Policy
With Respect To Taxation of Internet Services
The
policy of the Association is governed by the following:
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Internet
Tax Freedom Act of 1998, which prohibits multiple or discriminatory taxes on
Internet services for a period of three years, commencing October 1, 1998.
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The
“Commerce Clause” of the Constitution of the United States, as contained
in Article I, Section 8, clause 3: giving the Federal Government the power
“To regulate commerce with foreign nations, and among the several states,
and with the Indian tribes;” as interpreted by the US Supreme Court and
the Congress.
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The
decision of the United States Supreme Court in National Bella Hess Vs. Dept.
of Rev. of the State of Illinois, 386 US 753 (1967), in which the court held
that a State may not impose the duty of collection of a use tax upon a
seller whose only connection with customers in the State was by common
carrier or the United States mail. The Court emphasized the burden that a
requirement to collect the tax would impose, citing the many variations in
rates of tax, variations in allowable exemptions and the difficulties of
administrative and record-keeping requirements.
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The
decision of the United States Supreme Court in Complete Auto Transit, Inc.
v. Brady, 430 U.S. 274 (1977), in which the Court clarified the requirements
for finding an obligation for collection of the use tax. The four part test
developed to survive a Commerce Clause challenge required that the tax be
applied to an activity with a substantial nexus with the taxing State, that
it be fairy apportioned, that it not discriminate against interstate
commerce and that it be fairly related to the services provided by the
State.
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The
decision of the United States Supreme Court in Quill Corp. v. North Dakota,
504 U.S. 298 (1992), which upheld the restriction under Bella Hess that a
vendor whose only contacts with the taxing state are by mail or common
carrier lacks the "substantial nexus" required by the Commerce
Clause and that the requirement of substantial nexus serves as a means for
limiting state burdens on interstate commerce. The Court maintained the
"bright line" approach established by the prior cases because same
would benefit national commerce by "...encourag[ing] settled
expectations and, by doing so, foster[ing] investment by businesses and
individuals."
The
policy of the Association is:
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Access
to the Internet, via dial-up connection, satellite uplink, synchronous
network connection or other means, should not be subject to any Federal,
state or local tax.
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Electronic
Commerce and/or sale of goods and services via the Internet should be
governed by applicable law, including the provisions of the Internet Tax
Freedom Act of 1998, the “Commerce Clause” of the Constitution of the
United States and the decisions of the United States Supreme Court with
respect to nexus.
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No
Internet-based product or service should be subject to multiple or
discriminatory taxation.
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The Association will continue to support the
principles embodied in the Internet Tax Freedom Act of 1998.
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