electronic Commerce’s Report to Congress

The Advisory Commission on Electronic Commerce, authorized by the Internet Tax Freedom Act of 1998, was created to study federal, state, local and international taxation and tariffs on transactions using the Internet and Internet access. To read the commission’s findings and recommendations to Congress, click here.

Quill Corp. v. North Dakota

In 1992, the Supreme Court ruled in Quill Corp. v. North Dakota that states, without permission from Congress, cannot require out-of-state retailers to collect and remit sales taxes unless the retailer has a substantial physical presence or "nexus" in the state. To read the decision, click here.

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House of Representatives
H.R. 49	—	Internet Tax Nondiscrimination Act Sponsored by Representative Christopher Cox (R-CA), H.R. 49 would make permanent the Internet tax moratorium originally passed by Congress in 1998.
Senate
S. 52	—	Internet Tax Nondiscrimination Act Sponsored by Senator Ron Wyden (D-OR), S. 52 would make permanent the Internet tax moratorium originally passed by Congress in 1998.
S. 150	—	Internet Tax Non-discrimination Act of 2003 Sponsored by Senator George Allen (R-VA), S.150 would make permanent the Internet tax moratorium and repeal current taxes on Internet access in those states that were grandfathered when Congress originally passed the Internet Tax Freedom Act in 1998.

Legislation in the 107th Congress • INDEX

House of Representatives
H.R. 1675	—	Internet Tax Nondiscrimination Act H.R. 1665, sponsored by Representative Christopher Cox (R-California), would permanently extend the moratorium enacted by the Internet Tax Freedom Act of 1998.
H.R. 1552	—	Internet Tax Nondiscrimination Act H.R. 1552, sponsored by Representative Christopher Cox (R-California), would extend the moratorium enacted by the Internet Tax Freedom Act of 1998 through 2006.
H.R. 2526	—	Internet Tax Fairness Act of 2001 H.R. 2526, sponsored by Representative Bob Goodlatte (R-Virginia), would make permanent the moratorium enacted by the Internet Tax Freedom Act of 1998, and would establish bright-line nexus standards for states’ imposition of business activity taxes.
H.R. 1410	—	Internet Tax Moratorium and Equity Act H.R. 1410, sponsored by Representative Ernest Istook (R-Oklahoma), would extend the moratorium enacted by the Internet Tax Freedom Act of 1998 through 2005, and provides authorization and consent to the states to enter into a Interstate Sales and Use Tax Compact, describing a uniform and streamlined sales and use tax system. Those states joining the compact would be granted authority to force remote businesses to collect and remit sales taxes.
Senate
S. 777	—	Internet Tax Nondiscrimination Act S. 777, sponsored by Senator George Allen (R-Virginia), would permanently extend the moratorium enacted by the Internet Tax Freedom Act of 1998.
S. 664	—	New Economy Tax Fairness Act (NET FAIR) S. 664, sponsored by Senator Judd Gregg (R-New Hampshire), reinforces the 1992 U.S. Supreme Court decision in Quill Corp. v. North Dakota, by establishing clear and uniform nexus standards which prohibit states from forcing remote businesses to collect and remit sales and use taxes.
S. 288	—	Internet Tax Nondiscrimination Act S. 288, sponsored by Senator Ron Wyden (D-Oregon), would extend the moratorium enacted by the Internet Tax Freedom Act of 1998 through 2006, and provide for Congressional approval of states’ authority to force remote businesses to collect and remit sales and uses taxes. Such authority could be granted after a state meets minimum criteria in simplifying their sales and use taxes, including establishing a one-rate-per-state system.
S. 1525	—	Defense of Internet Tax Freedom Act S. 1525, sponsored by Senators George Allen (R-Virginia) and Barbara Boxer (D- California), would extend the moratorium enacted by the Internet Tax Freedom Act of 1998 through 2006.
S. 1481	—	Internet Tax Moratorium Extension Act S. 1481, sponsored by Senators Ron Wyden (D-Oregon), John McCain (R- Arizona) and Patrick Leahy (D-Vermont), would extend the moratorium enacted by the Internet Tax Freedom Act for 2 years, and encourage States to simplify their sales and use taxes.
S. 1504	—	Internet Tax Moratorium Extension Act S. 1504, sponsored by Senators Byron Dorgan (D-North Dakota) and John Breaux (D-Louisiana), would extend the moratorium enacted by the Internet Tax Freedom Act through June 30, 2002.

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  "The debate over the taxation of the Internet isn’t about feeding the already well-lined coffers of government. It’s about the fundamentally American idea that there should be no taxation without representation.

"While there is no evidence that Main Street firms have lost business due to tax differentials, that is beside the point. The answer to these concerns should not be to raise taxes on the Internet, but to lower taxes on Main Street businesses."

Colorado Governor Bill Owens
In a letter to Congress urging the extension of the Internet tax moratorium, and opposing his fellow governors’ plea for Congressional approval to force collection of sales and use taxes from remote businesses.
August 20, 2001

New York Governor George Pataki
Inside Politics
August 17, 2001

Virginia Governor James Gilmore
Testimony before the House Subcommittee
on Commercial and Administrative Law
July 26, 2001

Massachusetts Governor Jane Swift
“Opposing Taxation of Internet Commerce”
Testimony before U.S. Senate Committee
on Commerce, Science and Transportation
March 14, 2001

U.S. Rep. Christopher Cox (R-California)
Testimony before the House Subcommittee
on Commercial and Administrative Law
July 26, 2001

U.S. Rep. Bob Goodlatte (R-Virginia)
On the introduction of H.R. 2526,
Internet Tax Fairness Act
July, 17, 2001

U.S. Senator George Allen (R-Virginia)
On the introduction of S. 777,
Internet Tax Nondiscrimination Act
April 26, 2001

Las Vegas Review-Journal
Editorial
August 3, 2001

Write your elected officials TODAY! Tell them to say NO to new Internet taxes.

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