The 1998 Tax Provisions:
Internet Tax Freeze, Expiring Provisions, Technical Corrections, and Other Tax Provisions

Introduction

1. Extension of Expiring Provisions

2. Revenue Offsets

3. Other Provisions

4. Internet Tax Moratorium

5. Tax Technical Corrections

4. Internet Tax Moratorium

The legislation prohibits for three years taxes on Internet access charges. The few states that currently tax Internet access would be permitted to retain those taxes, but no state may enact a new levy. The measure also protects, for three years, new Internet-specific tax liability for consumers and vendors. Web-search taxes, e-mail surcharges, and other levies that target the Internet are outlawed. Tax collection requirements that discriminate against out-of-state Web sites are banned.

Congress also created the Advisory Commission on Electronic Commerce to study the taxation of electronic commerce and other remote access sales and report back to Congress within 18 months with recommendations about how these items should be taxed. The 19-member commission would be made up of three federal officials (the secretaries of Commerce and Treasury, and the U.S. Trade Representative), eight representatives from business and industry, and eight representatives from state and local governments (one representative would be from a state or local government that does not impose a sales tax).

The commission will examine international trade and other tax and trade issues associated with electronic commerce.