View source for Internet Tax Freedom Act

{{Use American English|date=June 2025}}
{{Ron Wyden series}}
The 1998 '''Internet Tax Freedom Act''' is a [[United States]] law authored by [[United States House of Representatives|Representative]] [[Christopher Cox]] and [[United States Senate|Senator]] [[Ron Wyden]] that established national policy regarding federal and state taxation of the internet, based upon its unique characteristics as a mode of interstate and global commerce uniquely susceptible to multiple and discriminatory taxation. The law prohibits state and local governments from imposing taxes directly on the internet or online activity, such as email taxes, internet access taxes, bit taxes, and bandwidth taxes. It categorizes taxes targeted specifically to the internet itself or to online commerce as “discriminatory.” Discriminatory taxes are outlawed.<ref name="ITFA S. Ct. Brief">Brief of Chris Cox as Amicus Curiae, pp. 1-2, in ''South Dakota v. Wayfair'', 138 S. Ct. 2080 (2018), https://www.supremecourt.gov/DocketPDF/17/17-494/23030/20171207151532703_Amicus%20Brief.pdf.{{PD-notice}}</ref><ref>{{Cite web|url=http://www.gpo.gov/fdsys/pkg/PLAW-105publ277/pdf/PLAW-105publ277.pdf|title=Public Law 105-277, Title XI}}</ref>

When it was originally signed into signed into law as Title XI of Pub.L. 105-277<ref>{{USPL|105|277}}</ref> on October 21, 1998 by [[President of the United States|President]] [[Bill Clinton]], the Act imposed a ten-year moratorium on discriminatory and multiple taxation of the internet and electronic commerce. The law was subsequently extended on multiple occasions by Congress, and on February 24, 2016, it was made permanent as Pub.L. 114-125, §922(a).

In both its original and permanent form, the law's stated purpose is to promote and preserve the commercial, educational, and informational potential of the Internet.<ref>{{cite news
| last         = Robinson
| first        = Sal
| date         = October 23, 2013
| title        = Illinois Supreme Court rules against 'Amazon tax'
| url          = http://www.mhpbooks.com/illinois-supreme-court-rules-against-amazon-tax/
| location     = Brooklyn
| publisher    = Melville House
| accessdate   = November 7, 2013
}}</ref><ref>{{cite news
| last         = SCHREIBER
| first        = SALLY 
| date         = October 21, 2013
| title        = Internet Tax Freedom Act preempts Illinois click-through nexus law
| url          = http://www.journalofaccountancy.com/News/20138956.htm
| location     = Durham
| publisher    = Journal of Accountancy
| accessdate   = November 7, 2013
}}</ref>

==Background==
The technology of the internet was uniquely challenging to existing regulatory and tax paradigms when the World Wide Web emerged in the 1990s. Its decentralized, packet-switched architecture, which could route even the simplest messages through servers in multiple cities, counties, and states, exposed the medium to potential taxation across a confusing patchwork of thousands of U.S. state and local taxing jurisdictions. Municipalities had taxed and regulated cable television as if it were a public utility, and they saw the internet as no different.<ref name="ITFA S. Ct. Brief" /> The United Nations was studying the idea of a global email tax.<ref>By taxing email users one cent per day, the UN estimated it would have collected $70 billion in 1996. James A. Paul & Katarina Wahlberg, "Global Taxes for Global Priorities," ''WEED Global Policy Forum'' (March 2002), 18. After the passage of the Internet Tax Freedom Act, the UN abandoned the idea. Nicole Winfield, “UN Distances Itself from Report Recommending Email Tax,” ''Boston Globe'', July 16, 1999. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=ff93e040f3aa02ec542f81680d1848a54a8c7d5e But the idea surfaced inside the U.N. again a few years later. https://www.cnet.com/news/privacy/u-n-could-tax-u-s-based-web-sites-leaked-docs-show/.</ref>

In Congress and the White House, preserving the uniquely national and global characteristics of the internet featured more prominently in policy making. In a white paper entitled “The Framework for Global Electronic Commerce,” the White House pointed to “the Internet’s special characteristics” as reason for its concern “about possible moves by state and local tax authorities to target electronic commerce.”<ref> “The Framework for Global Electronic Commerce,” The White House, § I.1 (1998), https://clintonwhitehouse4.archives.gov/WH/New/Commerce/</ref> The specter of multiple states and municipalities all simultaneously taxing and regulating commerce on the internet was seen as the
far greater concern. Congress believed the increase in GDP facilitated by internet commerce would boost state revenues, not cut them.<ref>The effect on U.S. GDP would later be measured. According to the U.S. Bureau of Economic Analysis, the U.S. digital economy for the year 2021 accounted for $3.7 trillion of gross output, $2.41 trillion of value added (translating to 10.3 percent of U.S. GDP, $1.24 trillion of compensation, and 8 million jobs.) https://www.bea.gov/system/files/2022-11/new-and-revised-statistics-of-the-us-digital-economy-2005-2021.pdf</ref>

==Legislative History==
On March 13, 1997, Representative Cox introduced H.R. 1054, titled the “Internet Tax Freedom Act,” in the U.S. House, and Senator Wyden introduced it in the Senate, where it was designated S. 442. The bill received hearings in both chambers. Cox introduced two updated versions: H.R. 3849, in May 1998; and H.R. 4105, in June 1998, the latter of which passed the U.S. House unanimously in July 1998.<ref>H.R. 4105, Internet Tax Freedom Act, https://
www.congress.gov/bill/105th-congress/house-bill/4105/all-actions</ref> Three months later, in October 1998, the Senate passed the companion bill, S. 442, by a vote of 96-2.<ref>S.442, Internet Tax Freedom Act, https://www.congress.gov/bill/105th-congress/senate-bill/442/actions.</ref>

The Internet Tax Freedom Act was then added to the omnibus
appropriations bill for that year, and signed into law by
President Clinton as Titles XI and XII of P.L. 105-277 on
October 21, 1998. It is codified at 47 U.S.C. § 151, note.

Prior to the expiration of the law's original ten-year term, 
[[United States Congress|Congress]] extended the Act on multiple occasions. President [[Barack Obama]] signed one extension on September 19, 2014, until December 11, 2014;<ref name="2007InternetBill">{{USBill|113|H.J.|124}}</ref> another on December 16, 2014, until October 1, 2015;<ref>Consolidated and Further Continuing Appropriations Act of 2015, https://www.congress.gov/113/plaws/publ235/PLAW-113publ235.pdf.
</ref> and a third on September 30, 2015, which extended the Act through December 11, 2015.<ref>Amendment 2689 to H.R. 719, Consolidated Appropriations Act, 2016, Pub.L. 114–113, 114th Congress, https://www.congress.gov/114/plaws/publ113/PLAW-114publ113.pdf.</ref>

Meanwhile, on July 15, 2014, the [[United States House of Representatives|House]] passed H.R. 3086, the [[Permanent Internet Tax Freedom Act (H.R. 3086; 113th Congress)|Permanent Internet Tax Freedom Act]],<ref name=PCWorldGross>{{cite news|last1=Gross|first1=Grant|title=U.S. House approves permanent ban on Internet access taxes |url=http://www.pcworld.com/article/2454420/us-house-approves-permanent-ban-on-internet-access-taxes.html|accessdate=16 July 2014|publisher=PC World|date=15 July 2014}}</ref> designed to bring an end to the need for extensions by making the Internet Tax Freedom Act permanent.<ref name=3086sum>{{cite web|title=H.R. 3086 - Summary |url=https://beta.congress.gov/bill/113th-congress/house-bill/3086|publisher=United States Congress|accessdate=15 July 2014}}</ref> When the Senate took no action on the bill prior to the expiration of the 113th Congress, it was reintroduced as H.R. 235 in the 114th Congress, and the [[United States House of Representatives|House]] unanimously approved it on June 9, 2015.<ref>{{Cite web|url=https://www.congress.gov/bill/114th-congress/house-bill/235|title = H.R.235 - 114th Congress (2015-2016): Permanent Internet Tax Freedom Act|date = 10 June 2015}}{{cite web |url=http://judiciary.house.gov/index.cfm/press-releases?id=2D7C5C09-0CB9-4E85-BD8B-409059E29C8E |title=House Passes Permanent Internet Tax Freedom Act (PITFA) to Ban Internet Access Taxes - Press Releases - Judiciary Committee |website=judiciary.house.gov |url-status=dead |archive-url=https://web.archive.org/web/20150610180533/http://judiciary.house.gov/index.cfm/press-releases?id=2D7C5C09-0CB9-4E85-BD8B-409059E29C8E |archive-date=2015-06-10}} </ref> The bill was then added to the Trade Facilitation and Trade Enforcement Act of 2015, which passed the [[United States House of Representatives|House]] on December 11, 2015<ref>https://web.archive.org/web/20150610180533/http://judiciary.house.gov/index.cfm/press-releases?id=2D7C5C09-0CB9-4E85-BD8B-409059E29C8E. ''judiciary.house.gov''. Archived from [http://judiciary.house.gov/index.cfm/press-releases?id=2D7C5C09-0CB9-4E85-BD8B-409059E29C8E the original] on 2015-06-10.</ref> and the [[United States Senate|Senate]] on February 11, 2016.<ref>{{Cite news|url = https://www.forbes.com/sites/kellyphillipserb/2016/02/11/congress-makes-internet-access-tax-ban-permanent/#eb34e3a380a3|title = Congress Makes Internet Access Tax Ban Permanent|date = February 11, 2016|work = Forbes}}</ref> [[Barack Obama|President Obama]] signed it on February 24, 2016, finally making the Internet Tax Freedom Act permanent after nearly two decades.<ref>{{USPL|114|125}}</ref><ref>https://www.congress.gov/bill/114th-congress/house-bill/644/all-actions?overview=closed; {{Bare URL inline|date=August 2024}}</ref><ref>{{Cite news|url = https://www.wsj.com/articles/obamas-best-day-in-office-1456316788|title = Obama's Best Day in Office|date = February 24, 2016|work = Wall Street Journal}}</ref><ref>{{Cite news|title = Permanent Internet Tax Freedom Act Signed Into Law|date = February 24, 2016|work = Broadcasting & Cable News}}</ref>

==U.S. Supreme Court Litigation==
On June 21, 2018, the [[Supreme Court of the United States|U.S. Supreme Court]] decided [[South Dakota v. Wayfair, Inc.]], a case addressing the constitutionality of a state's taxation of ecommerce sales when the seller does not have a physical presence in the state but the buyer lives in said state. In a 5–4 decision, the Court expressly overruled its prior precedent in [[Quill Corp. v. North Dakota]] in order to hold that states can tax citizens of other states if they are doing business over the internet. Under ''Quill'' and other prior decisions, some physical presence in the state had been required in order for a state to exercise its jurisdiction over nonresidents.

Because the internet reaches into every state, the effect of the ''Wayfair'' decision was to expose any person operating a business in a single state to the conflicting sales and use tax rules of thousands of taxing jurisdictions, so long as the business sells via a website — a result the Internet Tax Freedom Act had been meant to avoid.<ref>Brief of Chris Cox as Amicus Curiae, p. 3, in ''South Dakota v. Wayfair'', 138 S. Ct. 2080 (2018), https://www.supremecourt.gov/DocketPDF/17/17-494/23030/20171207151532703_Amicus%20Brief.pdf. {{PD-notice}}</ref> By deciding the case exclusively on constitutional grounds, the Court avoided the statutory issue, but impliedly determined that the Act does not include extraterritorial sales taxes on digital commerce within its definition of banned discriminatory taxes.

==See also==
*[[Internet taxes]]
*[[Taxation of Digital Goods]]
*[[Marketplace Fairness Act]]

==References==
*{{US government sources|title=South Dakota vs Wayfair et al|url=https://www.supremecourt.gov/DocketPDF/17/17-494/23030/20171207151532703_Amicus%20Brief.pdf}}

{{reflist}}

==External links==
* [http://www.opencongress.org/bill/110-h3678/show Bill tracking with OpenCongress]
* [http://www.govtrack.us/congress/bill.xpd?bill=h110-3678 Bill tracking with GovTrack.us]
* [http://www.gpo.gov/fdsys/pkg/PLAW-105publ277/pdf/PLAW-105publ277.pdf Public Law 105-277]
* [http://www.govtrack.us/congress/billtext.xpd?bill=h111-1560 Bill tracking of proposed amendment at GovTrack.us]
* [http://www.washingtonwatch.com/bills/show/110_PL_110-108.html Bill tracking with Washington Watch] {{Webarchive|url=https://web.archive.org/web/20080926093311/http://www.washingtonwatch.com/bills/show/110_PL_110-108.html |date=2008-09-26 }}
* [http://www.cybertelecom.org/ecom/tax.htm Cybertelecom :: Internet Taxation]

[[Category:105th United States Congress]]
[[Category:United States federal taxation legislation]]
[[Category:Riders to United States federal appropriations legislation]]
[[Category:1998 in American law]]