[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
               SALES TAX FAIRNESS AND SIMPLIFICATION ACT

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

                               H.R. 3396

                               __________

                            DECEMBER 6, 2007

                               __________

                           Serial No. 110-167

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov


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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
                 Joseph Gibson, Minority Chief Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                LINDA T. SANCHEZ, California, Chairwoman

JOHN CONYERS, Jr., Michigan          CHRIS CANNON, Utah
HANK JOHNSON, Georgia                JIM JORDAN, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts   TOM FEENEY, Florida
MELVIN L. WATT, North Carolina       TRENT FRANKS, Arizona
STEVE COHEN, Tennessee

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel


                            C O N T E N T S

                              ----------                              

                            DECEMBER 6, 2007

                                                                   Page

                            TEXT OF THE BILL

H.R. 3396, the ``Sales Tax Fairness and Simplification Act''.....     2

                           OPENING STATEMENTS

The Honorable Linda T. Sanchez, a Representative in Congress from 
  the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................     1
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................     8
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     9
The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................    10
The Honorable William D. Delahunt, a Representative in Congress 
  from the State of Massachusetts, and Member, Subcommittee on 
  Commercial and Administrative Law..............................    11

                               WITNESSES

Ms. Joan Wagnon, Secretary of Revenue, State of Kansas, Topeka, 
  KS, on behalf of the Streamlined Sales Tax Governing Board
  Oral Testimony.................................................    17
  Prepared Statement.............................................    19
Wayne Zakrzewski, Esquire, Vice President, Associate General 
  Counsel--Tax, J.C. Penney Corporation, Inc., Dallas, TX, on 
  behalf of the National Retail Federation
  Oral Testimony.................................................    37
  Prepared Statement.............................................    39
Mr. George Isaacson, Brann & Isaacson, Lewiston, ME, on behalf of 
  the Direct Marketing Association
  Oral Testimony.................................................    44
  Prepared Statement.............................................    46
Mr. Steven J. Rauschenberger, Rauschenberger Partners, LLC, 
  Elgin, IL, on behalf of the National Conference of State 
  Legislatures
  Oral Testimony.................................................    97
  Prepared Statement.............................................    99

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, 
  Chairman, Committee on the Judiciary, and Member, Subcommittee 
  on Commercial and Administrative Law...........................    10
Prepared Statement of the Honorable Zoe Lofgren, a Representative 
  in Congress from the State of California, and Member, 
  Subcommittee on Commercial and Administrative Property.........    10
Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Member, 
  Subcommittee on Commercial and Administrative Law..............    15
Articles submitted by the Honorable Chris Cannon, a 
  Representative in Congress from the State of Utah, and Ranking 
  Member, Subcommittee on Commercial and Administrative Law......   132

                                APPENDIX
               Material Submitted for the Hearing Record

Responses to Post-Hearing Questions submitted to Joan Wagnon by 
  the Honorable Linda T. Sanchez, a Representative in Congress 
  from the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................   138
Responses to Post-Hearing Questions submitted to Wayne Zakrzewski 
  by the Honorable Linda T. Sanchez, a Representative in Congress 
  from the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................   144
Responses to Post-Hearing Questions submitted to George Isaacson 
  by the Honorable Linda T. Sanchez, a Representative in Congress 
  from the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................   147
Responses to Post-Hearing Questions submitted to the Honorable 
  Steven J. Rauschenberger by the Honorable Linda T. Sanchez, a 
  Representative in Congress from the State of California, and 
  Chairwoman, Subcommittee on Commercial and Administrative Law..   148
Prepared Statement of Paul Misener, Vice President, Global Public 
  Policy, Amazon.com.............................................   151
Letter from Steve DelBianco, Executive Director, The NetChoice 
  Coalition......................................................   162
Prepared Statement of Brian Bieron, Senior Director of Federal 
  Government Relations, eBay Inc.................................   165
Letter from the United States Telecom Association and CTIA--The 
  Wireless Association...........................................   172


                        SALES TAX FAIRNESS AND 
                           SIMPLIFICATION ACT

                              ----------                              


                       THURSDAY, DECEMBER 6, 2007

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2237, Rayburn House Office Building, the Honorable Linda 
Sanchez (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Conyers, Sanchez, Lofgren, 
Delahunt, Cohen, Johnson, and Cannon.
    Staff present: Norberto Salinas, Majority Counsel; Stewart 
Jeffries, Minority Counsel; and Adam Russell, Majority 
Professional Staff Member.
    Ms. Sanchez. This hearing of the Committee on the Judiciary 
Subcommittee on Commercial and Administrative Law will now come 
to order. I will recognize myself first for a short statement.
    A recently released report on e-commerce revealed that 
online sales on Cyber Monday, 2007, the Monday following the 
Thanksgiving weekend, were $733 million, a 21 percent increase 
from the same shopping day last year. And the total online 
sales for this holiday season are predicted to be $29.5 
billion, an increase of $5 billion from the same shopping 
period last year.
    These numbers reflect the growing number of consumers who 
see the benefits of shopping online: no waiting in line, no 
traffic to deal with, no parking hassles, and the convenience 
of items being shipped to your front door. But there is an 
additional benefit that some consumers enjoy when purchasing 
items online: not having to pay sales taxes.
    Some companies actually post this on their Web sites to 
increase sales. States currently have limited legal authority 
to require remote sellers to collect sales taxes on items they 
sell. Instead, the burden is on consumers to remit use taxes, 
which are the equivalent of sales taxes, to their state of 
residence.
    However, most consumers do not, partly due to the 
complexity in calculating how much taxes they need to pay 
partly because they are not even aware of their obligation and 
partly because, let us face it, those who do know about the 
obligation are actually going to go out of their way to avoid 
paying additional taxes for their purchases.
    State and local governments have voiced their concerns that 
the increasing online sales and the resulting loss in 
collection of sales taxes are affecting an ever-larger portion 
of their revenue. On the other hand, online businesses remind 
us that the Supreme Court has ruled that States do not require 
them to collect sales taxes and remit them to the States 
because the tax systems are overly complex.
    In an effort to remedy this issue, Congressman Delahunt has 
introduced H.R. 3396. H.R. 3396 will give Congress' consent to 
the Streamlined Sales and Use Tax Agreement, which several 
States have entered into to simplify their sales tax system and 
respond to the Supreme Court's ruling. The legislation also 
sets forth 19 minimum simplification requirements which the 
States must follow to receive authorization to require remote 
sellers to collect sales taxes on items they sell.
    [The text of the bill, H.R. 3396, follows:]

HR 3396 IH  ___________________________________________________
                               

 deg.

                                                                      I
110th CONGRESS
    1st Session

                                H. R. 3396

To promote simplification and fairness in the administration and 
    collection of sales and use taxes.
                               __________
                    IN THE HOUSE OF REPRESENTATIVES
                             August 3, 2007
Mr. Delahunt (for himself, Mr. LaHood, and Mr. Bachus) introduced the 
    following bill; which was referred to the Committee on the 
    Judiciary
                               __________

                                 A BILL

To promote simplification and fairness in the administration and 
    collection of sales and use taxes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sales Tax Fairness and 
Simplification Act''.

SEC. 2. CONSENT OF CONGRESS.

    The Congress consents to the Streamlined Sales and Use Tax 
Agreement.

SEC. 3. SENSE OF THE CONGRESS.

    (a) Sales and Use Tax System.---It is the sense of the Congress 
that the sales and use tax system established by the Streamlined Sales 
and Use Tax Agreement, to the extent that it meets the minimum 
simplification requirements of section 6, provides sufficient 
simplification and uniformity to warrant Federal authorization to 
Member States that are parties to the Agreement to require remote 
sellers, subject to the conditions provided in this Act, to collect and 
remit the sales and use taxes of such Member States and of local taxing 
jurisdictions of such Member States.
    (b) Purpose.--The purpose of this Act is to--
            (1) effectuate the limited authority granted to Member 
        States under the Streamlined Sales and Use Tax Agreement; and
            (2) not grant additional authority unrelated to the 
        accomplishment of the purpose described in paragraph (1).

SEC. 4. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

    (a) Grant of Authority.--
            (1) In general.--Each Member State under the Streamlined 
        Sales and Use Tax Agreement is authorized, subject to the 
        requirements of this section, to require all sellers not 
        qualifying for the small business exception provided under 
        subsection (d) to collect and remit sales and use taxes with 
        respect to remote sales sourced to that Member State under the 
        Agreement.
            (2) Requirements for authority.--The authorization provided 
        under paragraph (1) shall be granted once all of the following 
        have occurred:
                    (A) 10 States comprising at least 20 percent of the 
                total population of all States imposing a sales tax, as 
                determined by the 2000 Federal census, have petitioned 
                for membership and have become Member States under the 
                Agreement.
                    (B) The following necessary operational aspects of 
                the Agreement have been implemented by the Governing 
                Board:
                            (i) Provider and system certification.
                            (ii) Setting of monetary allowance by 
                        contract with providers.
                            (iii) Implementation of an on-line 
                        multistate registration system.
                            (iv) Adoption of a standard form for 
                        claiming exemptions electronically.
                            (v) Establishment of advisory councils.
                            (vi) Promulgation of rules and procedures 
                        for dispute resolution.
                            (vii) Promulgation of rules and procedures 
                        for audits.
                            (viii) Provisions for funding and staffing 
                        the Governing Board.
                    (C) Each Member State has met the requirements to 
                provide and maintain the databases and the taxability 
                matrix described in the Agreement, pursuant to 
                requirements of the Governing Board.
            (3) Limitation of authority.--The authorization provided 
        under paragraph (1)--
                    (A) shall be granted notwithstanding any other 
                provision of law; and
                    (B) is dependent upon the Agreement, as amended, 
                meeting the minimum simplification requirements of 
                section 6.
    (b) Termination of Authority.--
            (1) In general.--The authorization provided under 
        subsection (a) shall terminate for all States if--
                    (A) the requirements contained in subsection (a) 
                cease to be satisfied; or
                    (B) any amendment adopted to the Agreement after 
                the date of enactment of this Act is not within the 
                scope of the administration of sales and use taxes or 
                taxes on telecommunications services by the Member 
                States.
            (2) Loss of member state status.--The authorization 
        provided under subsection (a) shall terminate for a Member 
        State, if such Member State no longer meets the requirements 
        for Member State status under the terms of the Agreement.
    (c) Determination of Status.--
            (1) In general.--The Governing Board shall determine if 
        Member States are in compliance with the requirements of 
        subsections (a) and (b).
            (2) Compliance determination.--Upon the determination of 
        the Governing Board that all the requirements of subsection (a) 
        have been satisfied, the authority of each Member State to 
        require a seller to collect and remit sales and use taxes shall 
        commence on the first day of a calendar quarter at least 6 
        months after the date the Governing Board makes its 
        determination.
    (d) Small Business Exception.--No seller shall be subject to a 
requirement of any State to collect and remit sales and use taxes with 
respect to a remote sale if--
            (1) the seller and its affiliates collectively had gross 
        remote taxable sales nationwide of less than $5,000,000 in the 
        calendar year preceding the date of such sale; or
            (2) the seller and its affiliates collectively meet the 
        $5,000,000 threshold of this subsection but the seller has less 
        than $100,000 in gross remote taxable sales nationwide.

SEC. 5. DETERMINATIONS BY GOVERNING BOARD AND JUDICIAL REVIEW OF SUCH 
                    DETERMINATIONS.

    (a) Petition.--At any time after the Governing Board has made the 
determination required under section 4(c)(2), any person who may be 
affected by the Agreement may petition the Governing Board for a 
determination on any issue relating to the implementation of the 
Agreement.
    (b) Review in Court of Federal Claims.--Any person who submits a 
petition under subsection (a) may bring an action against the Governing 
Board in the United States Court of Federal Claims for judicial review 
of the action of the Governing Board on that petition if--
            (1) the petition relates to an issue of whether--
                    (A) a Member State has satisfied or continues to 
                satisfy the requirements for Member State status under 
                the Agreement;
                    (B) the Governing Board has performed a 
                nondiscretionary duty of the Governing Board under the 
                Agreement;
                    (C) the Agreement continues to satisfy the minimum 
                simplification requirements set forth in section 6; or
                    (D) any other requirement of section 4 has been 
                satisfied; and
            (2) the petition is denied by the Governing Board in whole 
        or in part with respect to that issue, or the Governing Board 
        fails to act on the petition with respect to that issue not 
        later than 6 months after the date on which the petition is 
        submitted.
    (c) Timing of Action for Review.--An action for review under this 
section shall be initiated not later than 60 days after the denial of 
the petition by the Governing Board, or, if the Governing Board failed 
to act on the petition, not later than 60 days after the end of the 6-
month period beginning on the day after the date on which the petition 
was submitted.
    (d) Standard of Review.--
            (1) In general.--In any action for review under this 
        section, the court shall set aside the actions, findings, and 
        conclusions of the Governing Board found to be arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
            (2) Remand.--If the court sets aside any action, finding, 
        or conclusion of the Governing Board under paragraph (1), the 
        court shall remand the case to the Governing Board for further 
        action consistent with the decision of the court.
    (e) Jurisdiction.--
            (1) Generally.--Chapter 91 of title 28, United States Code, 
        is amended by adding at the end the following:

``SEC. 1510. JURISDICTION REGARDING THE STREAMLINED SALES AND USE TAX 
                    AGREEMENT.

    ``The United States Court of Federal Claims shall have exclusive 
jurisdiction over actions for judicial review of determinations of the 
Governing Board of the Streamlined Sales and Use Tax Agreement under 
the terms and conditions provided in section 5 of the Sales Tax 
Fairness and Simplification Act.''.
            (2) Conforming amendment to table of sections.--The table 
        of sections at the beginning of chapter 91 of title 28, United 
        States Code, is amended by adding at the end the following new 
        item:

    ``1510. Jurisdiction regarding the streamlined sales and use tax 
agreement.''.

SEC. 6. MINIMUM SIMPLIFICATION REQUIREMENTS.

    (a) In General.--The minimum simplification requirements for the 
Agreement, which shall relate to the conduct of Member States under the 
Agreement and to the administration and supervision of such conduct, 
are as follows:
            (1) A centralized, one-stop, multistate registration system 
        that a seller may elect to use to register with the Member 
        States, provided a seller may also elect to register directly 
        with a Member State, and further provided that privacy and 
        confidentiality controls shall be placed on the multistate 
        registration system so that it may not be used for any purpose 
        other than the administration of sales and use taxes. 
        Furthermore, no taxing authority within a Member State or a 
        Member State that has withdrawn or been expelled from the 
        Agreement may use registration with the centralized 
        registration system for the purpose of, or as a factor in 
        determining, whether a seller has a nexus with that Member 
        State for any tax at any time.
            (2) Uniform definitions of products and product-based 
        exemptions from which a Member State may choose its individual 
        tax base, provided, however, that all local jurisdictions in 
        that Member State shall have a common tax base identical to the 
        State tax base of that Member State. A Member State may enact 
        other product-based exemptions without restriction if the 
        Agreement does not have a definition for the product or for a 
        term that includes the product. A Member State shall relax the 
        good faith requirement for acceptance of exemption certificates 
        in accordance with section 317 of the Agreement, as amended 
        through the date of enactment of this Act.
            (3) Uniform rules for sourcing and attributing transactions 
        to particular taxing jurisdictions.
            (4) Uniform procedures for the certification of service 
        providers and software on which a seller may elect to rely in 
        order to determine Member State sales and use tax rates and 
        taxability.
            (5) Uniform rules for bad debts and rounding.
            (6) Uniform requirements for tax returns and remittances.
            (7) Consistent electronic filing and remittance methods.
            (8) Single, State-level administration of all Member State 
        and local sales and use taxes, including a requirement for a 
        State-level filing of tax returns in each Member State.
            (9) A single sales and use tax rate per taxing 
        jurisdiction, except that a State may impose a single 
        additional rate, which may be zero, on food, food ingredients, 
        and drugs, provided that this limitation does not apply to the 
        items identified in section 308 C of the Agreement, as amended 
        through the date of enactment of this Act.
            (10) A Member State shall eliminate caps and thresholds on 
        the application of sales and use tax rates and exemptions based 
        on value, provided that this limitation does not apply to the 
        items identified in section 308 C of the Agreement, as amended 
        through the date of enactment of this Act.
            (11) A provision requiring each Member State to complete a 
        taxability matrix, as adopted by the Governing Board. The 
        matrix shall include information regarding terms defined by the 
        Agreement in the Library of Definitions. The matrix shall also 
        include, pursuant to the requirements of the Governing Board, 
        information on use, entity, and product based exemptions.
            (12) A provision requiring that each Member State relieves 
        a seller or service provider from liability to that Member 
        State and local jurisdiction for collection of the incorrect 
        amount of sales or use tax, and relieves the purchaser from 
        penalties stemming from such liability, provided that 
        collection of the improper amount is the result of relying on 
        information provided by that Member State regarding tax rates, 
        boundaries, or taxing jurisdiction assignments, or in the 
        taxability matrix regarding terms defined by the Agreement in 
        the Library of Definitions.
            (13) Audit procedures for sellers, including an option 
        under which a seller not qualifying for the small business 
        exception in section 4(d) may request, by notifying the 
        Governing Board, to be subject to a single audit on behalf of 
        all Member States for sales and use taxes (other than use taxes 
        on goods and services purchased for the consumption of the 
        seller). The Governing Board, in its discretion, shall 
        authorize such a single audit.
            (14) As of the day that authority to require collection 
        commences under section 4, each Member State shall provide 
        reasonable compensation for expenses incurred by a seller 
        directly in administering, collecting, and remitting sales and 
        use taxes (other than use taxes on goods and services purchased 
        for the consumption of the seller) to that Member State. Such 
        compensation may vary in each Member State depending on the 
        complexity of the sales and use tax laws in that Member State 
        and may vary by the characteristics of sellers in order to 
        reflect differences in collection costs. Such compensation may 
        be provided to a seller or a third party service provider whom 
        a seller has contracted with to perform all the sales and use 
        tax responsibilities of a seller.
            (15) Appropriate protections for consumer privacy.
            (16) Governance procedures and mechanisms to ensure timely, 
        consistent, and uniform implementation and adherence to the 
        principles of the streamlined system and the terms of the 
        Agreement.
            (17) Each Member State shall apply the simplification 
        requirements of the Agreement to taxes on telecommunications 
        services, except as provided herein. This requirement is 
        applicable to Member States as of July 1, 2010, except that 
        sales and use taxes on telecommunications services shall be 
        subject to the Agreement and the authority granted to the 
        Member States when the requirements of section 4(a) are met. On 
        or after July 1, 2010, for those Member States which meet the 
        requirements of this paragraph, the authority granted such 
        Member States under section 4 may be exercised by such Member 
        States, pursuant to the terms of section 4 and section 5, with 
        respect to taxes on telecommunications services other than 
        sales and use taxes on such services. The following are 
        exceptions to the requirement established under this paragraph:
                    (A) The requirement for one uniform return shall 
                not apply, provided, however, there shall be one 
                uniform return for each type of tax on 
                telecommunications services within a State.
                    (B) The requirements for rate simplification are 
                modified to require that each taxing jurisdiction shall 
                have only one rate for each type of tax on 
                telecommunications services.
                    (C) The requirements for tax base uniformity in 
                section 302 of the Agreement shall apply to each type 
                of tax on telecommunications services within a State, 
                but shall not be construed to require that the tax base 
                for different types of taxes on telecommunications 
                services must be identical to the tax base for sales 
                and use taxes imposed on telecommunications services.
            (18) Uniform rules and procedures for ``sales tax 
        holidays''.
            (19) Uniform rules and procedures to address refunds and 
        credits for sales taxes relating to customer returns, 
        restocking fees, discounts and coupons, and rules to address 
        allocations of shipping and handling and discounts applied to 
        multiple item and multiple seller orders.
    (b) Requirement To Provide Simplified Tax Systems.--
            (1) In general.--The requirements of this section are 
        intended to ensure that each Member State provides and 
        maintains the necessary simplifications to its sales and use 
        tax system to warrant the collection authority granted to it in 
        section 4.
            (2) Reduction of administrative burdens.--The requirements 
        of this section should be construed--
                    (A) to require each Member State to substantially 
                reduce the administrative burdens associated with sales 
                and use taxes; and
                    (B) as allowing each Member State to exercise 
                flexibility in how these requirements are satisfied.
            (3) Exception.--In instances where exceptions to the 
        requirements of this section can be exercised in a manner that 
        does not materially increase the administrative burden on a 
        seller obligated to collect or pay the taxes, such exceptions 
        are permissible.

SEC. 7. LIMITATION.

    (a) In General.---Nothing in this Act shall be construed as--
            (1) subjecting a seller to franchise taxes, income taxes, 
        or licensing requirements of a Member State or political 
        subdivision thereof; or
            (2) affecting the application of such taxes or requirements 
        or enlarging or reducing the authority of any Member State to 
        impose such taxes or requirements.
    (b) No Effect on Nexus, Etc.--
            (1) In general.--No obligation imposed by virtue of the 
        authority granted by section 4 shall be considered in 
        determining whether a seller has a nexus with any Member State 
        for any other tax purpose.
            (2) Permissible member state authority.--Except as provided 
        in subsection (a), and in section 4, nothing in this Act 
        permits or prohibits a Member State from--
                    (A) licensing or regulating any person;
                    (B) requiring any person to qualify to transact 
                intrastate business;
                    (C) subjecting any person to State taxes not 
                related to the sale of goods or services; or
                    (D) exercising authority over matters of interstate 
                commerce.

SEC. 8. EXPEDITED JUDICIAL REVIEW.

    (a) Three-Judge District Court Hearing.--Notwithstanding any other 
provision of law, any civil action challenging the constitutionality of 
this Act, or any provision thereof, shall be heard by a district court 
of three judges convened pursuant to the provisions of section 2284 of 
title 28, United States Code.
    (b) Appellate Review.--
            (1) In general.--Notwithstanding any other provision of 
        law, an interlocutory or final judgment, decree, or order of 
        the court of three judges in an action under subsection (a) 
        holding this Act, or any provision thereof, unconstitutional 
        shall be reviewable as a matter of right by direct appeal to 
        the Supreme Court.
            (2) 30-day time limit.--Any appeal under paragraph (1) 
        shall be filed not more than 30 days after the date of entry of 
        such judgment, decree, or order.

SEC. 9. DEFINITIONS.

    For the purposes of this Act the following definitions apply:
            (1) Affiliate.--The term ``affiliate'' means any entity 
        that controls, is controlled by, or is under common control 
        with a seller.
            (2) Governing board.--The term ``Governing Board'' means 
        the governing board established by the Streamlined Sales and 
        Use Tax Agreement.
            (3) Member state.--The term ``Member State''--
                    (A) means a Member State as that term is used under 
                the Streamlined Sales and Use Tax Agreement as of the 
                date of enactment of this Act; and
                    (B) does not include associate members under the 
                Agreement.
            (4) Nationwide.--The term ``nationwide'' means throughout 
        each of the several States and the District of Columbia, the 
        Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin 
        Islands, the Northern Mariana Islands, and any other territory 
        or possession of the United States.
            (5) Nondiscretionary duty of the governing board.--The 
        phrase ``nondiscretionary duty of the Governing Board'' means 
        any duty of the Governing Board specified in the Agreement as a 
        requirement for action by use of the term ``shall'', ``will'', 
        or ``is required to''.
            (6) Person.--The term ``person'' means an individual, 
        trust, estate, fiduciary, partnership, corporation, or any 
        other legal entity, and includes a State or local government.
            (7) Remote sale.--The term ``remote sale'' refers to a sale 
        of goods or services attributed to a particular Member State 
        with respect to which a seller does not have adequate physical 
        presence to establish nexus under the law existing on the day 
        before the date of enactment of this Act so as to allow such 
        Member State to require, without regard to the authority 
        granted by this Act, the seller to collect and remit sales or 
        use taxes with respect to such sale.
            (8) Remote seller.--The term ``remote seller'' means any 
        seller who makes a remote sale.
            (9) State.--The term ``State'' means any State of the 
        United States of America and includes the District of Columbia, 
        Puerto Rico, and any other territory or possession of the 
        United States.
            (10) Streamlined sales and use tax agreement.--The term 
        ``Streamlined Sales and Use Tax Agreement'' (or ``the 
        Agreement'') means the multistate agreement with that title 
        adopted on November 12, 2002, as amended through the date of 
        enactment of this Act and unless the context otherwise 
        indicates as further amended from time to time.
            (11) Tax on telecommunications services.--The term ``tax on 
        telecommunications services'' or ``taxes on telecommunication 
        services'' shall encompass the same taxes, charges, or fees as 
        are included in section 116 of title 4, United States Code, 
        except that ``telecommunication services'' shall replace 
        ``mobile telecommunications services'' whenever such term 
        appears.
            (12) Telecommunications service.--
                    (A) In general.--The term ``telecommunications 
                service'' means the electronic transmission, 
                conveyance, or routing of voice, data, audio, video, or 
                any other information or signals to a point, or between 
                or among points.
                    (B) Inclusion.--The term ``telecommunication 
                service''--
                            (i) includes transmission services in which 
                        computer processing applications are used to 
                        act on the form, code, or protocol of the 
                        content for purposes of transmission, 
                        conveyance, or routing without regard to 
                        whether such services are referred to as voice 
                        over Internet protocol services or are 
                        classified by the Federal Communications 
                        Commission as enhanced or value added services; 
                        and
                            (ii) does not include the data processing 
                        and information services that allow data to be 
                        generated, acquired, stored, processed, or 
                        retrieved and delivered by an electronic 
                        transmission to a purchaser where the primary 
                        purpose of such purchaser for the underlying 
                        transaction is the processed data or 
                        information.

SEC. 10. SENSE OF THE CONGRESS ON DIGITAL GOODS AND SERVICES.

    It is the sense of the Congress that each State that is a party to 
the Agreement should work with other States that are also party to the 
Agreement to prevent double taxation in situations where a foreign 
country has imposed a transaction tax on a digital good or service.
                                 



    Ms. Sanchez. Today's hearing serves three purposes. First, 
the witnesses will help us understand whether there is a need 
for a simplified sales and use tax system. Second, this hearing 
will provide us with an opportunity to hear about the progress 
that States have made in coming to an agreement to simplify 
their sales and use tax system. And finally, the testimony will 
help us determine how soon the States can meet the requirements 
established in H.R. 3396 and whether the legislation fully 
addresses the concerns of consumers, States and businesses.
    We have four witnesses with us this morning to testify 
about the issues addressed by H.R. 3396 and to answer our 
questions about the legislation and the agreement and what 
impact H.R. 3396 would have on consumers, business and States' 
local revenue. Accordingly, I look forward to today's hearing.
    I now recognize my colleague and distinguished Ranking 
Member, Mr. Cannon and the co-author of the bill that we are 
examining today for his opening remarks.
    Mr. Cannon. I thank you, Madam Chair. I am pleased that we 
are holding this hearing after the passage of the Internet Tax 
Act Amendments of 2007. In years past, these issues have become 
intertwined. I appreciate the leadership of Chairman Conyers 
and Chairwoman Sanchez in keeping them separate during the 
consideration of Internet tax moratorium.
    The Streamlined Sales Tax and Use Agreement, which is now 
expanded--I am trying to figure out whether we should call it 
the SST, which seems simpler and more innocuous, or the SSUTA, 
which is a little more cumbersome. I think it deserves the 
cumbersome title. But I may lapse into the SST.
    This agreement was borne out of a desire to simplify and 
reduce the administrative burden of imposing sales taxes for 
businesses. And it was also designed to drive a framework for 
the remote collection of sales taxes.
    And this was done to address two decisions by the U.S. 
Supreme Court that held that States cannot compel out-of-state 
vendors--that is businesses that do not have any physical nexus 
with the State--to collect and remit the sales tax owed by that 
State's residents. With the growth of Internet commerce, there 
is concern on behalf of many States that their sales tax 
revenues will decline as more consumers buy goods from 
retailers that the States cannot compel to collect sales taxes.
    A 2000 study conducted by two University of Tennessee 
professors showed that by 2006 the total sales that would be 
lost to States due to e-commerce would be about $45 billion. I 
thought that laughable years ago when we first viewed that 
study. And those authors have revised their study repeatedly, 
and the latest estimate is that States and local governments 
will lose in uncollected sales taxes between $21.5 billion and 
$32.6 billion in 2008.
    However, these numbers are not beyond dispute. Direct 
Marketing Association estimates that in 2006 States lost only 
$4.2 billion, less than 10 percent of what the Tennessee study 
estimated.
    Further, as more e-commerce is transacted on the Web sites 
than more traditional brick and mortar stores, the so-called--I 
call them the click and brick stores--the number of sales that 
are conducted tax-free continues to decline. That is because 
the click and brick stores have a physical presence in many 
taxing jurisdictions and accordingly, collect taxes in those 
jurisdictions, even for sales on the Internet.
    In fact, forbes.com recently reported that one of the 
authors of the original University of Tennessee study estimates 
that 50 percent of all sales taxes--or all sales conducted on 
the Internet are subject to sales taxes. So while I appreciate 
the concerns of the States involved in this process, it appears 
to me that many of the original reasons for implementing a 
streamlined sales agreement have not materialized and, in fact, 
are being gradually abated by the presence of the so-called 
click and brick enterprises.
    Further, while I laud the goals of a streamline tax, it 
seems to me that the SST or the SSUTA as it has been 
implemented is not streamlined at all. The agreement as it 
exists today is over 130 pages, been modified no less than 10 
times in its 5-year history. If Congress enacts H.R. 3396, I 
fear that we will be giving our imprimatur to something that is 
just a work in progress.
    Which brings me to my final point. If Congress enacts H.R. 
3396, it would require businesses in all 50 States, including 
the 5 States that have no sales tax, to collect and remit sales 
taxes--sales and use taxes--to the 17 States that actually have 
implemented the SSUTA. This is different from the approach that 
Congress usually takes when it approves interstate compacts.
    That is, permitting the States in the compact to share 
resources. Rather, H.R. 3396 would require businesses in States 
that are not party to the SSUTA to, in effect, participate 
against their will.
    Madam Chair, while I commend you for holding a hearing on 
this legislation, I would much prefer that we think of other 
issues affecting interstate commerce and discriminatory taxes. 
To that end, may I suggest the Subcommittee hold hearings on 
bills that prevent the States from imposing discriminatory 
taxes on pipelines, rental cars and multi-channel video 
services? I hope the Subcommittee will deal with these issues 
next session, in the interest of putting more money into the 
pockets of consumers and less in the coffers of tax collectors.
    And may I just say as a final note that it has been a great 
pleasure to work with Mr. Delahunt on this issue over a very 
long period of time. He is expert in these issues, and our 
disagreements tend to be relatively minor and pleasant. And I 
appreciate that, Madam Chair, and yield back.
    Ms. Sanchez. I thank the gentleman for his statement. I 
want to apologize. I misspoke earlier when I introduced you. I 
said that you were a co-author of the bill. And I understand 
that you are not. I apologize. My apologies----
    Mr. Cannon. But a dear friend was the author.
    Ms. Sanchez. My apologies and so noted that you are a dear 
friend of Mr. Delahunt. And I am sure he is not offended.
    Mr. Cannon. Not in the least, Madam Chair.
    Ms. Sanchez. At this time, I would like to recognize for an 
opening statement, Mr. Conyers, the distinguished Member of our 
Subcommittee and the Chairman of the full Committee on the 
Judiciary. Mr. Conyers?
    Mr. Conyers. Thank you, Chairwoman Sanchez.
    And good morning to all of you.
    I commend you, Madam Chairwoman, for holding hearings on 
the important legislation, and I was just busily lining out my 
commendations to Chris Cannon before I found out he was not a 
sponsor of the bill. But he is still a good friend.
    I join Bill Delahunt and the gentleman from Alabama, Mr. 
Bachus and others, Ray LaHood, in looking at this very 
important question. And I think that holding hearings about a 
simplified, streamlined tax agreement could increase our 
Nation's economic efficiency, facilitate the growth of 
electronic commerce, and help our States and local government 
maintain financial support for public health, education, 
safety.
    And so, I come here with the encouragement of my governor, 
Jennifer Granholm, who has lost somewhere between $700 million 
and $1.1 billion in foregone sales tax because of the complex 
system which we are here to examine how we can simplify. So I 
am very happy to join you and would ask that my statement be 
included in the record.
    Ms. Sanchez. Without objection, so ordered.
    [The prepared statement of Mr. Conyers follows:]

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, Chairman, Committee on the 
 Judiciary, and Member, Subcommittee on Commercial and Administrative 
                                  Law

    Sales taxes constitute a significant state and local revenue 
source, with the census bureau estimating that nearly one third of 
State and local revenues come from general sales and use taxes. With 
ever increasing online sales, states and local governments must plan 
their budgets anticipating huge revenue loses due to uncollected sales 
and use taxes from online sales. For example, my beloved state of 
Michigan is estimated to lose between $700 million and $1.1 billion in 
foregone sales taxes in 2008, with online sales accounting for over 
half of those losses. Even the most conservative estimates suggest that 
Michigan will lose in the hundreds of millions of dollars in 2008, at a 
time when the state is hemorrhaging and is in dire need of revenue to 
support quality education, effective public safety, and other basic 
services. And that is just Michigan. Think of how much each state could 
do to reduce class sizes, build new schools, strengthen our bridges, 
and protect our communities and citizens with these funds.
    However, the Supreme Court has ruled that partly because the states 
had very complex tax systems, state do not have the authority to 
require out-of-state sellers to collect sales taxes. This bipartisan 
legislation, of which I proudly cosponsor, addresses the Supreme 
Court's concern for a simplified tax system. It authorizes states to 
develop and enter into an interstate sales and use tax agreement where 
states joining the agreement and adopting a simplified sales tax system 
would be authorized to require remote sellers to collect sales taxes. 
Many states have already settled on a framework and streamlined their 
tax code for the benefit of consumers and both small businesses and 
national retailers. Thus, the framework makes it easier for businesses 
to collect sales taxes across state lines.
    I thank my colleague from Massachusetts, Mr. Delahunt, for 
introducing this legislation. And I am pleased that the Chair of this 
Subcommittee is holding this hearing on the important legislation. I 
believe that a simplified streamlined tax agreement would increase our 
nation's economic efficiency, facilitate the growth of electronic 
commerce, and help our states and local government maintain financial 
support for public education, health and safety. H.R. 3396 accomplishes 
this goal.

    Ms. Sanchez. I want to thank Mr. Conyers for coming. And I 
would also like to recognize a colleague of mine from the state 
of California, Zoe Lofgren.
    Ms. Lofgren. Thank you, Madam Chair. And I would ask 
unanimous consent that my full statement be made a part of the 
record.
    Ms. Sanchez. Without objection, so ordered.
    [The prepared statement of Ms. Lofgren follows:]

 Prepared Statement of the Honorable Zoe Lofgren, a Representative in 
  Congress from the State of California, and Member, Subcommittee on 
                 Commercial and Administrative Property

    Thank you Madam Chairwoman. I would also like to thank the 
witnesses and thank Mr. Delahunt for all of his work on this issue.
    I'm sorry that I can't attend today's hearing in its entirety. 
Unfortunately I will have to leave shortly to chair a hearing on the 
use of robocalls in federal elections
    Simplification and interoperation of state sales and use tax 
systems is a worthy goal and area in which state and local governments 
as well as private businesses have many shared interests.
    I have watched this issue closely and with each iteration, the 
Streamlined Sales Tax Project and authorizing legislation gets closer 
to a system that is simple, fair, and does not unduly burden interstate 
commerce.
    That being said, I am uncertain that we have reached the conclusion 
of this process. Numerous question and concerns remain.
    For example, it is still unclear how to reconcile a dual-sourcing 
system that would accommodate either origin or destination sourcing 
with the requirement in HR 3396 to maintain uniform sourcing.
    Similarly it is unclear exactly what is entailed by the bill's 
requirement that states provide ``reason compensation for expenses 
incurred by the seller'' in implementing the SSUTA. Given that there 
are over 7,500 distinct taxing jurisdictions in the United States with 
their own rates, exclusions, and tax holidays, compliance will be 
significantly more difficult and costly than simply purchasing 
software.
    This issue takes on added significance given the initial estimates 
of how much revenue states are losing, and therefore would realize 
under SSUTA, may have relied on incorrect assumptions.
    Obviously these issues are very serious ones not only for online 
commerce, but also for states, like California, that have concluded 
that ``conforming would require a major overhaul of the state's sales 
and use tax system.'' [California Board of Equalization.]
    Member states believe that they have many of these issues solved. 
The best way to test that claim would be to have the SSUTA operate as a 
voluntary multistate compact among member states for a few years before 
imposing it on every state in the nation.
    This would allow us to determine exactly how simplified and 
streamlined the SSUTA has become.
    Barring that approach, I think we must continue to examine the most 
significant obstacles to a genuinely simplified remote sales tax system 
and therefore appreciate the Chairwoman's decision to hold this 
hearing.
    Thank you.

    Ms. Lofgren. I would just note that I think this is an 
important hearing. I thank you and also especially Mr. Delahunt 
for his years of work on this issue. I am going to have to 
leave the hearing before it is concluded because I am chairing 
a hearing in another Subcommittee. But I do believe that the 
goal of simplification is a worthy one. However, as we all 
know, it is very complicated and with the over 7,500 distinct 
taxing jurisdictions in the United States with their own rates, 
exclusions, tax holidays, compliance could be tough.
    I note that the state of California has indicated to me 
that conforming would require a major overhaul of California's 
sales and use tax system. California is not on board on this 
proposal yet, and as you know, I chair the California 
Democratic delegation. So we are concerned that maybe we are 
not there yet. But that the goal is a worthy one, and so we 
have many questions, and I am sure that we will have ample 
opportunity to review these issues. I appreciate, once again, 
Mr. Delahunt's leadership.
    Ms. Sanchez. Thank you, Ms. Lofgren.
    Now, last but certainly not least, I would like to 
recognize the author of this bill for his opening statement, 
the distinguished gentleman from Massachusetts, Mr. Delahunt.
    Mr. Delahunt. Well, thank you, Madam Chair. And I 
appreciate the opportunity and your sincere efforts to see that 
Congress gives full consideration to the issue of taxation of 
remote sales. I want to thank you for scheduling this hearing 
and look forward to working with you and other Members of the 
Subcommittee to make it a productive exercise.
    I also want to thank the Chair of the full Committee for 
his leadership on this issue, because I know it is of 
importance to him. And for a moment I was pleased to hear that 
my good friend from Utah had an epiphany, however brief. But I 
am sure that after listening to the testimony today he will 
give more consideration, more thoughtful consideration to the 
issue.
    Every year the first days of the holiday shopping season 
are examined as an indicator of economic health. I can't say 
that I am one of those people in line at the retail stores at 5 
a.m. after Thanksgiving, but so-called Black Friday has become 
a staple of measurement in the retail sector. In the last few 
years, the media coverage of those early shopping days has 
included a new term, Cyber Monday, when shoppers who didn't get 
enough of Black Friday flood online stores in search of gifts 
for friends and loved ones.
    Well, this year Cyber Monday, which was November 26, online 
sales increased 21 percent over last year, 21 percent, $733 
million, which was an excess of over--rather $733 million over 
the $610 million figure in 2006. Each of the next 3 days also 
surpassed $700 million in sales, resulting in more than $4 
billion in online spending during the week.
    More than $13.4 billion has been spent online during this 
year's holiday season to date, clocking an 18 percent gain 
versus the corresponding days of last year. Now, people will 
use these numbers to debate the health of the economy. But my 
point is simple. It is that with every passing year, the 
American people are fulfilling more of their retail needs 
online as opposed to so-called brick and mortar stores.
    Why is this important? Several reasons. States have relied 
on sales and use taxes since 1932 for roughly one-third of 
their revenue. Today our States are collectively losing tens of 
billions of dollars each year because the taxable transactions 
on which they rely on are increasingly taking place over the 
Internet.
    Adjusted retail e-commerce sales from the third quarter of 
2007 were an estimated $35 billion, an increase of 3.6 percent 
from the second quarter of 2007 and an increase of almost 20 
percent from the third quarter, the corresponding quarter of 
2006, almost 20 percent. These increases far exceed overall 
brick and mortar retail growth.
    When the remote sellers in these e-commerce transactions do 
not collect sales tax, the obvious result is an erosion of the 
sales tax base of those States that rely on this revenue 
stream. This amounted to State and local governments losing 
between $17 to $20 billion in uncollected sales and use taxes 
for remote transactions in the year 2004. That number is likely 
to go up to $66 billion by 2011 with the total loss, the 
aggregate coming to nearly half a trillion dollars by that 
date.
    Put these numbers together with recent reports about the 
health of State budgets, and, folks, we have a serious problem. 
Sixteen States are facing major budget shortfalls right now 
largely due to the rising health care costs and housing costs. 
In fiscal year 2007 State budget balances are below 2006 fiscal 
year levels. And the downward trend is expected to carry over 
into fiscal year 2008, given the State of our economy.
    Many of our State and local government officials are facing 
a stark choice between unpopular tax increases. Many will have 
to resort to the most aggressive of all taxes, the property tax 
and drastic cuts, more drastic cuts in services or maybe both.
    But this issue isn't just simply about the devastating loss 
of revenue. It is about fairness and equity. By failing to 
ensure sales tax parity between remote sellers and Main Street 
merchants, we are putting at risk the thousands of small 
businesses that sustain our local economy as well as the fabric 
of our communities and our neighborhoods.
    For example, it is that small store, the independent book 
store, for example, that doesn't just provide books. It 
sponsors the little league team, creates a venue for people to 
come together. It enhances, if you will, a sense of community.
    If there is any bill that is supportive of the small 
business owner in this country, it is this legislation that is 
before us today. And please note it is both local and remote 
businesses that benefit from local infrastructure, roads, fire, 
and safety services in our cities and towns. But right now most 
remote sellers have an unfair advantage over their brick and 
mortar competitors.
    States, cities, and towns must be empowered to level the 
playing field for their home town businesses. And I am not in 
any way opposed to the progress represented by e-commerce. I am 
amazed by it. But I strongly believe that fairness requires 
that remote sellers collect and pay the same taxes that our 
home town businesses on Main Street have to collect and pay.
    You know, States have gone to work. They have done their 
jobs. And it is time that Congress recognizes that.
    States went to work beginning with the creation of the 
streamlined sales and use tax agreement, which has served as a 
blueprint of States to streamline their taxation systems. In 
the 108th Congress, I stated back then that the States have 
made substantial progress and that once a sufficient number of 
States have implemented the agreement, Congress should move 
expeditiously to pass what was an earlier version of the bill 
that we are having this hearing on today. That bill, like the 
one before us, would simply bless, if you will, the agreement 
and authorize those member States to compel out-of-state 
sellers to collect and remit sales and use tax arising from 
sales out of the member's jurisdiction.
    Our current bill also outlines minimum simplification 
requirements and exempts remote small businesses from any such 
requirement. Let me repeat. It is straightforward. It is 
narrowly tailored and responds directly to the Supreme Court's 
conclusion in Quill.
    It is Congress' authority and responsibility to enable the 
States to develop tax policy that reflects today's economy, 
rather than buying into antiquated notions of what the 
marketplace wants. But we have yet to adopt what I believe to 
be common sense legislation.
    Well, since October 1, 2005, approximately 1,100 remote 
retailers have volunteered to collect an out-of-state sales tax 
for these States. To date, member States have collected almost 
$115 million in new sales tax revenues from those volunteer 
sellers which previously would have been uncollected.
    You know, in the 7 years since this bill was first 
introduced the States have organized and lined up to address 
the issue. They have done everything that we have asked them to 
do. Now that the States are meeting their responsibilities, it 
is long past due that the Federal Government and the United 
States Congress stand up and do what is clearly our 
responsibility.
    Recognizing that the Ranking Member is from Utah, I thought 
it might be apropos that I conclude with a very brief quote 
from the former governor of Utah, the current secretary of 
health and human services, a good man, a man with great common 
sense and on this particular issue, a man of great insight and 
intellect. These are Secretary Leavitt's words back in 1995. 
And I presume I have no doubt that he continues to embrace 
them.
    ``The current sales tax is a great system of taxation for 
the agricultural and industrial economy it was created for. But 
it is unworkable now. There is no new tax involved in a 
streamlined sales tax system, none. Every tax obligation talked 
about exists today.''
    ``Citizens know what the sales tax is and what it pays for, 
the schools their children attend, the roads they drive, and 
the fire and police departments that protect them. The new 
streamlined sales tax system when fully deployed treats every 
buyer and seller the same, no special privilege, no selected 
burden, just a level playing field.''
    ``The new system is voluntary. Whether you are a New 
Hampshire that has no sales tax or a Nevada where sales tax 
comprises 80 percent of all State revenue, it is your choice. 
If you don't like it or you don't need it, don't use it.''
    I yield back, and I----
    Mr. Cannon. Would the gentleman yield briefly?
    Mr. Delahunt. Very briefly.
    Mr. Cannon. I noticed the clock wasn't working as you spoke 
briefly.
    Ms. Sanchez. I want it noted for the record the Chair has 
been very generous with the time.
    Mr. Delahunt. I would note that.
    Mr. Cannon. My dear friend, Mr. Leavitt, former Governor 
Leavitt, now Secretary Leavitt made that statement in 1995, 
generations ago in Internet time. And I think that the State 
legislature, which is now back to the Utah State Legislature, 
which was, I think, the first legislature to back the SST, has 
now pulled out and is in that standby status, and I think 
wisely so because time has led them to understand the 
difficulties of SST and the burdens that it puts on the world 
probably don't make sense. And that is why we are going to have 
this hearing.
    So we will examine that in a little more, but I wanted to 
validate the prescience of my former governor, but it is the 
transformation of society that has made him less relevant. 
Thank you, and I yield back.
    Ms. Sanchez. Well, I am glad everybody is happy about 
today's hearing. I hope that it will provide us with the 
information that we are seeking in order to make a more 
informed decision on where we fall on this issue.
    I want to thank Mr. Delahunt for his opening statement. And 
without objection, other Members' opening statements will be 
included for the record. Without objection, the Chair will be 
authorized to declare a recess of the hearing at any point.
    [The prepared statement of Mr. Cohen follows:]

 Prepared Statement of the Honorable Steve Cohen, a Representative in 
   Congress from the State of Tennessee, and Member, Subcommittee on 
                   Commercial and Administrative Law




    Ms. Sanchez. And at this time, I am pleased to introduce 
the witnesses for today's hearing. Our first witness is Joan 
Wagnon. Ms. Wagnon is currently serving as secretary of revenue 
for the state of Kansas and was appointed to her post on 
January 13, 2003 by Governor Kathleen Sebelius. Is that a 
correct pronunciation?
    Prior to her appointment, she was president of Central 
National Bank, Topeka, elected mayor of Topeka on April 1, 
1997. Ms. Wagnon was the first woman to serve as mayor since 
the city's incorporation in 1867. Wow, what a breakthrough.
    She also served 12 years in the Kansas House of 
Representatives from 1983 to 1994. Ms. Wagnon currently serves 
as president of the Streamlined Sales Tax Governing Board and 
has been an officer since the organization's inception in 2005. 
She also has served as chair of the Multi-State Tax Commission 
from 2005 to 2007 and is currently on the board of directors 
for the Federation of Tax Administrators.
    Our second witness is Wayne Zakrzewski. Mr. Zakrzewski is a 
vice president and associate general counsel for tax for 
JCPenney Company, Incorporated where he has responsibility for 
all legal matters related to tax, audit of sales, use and State 
income taxes, property tax compliance, and value appeals, and 
State tax research and planning. From 1981 to 1988 he served as 
attorney deputy chief counsel of the Arkansas Revenue Division.
    He has been an active participant in the streamlined sales 
tax project since its beginning and currently serves as a 
member of the board of directors of the Business Advisory 
Council to the governing board of streamlined sales tax 
agreement. He also served as co-chair of the steering committee 
for the Joint Cost and Collection Study which was a joint 
business and State government project to provide data 
concerning the cost of the current sales tax business and to 
provide tools to compare that cost with those costs of a 
streamlined business.
    We welcome you to our panel.
    Our third witness is George Isaacson. Mr. Isaacson is a 
senior partner in the law firm of Brann & Isaacson in Lewiston, 
Maine, which represents over 70 direct marketers and electronic 
merchants throughout the United States in connection with State 
sales use and income tax matters.
    For over 15 years he has provided counsel to the Direct 
Marketing Association and has represented the DMA in the filing 
of amicus cure briefs in State and Federal court. In addition 
to tax advice, Mr. Isaacson also consults for direct marketers 
on a wide range of electronic commerce issues.
    We want to welcome you as well.
    Mr. Isaacson also serves as outside general counsel to L.L. 
Bean, Incorporated and frequently speaks before business groups 
and trade associations regarding legal issues affecting 
electronic commerce.
    Our final witness is Steve Rauschenberger. Mr. 
Rauschenberger is president of Rauschenberger Partners, a 
partnership with extensive experience in government affairs, 
strategic development, and business management. Prior to 
founding the firm, Mr. Rauschenberger served for 15 years in 
the Illinois State Senate holding various leadership positions, 
including assistant Republican leader and Chairman of the 
Senate Appropriations Committee.
    He is immediate past president of the National Conference 
of State Legislature where he also served as co-chair of the 
task force on telecommunications and electronic commerce. Prior 
to his tenure in government, Mr. Rauschenberger was president 
of Ackerman Brothers, Incorporated, which owned and operated 
three retail furniture stores. And before taking that position, 
he was a partner in the Rauschenberger Furniture Company, a 
third generation family furniture retail business.
    We want to welcome you to our panel this morning.
    We want to thank you all for your willingness to 
participate in today's hearing. Without objection, your written 
statements will be placed in the record in their entirety. And 
we would ask that you please limit your oral remarks to 5 
minutes.
    We have a lighting system when we remember to employ it, 
which gives you a green light at the beginning of your 
testimony. When you are 4 minutes into your testimony, it will 
turn yellow to warn you that you have a minute remaining. And 
when the yellow light turns red, you know that your time has 
expired. If we catch you mid-sentence when the light turns red, 
we would ask that you please just summarize your final thoughts 
so that we can move on to the next witness.
    After each witness has presented his or her testimony, 
Subcommittee Members will be permitted to ask questions subject 
to the 5-minute limit.
    With that, I would now invite Ms. Wagnon to please proceed 
with her testimony.

   TESTIMONY OF JOAN WAGNON, SECRETARY OF REVENUE, STATE OF 
  KANSAS, TOPEKA, KS, ON BEHALF OF THE STREAMLINED SALES TAX 
                        GOVERNING BOARD

    Ms. Wagnon. Well, good morning, Chairwoman Sanchez and 
Chairman Conyers and Ranking Member Cannon, and all of the rest 
of you Members of the Committee. I do appreciate the 
opportunity to speak to you today. I am here representing the 
governing board of the streamlined sales tax. And I do refer to 
it as SST because it is shorter.
    And I want to encourage Congress to recognize that the 
simplifications that we have achieved in our member States 
sales taxes are sufficient to remove the burden on interstate 
commerce that the Supreme Court noted in Quill v. North Dakota 
and sufficiently simplified for Congress to allow the States to 
require remote retailers to collect our sales tax. That is our 
goal. That is our work on simplification, and that leads to 
mandatory collection.
    I wanted to make one point today about the nature of----
    Ms. Sanchez. Ms. Wagnon, I am sorry. Can I interrupt you 
for a moment?
    Ms. Wagnon. Yes.
    Ms. Sanchez. We just want to check and make sure that your 
microphone is on. Otherwise your testimony isn't recorded.
    Ms. Wagnon. It says that it is green.
    Ms. Sanchez. Okay.
    Ms. Wagnon. Am I not close enough?
    Ms. Sanchez. I suspected as much, I just wanted to verify. 
And I apologize for interrupting.
    Ms. Wagnon. Not a problem. I am just still looking to see 
my light. So----
    Ms. Sanchez. We will give you additional time and make sure 
that you finish your statement.
    Ms. Wagnon. My first point was that the nature of retail is 
changing. And I think Congressman Delahunt's statement and Ms. 
Sanchez's statement have eloquently spoken to that. And I won't 
go into it again, except to say that our sales tax bases in 
States across this country are rising maybe at 2 percent a 
year. And we see the erosion at maybe 27 to 30 percent a year. 
So that point is so valid.
    So let me really give you an update on where we are with 
SST about our need for simplification. And I am, quite frankly, 
amazed at the phenomenon that is the streamlined sales tax 
because you for the first time have seen business stakeholders 
coming together with tax administrators, legislators, and 
members of the public to devise solutions to problems that have 
been huge.
    We have a myriad of sales tax laws. You asked why do we 
need to simplify. Just the number of forms that you fill out in 
order to report in every State--they are all different. We now 
have 22 States that are part of the agreement, and they all 
have a single reporting form done electronically. That in and 
of itself is simplification.
    There is a map in your packet that we have provided that 
shows you the number of States. Today we have 22. It is my hope 
that we have 10 more States that we are working with that over 
the course of the next year if we are able to maintain the 
progress that we have made so far will be able to join with us.
    Twenty-eight percent of the country's population now lives 
in a streamlined state. The reason those States are not--those 
10 are not with us now--we need to make a minor adjustment in 
our sourcing rules so that some of the barriers that currently 
exist can be overcome. We have a meeting scheduled in Dallas 
next week, and we will be discussing those changes.
    We made a number of changes in the agreement, as was noted 
in the opening remarks, because we had not completely finished 
the work when the agreement was first adopted. But what we have 
done so far is absolutely amazing. Since December of 2005, we 
have been able to bring those 22 States onboard, achieve the 
simplifications that are outlined in the bill. And section 6 of 
that bill is a wonderful framework for what simplification 
looks like.
    And our annual report does show that just in the last year 
we brought in almost $89 million for the 2007 fiscal year. So 
if you compare that to the number that is collected overall, it 
has been an explosion of collections by these 1,072 sellers 
that are currently registered.
    What does our simplification look like? We have certified 
service providers that provide services free of charge to 
remote sellers to collect and distribute these new taxes. So 
what could be simpler than that?
    The payments come from the new money that is being 
collected. We do have a simplified reporting form used by all 
States.
    In the past it was said there wasn't sufficient software. 
But that is just not right. The software has been there. What 
has been missing is the rates and boundaries databases where 
States will certify these are the rates in all of these 
different jurisdictions, these are the boundaries.
    We do not allow them to change more than once a quarter. We 
give notice to retailers when it does change. We hold them 
harmless if we use these States' boundaries and databases. And 
so, that makes it possible to do the collection.
    We have a central registration system that provided amnesty 
in the first 12 months. And it provides liability protection 
for people that are enrolling.
    We have managed to, I believe, accomplish everything that 
is in section 6 of the bill where there is a listing of 
simplification measures with one exception. We have not gotten 
around to the issues in the dispute resolution process. We have 
been pretty busy organizing the board. We have taken care of 
our governance issues. We have come up with a standard uniform 
product definitions.
    The most recent amendment to the agreement was an amendment 
about digital goods. We had a hard time figuring out what 
digital goods are going to look like in the future. But we 
finally have come up with those descriptions.
    I think you are going to see fewer amendments in the 
future, more effort toward bringing in new States. I think you 
are going to see more effort to work with you in Congress to 
help you with having information that shows that we have indeed 
simplified the system and that our voluntary system is bringing 
in to the best of our ability.
    But the question is should it stay voluntary forever. I 
don't think so. I think we are letting a lot of people off the 
hook who are operating, as Mr. Delahunt said, at a competitive 
advantage over the people in your home States because they 
don't have to collect the sales tax. And that simply isn't 
fair. So we would ask you to overturn the Quill decision, to 
work with us and give us the ability to collect this tax.
    [The prepared statement of Ms. Wagnon follows:]

                   Prepared Statement of Joan Wagnon

    Good Morning Chairwoman Sanchez, Ranking Member Cannon, and Members 
of the Subcommittee:
    Thank you for giving me the opportunity to speak with you today. I 
am Joan Wagnon, President of the Streamlined Sales Tax Governing Board 
and Secretary of Revenue for the State of Kansas. I have also served as 
a state legislator for 12 years, Mayor of Topeka for 4 years and 
president of Central National Bank in Topeka--all helpful experiences 
in my current capacity with the Streamlined Sales Tax Governing Board 
since SST brings together state legislators and state tax 
administrators with business interests and local governments. It's 
quite a balancing act for the Board, but we recognize the importance of 
respecting the partnerships that have been created in this process and 
continuing to work together.
    I am here today representing the Governing Board and wish to urge 
Congress to recognize that the simplifications we have achieved in our 
Member State's sales taxes are sufficient to remove the burden on 
interstate commerce as noted by the Supreme Court in Quill v. North 
Dakota, and sufficiently simplified for Congress to allow states to 
require remote retailers to collect our sales taxes. That's our goal: 
simplification and mandatory collection.
    My remarks today will attempt to give you some background on 
Streamlined Sales Tax (SST), why it is important to states as well as 
the business community, and why the federal legislation is so important 
to all of us involved in the project.
    First, retailing is changing rapidly. So rapidly, that in fact, 
without the federal legislation allowing states to require remote 
retailers to collect the sales tax on interstate sales, whether catalog 
or internet, states will experience an ever-accelerating loss in their 
sales tax bases. I have attached an article to my testimony, ``E-
Tailers Launch Holiday Shopping Season'' that talks about the ``Cyber 
Monday'' and the push for on-line sales. In the article internet 
retailers are reporting huge surges in sales. One retailer reported ``. 
. . that traffic soared more than 70 percent and sales were up 82 
percent as of Monday afternoon. Another reported, ``. . . an almost 49 
percent increase in sales compared with a year ago, beating 
expectations for 20 percent growth.''
    This continued explosion in growth of online sales is at the 
expense of the brick and mortar stores in our hometowns. The 
competitive advantage of shopping without sales tax collection is huge. 
Most consumers don't remit the compensating use tax which their laws 
have imposed, so the loss to the states is quite real. And that loss is 
growing faster than our sales taxes grow. In Kansas, for example, our 
sales tax collections are flat, and the money coming in from the use 
tax collected under the voluntary SST program because we are a 
Streamlined state, is quite necessary to prevent having to raise our 
taxes which no one wants to do.
    Second, I'd like to talk a little about SST, how we got started, 
how many states are involved, the Agreement which all of us have 
adopted, and where we are going.
    The rise of the Streamlined Sales Tax Project is an amazing 
phenomenon--45 states voluntarily coming together time after time over 
a period of several years to create a voluntary system to demonstrate 
to Congress and business that we can simplify sales taxes. The 
leadership exerted by the National Conferences of State Legislatures, 
the National Governor's Association, the Federation of Tax 
Administrators, and the Multistate Tax Commission was enormously 
helpful. The commitment and guidance from the business community was 
remarkable. They have now formed a Business Advisory Council that meets 
regularly to advise the Governing Board and have two ex officio members 
on the Governing Board. In my 20 plus years in government, I've never 
seen a coalition like this come together and work to solve problems. 
The result was the Streamlined Sales and Use Tax Agreement (SSUTA) 
which was adopted by the participating states in November, 2002. States 
then set about changing and simplifying their tax laws.

       WHO BELONGS TO THE STREAMLINED SALES TAX GOVERNING BOARD?

    The Governing Board was formed pursuant to the Streamlined Sales 
and Use Tax Agreement (SSUTA) on October 1, 2005 by thirteen states 
which were in full compliance with the SSUTA, representing 20.3 percent 
of the population of all the sales tax states. This accomplishment is 
unparalled in government history. Certainly we've had compacts before, 
and model legislation, but nothing like SST. Five associate states 
joined with those thirteen full member states making a total of 18 
states involved since the beginning. An additional four states have 
joined the Streamlined Sales Tax Governing Board since its founding 
bringing the number today to 22.
    I would encourage you to examine the attached map and listing that 
shows the status of states. On January 1, 2008 Associate Members 
Arkansas and Wyoming will become full members. Washington will become a 
full member on July 1, 2008. Nevada's petition for full membership will 
be considered at our Governing Board meeting next week in Dallas. These 
states either had future effective dates in their legislation, or had 
to rework some part of their law to pass the stringent review by the 
Compliance and Interpretations Committee and the full Governing Board. 
The review is indeed, stringent, and some states didn't make it the 
first time! It requires a 3/4 vote to be admitted and certified that 
your state's laws are simplified in accordance with the Streamlined 
Sales and Use Tax Agreement. Once certified, each state has to 
recertify annually that it didn't change its laws and come out of 
compliance. We take compliance seriously!
    Over 28 percent of the country's population now lives in a 
Streamlined state. We are in constant communication with the other 
states that support Streamlined, but haven't yet simplified all their 
laws. We call them Adviser states, and they participate substantively 
in the State and Local Advisory Council, and on the governing board in 
a limited way as they continue to try to amend their laws in order to 
join with us. I believe there are another 10 states that are likely to 
join in the next two years if we can continue the progress we have made 
so far. Some states are waiting to see if there is movement in 
Congress, so this hearing is particularly encouraging for them. Others 
need a modification in our sourcing rule which will be discussed at the 
meeting in Dallas next week.

                   HOW MUCH MONEY HAS BEEN COLLECTED?

    Our Annual Report which is attached notes several successes in this 
past fiscal year. One of the greatest is the amount of tax collected by 
the sellers who have registered on the Streamlined registration system. 
The sellers registered on the Governing Board's registration system 
collect sales taxes for the member states. Member states report that 
those sellers who registered voluntarily to conduct business in their 
states collected $88,958,093 in sales tax for the 2007 fiscal year. 
This represents tax that was owed but would otherwise not have been 
collected or paid to those states.

              HAS THE SYSTEM BEEN SIMPLIFIED? ABSOLUTELY!

    These collections were made possible, in part, because the 
Governing Board contracted with three Certified Service Providers to 
provide services, free of charge, to remote sellers to collect and 
distribute these sales taxes. What could be simpler? The payments to 
these CSP's come from the new money that is collected. A fourth company 
is in the process of being certified. All reporting is electronic on a 
simplified reporting form used by all states. The development of this 
single form and the ability to transmit electronically is a huge 
accomplishment and simplification.
    A Rates and Boundaries data base, provided by each member state, 
ensures that the monies collected go to the appropriate jurisdiction, 
and CSP's and retailer are held harmless if they use these state tools 
and they inaccurately distribute the funds. In the past, concerns have 
been raised to this Subcommittee about the existence of software to 
handle this tax collection function. While software has been available 
for a number of years, what was missing was the accurate information 
about tax rates and district boundaries. These Rates and Boundaries 
data bases make it possible to collect taxes at the destination of the 
goods and services.
    The Governing Board maintains a web site with a central 
registration system, making it easy for these remote retailers to 
register, and also provided amnesty during the first 12 months in order 
to encourage retailers to register. Every effort is made to balance the 
burden, relieve sellers of responsibility when the state doesn't 
function or makes an error, and to work electronically.
    As of November 28, 2007 there were 1,072 companies registered on 
the Governing Board's centralized registration system. The system asks 
sellers to choose a ``model'' which indicates whether the seller will 
utilize the services of a certified service provider or a certified 
automated system (CAS) or will file and pay their sales tax using their 
own system. One hundred nine of the registered sellers stated they were 
using a CSP, 53 said they would use a CAS, and 910 said they would use 
their own system to collect and report sales tax to the member states. 
These sellers range in size from the very large to the very small pure 
internet sellers.
    The Agreement, itself, has been modified regularly since it was 
first signed, largely to embrace issues, such as the handling of 
digital products, which were not included in the original agreement. 
The basic simplification requirements remain unchanged; however some 
issues just simply needed more discussion and those have been the 
subject of the amendments. It is envisioned that changes in the future 
will be fewer and much further between since the large number of 
unresolved issues has now been addressed. Although a few contentions 
issues are still on the Dallas meeting agenda, it is expected that the 
Governing Board will turn its attention to trying to recruit more 
states, and become more active with the federal legislation.
    Other simplification has been achieved in the form of a single, 
simplified report form, electronic registration and reporting, uniform 
product definitions, availability of a certified service provider for 
collecting and reporting to the states, uniform sourcing and rounding 
rules, elimination of caps and thresholds, state administration, 
consistency between local and state tax bases, and a host of other 
things, most of which are included in your legislation, H.R. 3396, 
section 6. Although the Governing Board has not formally compared the 
Agreement to this particular piece of legislation, Mr. Scott Peterson, 
our Executive Director and I agree that all the requirement of that 
section are in place now, with the exception of the rules and 
regulations for dispute resolution, which fortunately, we have not 
needed to date. Those are on our list to accomplish in the near future.

                              WHAT'S NEXT?

    There are still a few issues to resolve and they are being worked 
on in the State and Local Advisory Committee and will reach the 
Governing Board this year, some as early as December 11, 2007 in 
Dallas.

          A review of the direct mail and delivery definitions 
        and rules.

          A review of the replacement taxes definition.

          A review of the rule on software maintenance 
        contracts.

          A review of the florist sourcing issue paper.

          A review of the Energy Star products definition for 
        sales tax holidays.

          A review of the sales price/sale for resale 
        definitions.

    The biggest issue is to expand the sourcing rule, while retaining 
uniformity, to allow for origin sourcing in-state for those states that 
have been unable to convert totally to destination sourcing. (The 
current rule says that the source of a sale, i.e., where the tax is 
applied, is where the goods are delivered, not where the sale 
originated. About half of the states use origin sourcing--where the 
sale was made--as the place where the tax is applied. This is quite a 
change for certain businesses, such as furniture stores, pizza delivery 
places, etc.) Texas, Ohio, Tennessee, Utah, Virginia, Illinois, New 
Mexico, Missouri have all been participating in the refinement of the 
current rule as well as members of the Business Advisory Council. 
Several alternatives are on the table for discussion in Dallas next 
week.
    The SST Executive Committee, officers and I will be approaching 
other states that are interested in becoming member states to see if we 
can assist them. Scott Peterson and I have visited with the tax reform 
commissions in Massachusetts, and Connecticut. There is interest in 
both states. Several southern states are also interested and we plan to 
visit them in the coming months to assess their interest and potential 
participation.
    Finally, with regard to H.R. 3396, the Governing Board stands ready 
to work with this Subcommittee as you mark up the bill and try to 
resolve the remaining outstanding issues. The important thing to 
remember, however, is that the basic framework of the bill mirrors the 
current Streamlined Sales and Use Tax Agreement. The provisions in 
Section 6 are included in the Agreement as it exists today. We have met 
and exceeded the threshold provisions for numbers of states, and 
percent of population. The Governing Board is operating smoothly, has 
excellent staff, and can continue to expand as required. We are in the 
process now of analyzing what changes we might have to make to conform 
to the legislation as written, or any suggested changes when you mark 
up the bill.
    On behalf of the Governing Board, I urge you give states the 
ability to require remote sellers to collect our sales tax and use the 
authority to overturn Quill that the Supreme Court acknowledged 
Congress has. Please pass H.R. 3396.











                             Attachment #4



















    Ms. Sanchez. Thank you, Ms. Wagnon. Your time has expired. 
And I am told that the lights are actually not working.
    Ms. Wagnon. They are not working. I had no idea where I 
was.
    Ms. Sanchez. We are employing them, they just aren't 
working. So we are resorting to good, old fashioned ingenuity. 
We will let you know when you have 3 minutes remaining and when 
you have 1 minute remaining. We do have the timer up here. So 
thank you for bearing with us.
    Okay, we just roll with the punches. What can I say?
    I want to thank you for your testimony.
    And I want to invite Mr. Zakrzewski to please proceed with 
his testimony.

    TESTIMONY OF WAYNE ZAKRZEWSKI, ESQUIRE, VICE PRESIDENT, 
ASSOCIATE GENERAL COUNSEL--TAX, J.C. PENNEY CORPORATION, INC., 
    DALLAS, TX, ON BEHALF OF THE NATIONAL RETAIL FEDERATION

    Mr. Zakrzewski. Thank you, Chairwoman Sanchez, Chairman 
Conyers, Ranking Member Cannon, and Members of the Committee. 
We appreciate the opportunity to talk with you this morning.
    I am Wayne Zakrzewski. I am vice president and associate 
general counsel for tax for JCPenney. I am here to talk to you 
on behalf of JCPenney and our trade association, the National 
Retail Federation to speak in support of Mr. Delahunt's bill, 
3396. And both on behalf of Penney and the National Retail 
Federation we urge your support for this important piece of 
business legislation.
    As a representative of JCPenney, I have been involved with 
the streamlined sales tax project since its beginning. I 
currently serve as a member of the board of directors of the 
business advisory council to the governing board and as co-
chair to the steering committee for the joint cost and 
collection study.
    JCPenney is a multi-state retailer. We have got $20 billion 
in sales. And those sales occur through both our stores, 
catalogue, and an Internet business. Our Internet site is one 
of the top largest Internet sites for selling apparel and home 
furnishings.
    And to give you a picture of how that business is growing, 
in 2002, we had $400 million in sales through our Internet 
business. This year we should hit $1.4 billion. In that short 
period of time, that business has grown by three-fold. True, 
some of that business is moving customers from the catalogue to 
the Internet, but this represents a remarkable growth in the 
Internet marketplace, which has got to be paid attention to.
    So we are here to ask you today to level the playing field 
between sellers like JCPenney who are required to collect tax 
because we have physical stores and those people who exploit 
the marketplace in your States virtually rather than through 
physical presence. We remit $1.2 billion in sales tax each 
year. And that $1.2 billion that we collect and our competitors 
don't give them a competitive advantage, not because they 
provide innovation or value to the customer, but because they 
are not required to collect sales tax.
    We believe there are compelling reasons that you should act 
now to allow the streamlined States to require collection. 
Primary among those is the simplification and uniformity the 
streamlined agreement has provided and Chairman Wagnon has just 
described to you. We believe, though, that--we commend them for 
this effort, but we believe a lot more States would participate 
if they were rewarded for this difficult effort by having the 
ability to require remote sellers to collect the tax that is 
due from their customers.
    We support this bill because we believe it would strengthen 
the streamlined agreement by mandating, by mandating that 
certain levels of uniformity and sophistication and 
simplification be maintained and providing an enforcement 
mechanism to ensure compliance. In the past there has been a 
major stumbling block to you all acting on this proposal. And 
that is the concern that collection places on businesses, 
particularly small businesses.
    That burden is illustrated by the results of the cost of 
collection study that I chaired. That study was conducted by a 
group of businesses and government organizations interested in 
streamlining who wanted to measure the cost that collecting 
would place on business. The result of this study showed that 
over all businesses the cost of collection under the current 
system was 3.09 percent of the sales tax collected.
    If you break that down by business size, for major--for 
large businesses with sales over $10 billion, that cost was 
2.17 percent. For mid-sized businesses, it was 5.2. And for 
small businesses, it was 13.4 percent.
    This demonstrates that there is a significant burden on all 
businesses and that it is significantly more for small 
businesses. We believe, though, that the right way to relieve 
that burden is not necessarily through a small business 
exception, but to provide for reimbursement for all businesses 
based on this cost of collection study.
    Rather than having to draw a single line between all 
business, if you provide for reimbursement, it is a fair 
system. It also eliminates the burden generally on interstate 
commerce by providing for reimbursement to all sellers. And it 
takes care of that burden by removing it through compensation. 
So again, we would like to urge you to support this and think 
about this as an alternative.
    [The prepared statement of Mr. Zakrzewski follows:]

                 Prepared Statement of Wayne Zakrzewski











    Ms. Sanchez. Thank you, Mr. Zakrzewski. We appreciate your 
testimony. You came in right under the 5-minute mark.
    We have been summoned across the street for votes, the 
bells that you have heard. So we are going to take a recess to 
allow Members to cross the street to vote. And hopefully in 
that time we will also get a page in here to look at the 
lighting system. And we will reconvene immediately after the 
last vote.
    [Recess.]
    Ms. Sanchez. I am going to call the Subcommittee back to 
order. And I want to thank the witnesses for their patience. I 
believe we are now to Mr. Isaacson.
    So, Mr. Isaacson, I would invite you to begin your 
testimony.

 TESTIMONY OF GEORGE ISAACSON, BRANN & ISAACSON, LEWISTON, ME, 
         ON BEHALF OF THE DIRECT MARKETING ASSOCIATION

    Mr. Isaacson. Thank you, Madam Chair and Members of the 
Committee. On behalf of the Direct Marketing Association and 
its more than 4,700 member companies, I want to thank you for 
the opportunity of testifying today and to discuss with you 
serious concerns that I have, both as an attorney who has 
practiced in the field of sales and use tax law for more than 
20 years and also as a teacher of constitutional law at Bowdoin 
College.
    I have serious concerns that the bill which this Committee 
is considering would undermine core constitutional principles 
that have served this Nation well for more than two centuries 
and would also erect a tax compliance barricade across the 
electronic highway to the detriment of the very small 
businesses and medium-sized businesses that have had the 
opportunity to access the unified national market that the 
commerce clause has created.
    Advocates of the STA have stated that they believe that it 
is worth abandoning these constitutional principles because of 
the lost sales tax revenue that they believe that they are 
suffering. The real problem is that the numbers that are used 
are totally illusory.
    And Mr. Cannon referred to the discrepant numbers that 
exist between the University of Tennessee study and the recent 
study that was undertaken by the Direct Marketing Association. 
And the question then becomes why are these figures so 
different. And I think that there are three basic reasons.
    The first reason is that the growth of electronic commerce 
just has not been the rocket sled that was predicted in the 
University of Tennessee study. Growth rates have been much more 
modest than those predictions anticipated. And that fact has 
been admitted by the authors of the study.
    The second reason and one which is oftentimes missed in 
this discussion is that 90 percent of electronic commerce, 
these huge numbers that you hear, are business-to-business 
sales. And in the business-to-business sales community, there 
is very little loss of sales tax revenue. And that is because 
most of those sales are either exempt sales that are made as 
sales for resales or sales in connection with the manufacturing 
process or businesses self-report their tax liability to State 
revenue departments.
    A recent study undertaken by the Washington State Revenue 
Department reported that for Internet sales that are made 
between businesses, 85 percent of the sales tax is, in fact, 
collected. So the notion that there is this sieve of lost 
revenues is not accurate, even when you look at what the 
overall volume of Internet sales may be.
    And perhaps the most significant reason why the University 
of Tennessee study is inaccurate is because of the fact of 
multi-channel merchandising, which has really become the 
predominant clicks and bricks phenomena that, again, Mr. 
Cannon, described. Most companies that use the Internet to 
expand their market, develop brand equity, provide customer 
service find that it is to their advantage to open retail 
stores or other customer service facilities, create nexus in 
States, and then commence use tax collection.
    In effect, the problem that has been described is largely a 
self-correcting one. And certainly, much of these figures that 
we described from Cyber Monday are by companies that are clicks 
and mortar retailers, are collecting the tax. In that regard, 
the issue is simply not one that reflects the kinds of numbers 
that are frequently bandied. And I think we need to be very 
cautious before surrendering long-established constitutional 
standards based upon illusory figures.
    In my opinion, the streamlined sales tax project has been 
the wrong approach to this issue. Unlike most uniform laws 
which are submitted to the Uniform Law Commission that consists 
of distinguished jurists, law school professors, practicing 
attorneys, and has produced such works as the uniform 
commercial code, the Uniform Division of Income for Tax 
Purposes Act, the famous UDITPA law that State practitioners 
are very familiar with. That process wasn't followed in this 
instance.
    Instead, this was essentially a government-only exercise. 
And I think in being a government-only exercise, an agreement 
negotiated by tax administrators for tax administrators, the 
project failed to take on some of the key areas of needed tax 
reform that had been recommended to it by the previously 
congressionally authorized advisory commission on electronic 
commerce and by the National Tax Association Project that 
looked into this same issue.
    So, for example, the project early on abandoned the idea of 
reducing the more than 7,600 different tax jurisdictions in the 
United States. It failed to address the issue of one rate per 
State. It failed to address the issue of having a single audit 
for companies that were registered under the agreement. It 
failed to come up with even a uniform definition for selling 
price, which is the core concept that underlies the application 
of a sales tax rate.
    The fact that these issues were simply not addressed 
because State laws were already too discrepant to reach 
conformity on those issues shows that there was a low bar that 
was established at the beginning of the project. Perhaps even 
more problematically, however, is that the STA has been a 
moving target.
    It has had more than 70 different amendments since it was 
adopted in 2002. And most of those amendments have been for the 
purpose of diluting or simply eliminating conformity provisions 
that were previously in the original agreement that was 
adopted. That is not the right direction for sales and use tax 
reform. And there are 20 more amendments that are going to be 
considered by the governing board at the meeting next week in 
Dallas.
    Ms. Sanchez. Mr. Isaacson, your time has expired. But 
hopefully we will be able to follow up with your testimony 
during the round of questions.
    Mr. Isaacson. Thank you.
    [The prepared statement of Mr. Isaacson follows:]

                Prepared Statement of George S. Isaacson







































































































    Ms. Sanchez. Thank you so much.
    At this time, I would invite Mr. Rauschenberger to begin.

TESTIMONY OF STEVEN J. RAUSCHENBERGER, RAUSCHENBERGER PARTNERS, 
 LLC, ELGIN, IL, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE 
                          LEGISLATURES

    Mr. Rauschenberger. Good afternoon--or good morning still, 
I guess. I appreciate the opportunity to be here.
    I am Steve Rauschenberger, past president of NCSL, a former 
assistant Republican leader in the Illinois State Senate, third 
generation retailer and an accountant by education. The 
National Conference of State Legislatures is a bipartisan 
national organization representing every State legislature from 
all 50 States and our Nation's commonwealths, territories, and 
possessions and the District of Columbia.
    I am pleased to have the opportunity to appear before you 
today in support of H.R. 3396. But I have to tell you this. My 
spending 15 years in the Illinois Senate, much of it in hearing 
rooms and chairing the appropriation committee for 10 years of 
testifying in Congress on four separate occasions in the past, 
I am nervous today because today's it is not just a good idea I 
am representing. I am representing the work of hundreds of 
people who have devoted literally thousands of hours and effort 
and compromise to try to figure out a way to bring the States 
together.
    I am representing the active involvement of 35 States 
through their legislative leaders and the executive branches. 
More than 37 States have taken action in both chambers or 
through executive order to participate in this process. I am 
commenting in favor of what I think is the most important piece 
of legislation to sustain, to reform, and stabilize our world-
admired system of federalism that 50 sovereign States and an 
indivisible union that I have ever been involved with.
    So I am a little nervous. It is because I care a great deal 
about this issue. And it is much more important than I think 
people realize.
    You have heard a lot about the substance and the structure. 
Maybe, you know, I can touch on some of the soft balls that 
need to be added out of the ballpark a little bit.
    What this bill in combination with the streamlined sales 
tax agreement does is it levels the playing field so businesses 
that play by the rules that have been traditional retailers are 
treated equally with everybody using cyber to a sort. I am in 
favor of Internet retail. I think it is a wonderful thing. It 
expands the assortment. It strengthens the American economy.
    But we should have a tax system that treats all 
transactions of like transactions in similar ways from a tax 
point of view. The streamlined sales tax together with this 
bill provides stability for State and local revenues. So 
whether there is a treasure hidden somewhere under the sand or 
not, equity doesn't require justification. I mean, that is what 
our tax laws should be pursuing.
    This provides both administrative and liability relief for 
businesses that adopt the modernized sales tax. States accept 
the responsibility to compensate retailers for the cost of 
collection. The bill includes protections for small retailers 
who have sales of less than $5 million over the Internet so 
they don't have to come into compliance with this.
    It retains and protects State sovereignty and tax 
competition between the jurisdictions, which is something we 
all believe in. It retains local governments' rights its 
States' granted to impose sales taxes on their own. And it 
recognizes in a way other things don't the political realities 
of adopting reform in a complex economy, in a complex country 
under our laws.
    Taxes are never popular. However, if State and local 
governments are to have the necessary resources to provide 
education and homeland security and public safety, then we need 
to maintain their ability to levy taxes. In surveys across the 
Nation, the tax that is least disliked is, surprisingly, the 
sales tax.
    When you think about it, sales taxes when they were first 
imposed in the 1930's customers bought goods from local 
merchants. There were very few remote sellers.
    In the 1970's and the 1980's we saw more goods being sold 
by remote mail order sellers and without collection of tax. 
This was adjudicated in the court cases of Bellis, Hess in 1967 
and reaffirmed by the Quill decision. What we have tried to do 
rationally since 1999 is to pull together legislative leaders 
and business leaders, executive branch, tax commissioners and 
try to come up with a solution to the change in commerce that 
adopts State laws.
    This is not replacement of sales tax law in the 50 States 
with some new model act, which maybe the UCC would be. It is a 
convergence of State policy. It is complicated necessarily 
because it is designed to protect and to defend State 
sovereignty at the same time it provides local options and 
local resources.
    I am going to wind up real quick because I can tell you 
lots. I could do this for about 45 minutes and probably bore 
you to death. But, you know, let me end by reminding you. You 
know, it is wonderful that the uniform commercial code went to 
the uniform group on laws. I think it took about 40 years from 
the beginning of the adoption of that to its last adoption.
    We are in an Internet age. And the challenge is are States 
going to be able to conform and to change and adapt to the 
changing environment, whether it is our taxes, whether it is a 
regulation of professions, whether it is a regulation of 
insurance.
    This is a fragile flower of reform that has been brought 
along by people working very hard. I hope you treat it 
delicately. I hope you treat it thoughtfully. I couldn't 
disagree more with some of the representations from the 
previous distinguished speaker. And if we get to him in 
questions, I would be happy to try to knock some more out of 
the park.
    [The prepared statement of Mr. Rauschenberger follows:]

               Prepared Statement of Steve Rauschenberger







































    Ms. Sanchez. Great. Thank you, Mr. Rauschenberger.
    We will now begin our round of questioning. And I will 
begin by recognizing myself for 5 minutes.
    My first question is for Ms. Wagnon. In establishing a 
uniform set of rules, one of the heated discussions that a 
uniform rule--for a uniform rule is the issue of sourcing for 
sales taxes and whether the taxing should be based on the 
destination of the goods or the origin of the goods. As the 
secretary for revenue of Kansas and knowing that Kansas has 
altered its sales tax system, what insight can you provide 
about the change from destination to origin sourcing?
    Ms. Wagnon. It was painful. I think the concept of using 
destination sourcing makes sense. But it does require an 
adaptation on the part of, in Kansas, about 25 percent of our 
retailers. And we had to provide the rates and boundaries 
database. We had to provide consistent assistance. And I am 
still sending some of our technical staff from revenue out to 
companies that deal in many jurisdictions. We have 750 
jurisdictions.
    We made the conversion because all of us believe from the 
governor to the Republican and Democratic leadership that this 
was an appropriate thing to do. But the political reality is 
that there are 10 States or more that some of which are 
associate member States now that have tried and simply cannot 
get that done. The state of Texas is very interested in being 
part of this.
    They were involved from the very beginning. But they don't 
see this as politically possible. So we are now considering on 
the governing board next week an option to allow for origin 
sourcing in-state and uniform among any State that would adopt 
that. So it would be an addition to our sourcing rule.
    It would still be uniform so you won't have all origin 
States doing everything differently, but one rule. And then for 
the remote sales, either destination sourced. Or the other 
proposal that is being considered is a single rate. And we will 
be debating that and making a decision. I think the political 
reality is it simply is not going to accommodate all the States 
that need to be there with the rule that we have in place.
    The state of Washington has its deadline for making its 
conversion on July 1 of 2008. Arkansas has made a conversion. 
Iowa made some changes. But Ohio has been unable to do it. Utah 
has been unable to do it. Tennessee has been unable to do it.
    And we are trying to adjust so that we can bring in these 
other groups. I hope that is sufficient.
    Ms. Sanchez. Thank you.
    Mr. Zakrzewski, some opponents of the SSUTA and the 
legislation Mr. Delahunt has introduced argue that the 
collection and remittance of sales tax by remote sellers would 
impede electronic commerce. And I know that you are a 
representative of a company that conducts business online. So 
in your experience, would the requirement of collecting and 
remitting sales tax impede electronic commerce?
    Mr. Zakrzewski. It shouldn't impede electronic commerce. 
Today you have to have a system that takes your order and 
records it and tells the customers what the price is.
    With the streamlined sales tax project, the project 
provides software and certified service providers that will 
come in and attach to your system and collect the tax and tell 
your customers how much that tax is. So to me it is really not 
a legitimate concern that that would impede commerce because 
not only can you do it, you are doing it at least in the State 
where you are located today and software to do it for a multi-
state is free.
    Ms. Sanchez. So with the emerging technology you have found 
a solution to that particular problem?
    Mr. Zakrzewski. That provides a solution to these sellers.
    Ms. Sanchez. Thank you.
    Mr. Isaacson, is there any policy reasons why the medium to 
which a particular good is sold to the consumer should dictate 
whether it is subject to sales tax? The question specifically 
is is there anything about the Internet that suggests sales of 
goods ordered over that medium should not be taxed?
    Mr. Isaacson. The issue is not whether goods should be 
taxed if they are sold over the Internet or not. As I pointed 
out before, multi-channel merchants who are selling over the 
Internet such as JCPenney are collecting. And a large number of 
the largest companies are, in fact, doing so. So that is not 
the issue.
    The issue is whether a company that has no presence within 
a State does not benefit in any way from any services being 
provided by that State, does not get tax increment financing 
for building new facilities or getting bypasses and access 
roads built to its stores, who has no political role in that 
State whose employees are not voting in that State, whether it 
is appropriate for a 7,600 tax jurisdictions to be able to 
export their unique and non-unifying tax systems across their 
State borders to 49 other States. That is the issue the Supreme 
Court has repeatedly addressed and has said that the commerce 
clause protects commerce from that type of approach.
    It also happens to be the reason the commerce clause was 
adopted in the first place. What was happening in 1878 and the 
reason why the convention was called in Philadelphia was 
because States were imposing tariffs, duties and taxes on each 
other's trade and the country was going into a depression. And 
the commerce clause is what created the unified market to 
prevent them.
    Ms. Sanchez. Thank you. I see my time has expired.
    So I will recognize Mr. Cannon for 5 minutes.
    Mr. Cannon. Madam Chair, would you mind if I deferred my 
time?
    Ms. Sanchez. Not at all.
    We may do a second round, depending on the interest of 
questions.
    Mr. Cannon. I shall do everything in my power to help us 
get done in one round.
    Ms. Sanchez. Okay, Mr. Delahunt, you are recognized for 5 
minutes.
    Mr. Delahunt. Thank you, Madam Chair. I was going to direct 
my question to the three panelists other than Mr. Isaacson. Mr. 
Isaacson made the statement that this was a government 
exercise. The implication being that we are a bunch of 
bureaucrats stuck in a corner someplace. At least this is the 
way I interpret. And maybe I am mischaracterizing.
    But would you explain to me--maybe there was some packet of 
missions that weren't allowed in or maybe even a professor of 
constitutional law at a fine institution, a fine ivy college up 
in Maine didn't participate. But the point is I think it was 
misleading because--and why don't I address it to Secretary 
Wagnon.
    How did this come about?
    Ms. Wagnon. Well, I think----
    Mr. Delahunt. What was the process? I know you have had 
numerous amendments. And I congratulate you, by the way, on 
having numerous amendments. I think what that reflects, at 
least from my vantage point, is an effort to get it right and 
to do it well and to attempt to look at a very complex problem 
and to achieve a balanced resolution.
    Ms. Wagnon. And I think that is exactly correct. It started 
out with governors, State legislators, and business 
representatives as well as tax administrators. The members of 
the governing board are selected by the State. Some of them are 
business representatives.
    Mr. Delahunt. If I may, Madam Secretary. The National 
Governors Association, I know, in the past has taken a position 
on earlier versions of the bill that is before us. Are you 
aware of their position on this particular legislation?
    Ms. Wagnon. Yes, I am. We work very closely with NGA, NCSL, 
the Federation of Tax Administrators, all of the organizations 
that they support.
    Mr. Delahunt. What is their position on this bill?
    Ms. Wagnon. They are supportive of this.
    Mr. Delahunt. Do you know how many of the governors have 
indicated their support for this particular or earlier versions 
of this legislation?
    Ms. Wagnon. It is a little difficult for me to answer that 
because governors keep going in and out of office.
    Mr. Delahunt. I know. They keep coming and going.
    Ms. Wagnon. And Governor Leavitt was a good example of a 
leader early on who is now no longer in that position. But the 
fact that 22 States have embraced this legislation and 
governors have signed it--there is a minimum of 22 and probably 
10 more that were involved earlier. The NGA has consistently 
had a position on this legislation in support of it. And that 
is true also for the National Conference of State Legislatures.
    Mr. Delahunt. Let me go to Mr. Rauschenberger and ask him 
to respond to both of those questions.
    Mr. Rauschenberger. I am happy to have the opportunity 
because I don't think it is the only thing Mr. Isaacson got 
wrong. I have been involved since----
    Mr. Delahunt. Well, don't----
    Mr. Rauschenberger. You know State legislators. You 
shouldn't let us near microphones anyway. Since 1999 I had been 
a co-chair of a task force that NCSL has had to work on this 
issue. I have never participated in a meeting that wasn't a 
public meeting. We spend more time with members of the business 
community. It is why we have so much broad-based business 
support.
    There is only a single association I am aware of that they 
looked hard to find that was in opposition. So to say that this 
was done by bureaucrats--this was done by elected officials and 
people representing the business community together with people 
who understood the tax system, which makes sense to me.
    To the question of support, NCSL has supported this effort 
since 1999, which requires a majority, I think 70 percent, of 
the 50 States to be in support at all times for us to have 
stayed in continuous support of this. We have had a lot to do 
with drafting it.
    And I think the number I recall is--I think it was Franklin 
who presented more than 50 changes to the Constitution before 
it was finally ratified. The amendment process is about seeking 
perfection, not about confusion about goals.
    Mr. Delahunt. And let me just make a comment, too. I think 
you said something here that is very significant. We do have a 
unique system of federalism. And I think it is very important 
for this Congress to respect federalism.
    I happen to embrace the concept of devolution and States' 
rights. Sometimes I am surprised at my colleagues of your party 
that seem to believe that Washington knows best in terms of 
what the States ought to do or ought not to do.
    But out of respect for the States I think it is important 
that we understand that this is about sustaining that system of 
federalism and conferring to the States the power to raise 
revenue which is justifiably there. I want to commend you all 
for really a tremendous effort and for the significant progress 
that you have achieved. I wish we could do the same here in the 
United States Congress.
    And with that, I will yield back.
    Ms. Sanchez. The gentleman yields back.
    Mr. Cohen is recognized for 5 minutes of questions.
    Mr. Cohen. Thank you, Madam Chair.
    First, I would like to say hello to my former colleague and 
good friend, Mr. Rauschenberger.
    It is good to see you.
    Mr. Rauschenberger. Good to see you. You look taller and 
better now.
    Mr. Cohen. It is Congress. We have a great basketball team.
    Tennessee is a State that is heavily sales tax reliant and 
yet has been somewhat reticent, maybe, to become a full-fledged 
member. And I probably should know the answer to this. But can 
you tell me why Tennessee, a State so starved for revenue, is 
an associate member and hasn't joined in?
    Mr. Rauschenberger. The sourcing complications of the local 
jurisdictions have been a hard bite for both chambers in 
Tennessee to embrace. Most of the States that are having 
trouble coming into compliance it is around the changes 
required and the risks that are assumed by the local 
jurisdictions in the sourcing change and its effect on local 
revenues. States that have kind of bridged that gap have done 
it.
    And I think Washington is one of them which actually set 
aside, directed the set-aside of a major portion of the new 
increment revenue and used that as a hold harmless to kind of 
solve the local jurisdictional problems. But that is my best 
understanding right now.
    Mr. Cohen. And I have thought about this issue. And, of 
course, Mr. Isaacson, I read your statement. There is a lot of 
revenue that--your brief or the brief that is attached to it 
questions how much revenue the Tennessee study suggested we 
might be losing in Tennessee. But there is considerable 
revenue, and there is the years to come of revenue. When you 
have a State like Tennessee and there are only a handful that 
don't have an income tax and that are relying on the sales tax. 
It really does deprive people of basic services because you 
have got a progressive tax system.
    And if you have a State, Mr. Isaacson, with a progressive 
tax system like Tennessee has and others without any major 
source like oil or gambling, Nevada, Texas, and those other 
States that don't have any income tax, how would you suggest 
that they survive in the future years to provide the services 
to people that need education and health care and help with the 
utility bills? Should they just kind of let e-commerce grow and 
grow and grow and their sales base just decline?
    Mr. Isaacson. It is a fair question. And I think that there 
is a clear answer to your question. I think the starting point 
has to be understanding what are the numbers that we are 
dealing with.
    If you look at the United States Commerce Department 
figures in regard to those States that are currently full 
members and based on that commerce department data, the lost 
tax revenue is $145 million. So dealing with what is the scale 
of the issue, I think, is significant.
    One of the reasons why Tennessee has not wanted to 
participate in this process is that Tennessee has had different 
tax rates or different kinds of products, agricultural 
products, heavy equipment, for example, different tax rates, 
and not wanting to conform to the tax regime or protocol that 
the SSUAT has called for. That is part of their sovereignty. 
That makes sense.
    The real reality is that this problem is largely self-
correcting because companies do start collecting as they expand 
their businesses. The incubator is electronic commerce. The 
long-term business plan is to leverage grand equity, establish 
retail stores, provide after-sale customer services and by 
doing so, establish a nexus. That is what we are seeing in all 
of the major large retailers. And I think it is a development 
that says that we don't need to be concerned about the future 
in the manner that has been described by my co-panelists.
    Mr. Cohen. I hope you are right. We have been waiting for 
Saks to come to Memphis for a long time.
    Mr. Rauschenberger says that they searched long and hard to 
find you. Are there other business groups that are against this 
proposal that you are familiar with?
    Mr. Isaacson. I don't know what he means by long and hard. 
When the project began in 2000, the Direct Marketing 
Association submitted 30 suggested reform proposals. And I met 
with the leaders of the organization at that time.
    Of 30 proposals that were recommended by the Direct 
Marketing Association, only one was adopted.
    Mr. Cohen. I don't think that--other than the Direct 
Marketing Association, other business or commercial groups that 
are in opposition to this. He said that you were kind of a 
singular----
    Mr. Isaacson. There are. And I don't speak for them. Some 
of them are in the room today.
    Mr. Cohen. They are in the room?
    Mr. Isaacson. I believe so. I have been talking to them. I 
haven't looked behind me while I have been questioned, but they 
were here earlier today.
    Mr. Cohen. Some of them are nodding their heads. We will 
figure out who they are later.
    I appreciate you on that. And I really appreciate the work 
of the NCSL. It is well-represented here. And there are two of 
your predecessors, I guess, were Claybough and--Bill Claybough 
and Matt Kisworth. They were great State legislators----
    Ms. Sanchez. The gentleman yields back?
    Mr. Cohen. I do.
    Ms. Sanchez. The gentleman yields back his time. There is 
sufficient interest on the part of Members of the Committee and 
a second round of questions.
    Mr. Cannon. I think actually this is still the first round. 
But, I mean, I understand there is a second round.
    Ms. Sanchez. I apologize. You are correct, Mr. Cannon. You 
are recognized for 5 minutes.
    Mr. Cannon. Thank you, Madam Chair.
    I appreciate you all being here.
    We appreciate, Ms. Wagnon, the update. I think that is the 
only new thing that is on the table today. And that is 
appreciated.
    And, Mr. Isaacson, you know, you said it all very well. And 
then frankly now, Mr. Rauschenberger and I probably need to go 
back and punt a little bit because we have had this same 
discussion many, many, many times. And to suggest that there is 
error in your thinking, I think, is appropriate. Personally we 
have looked at all the data, I think, and we have not seen 
errors in your presentation. That was very concise. I think 
this is probably the fourth time you have made a presentation 
like this to this Committee. And that was by far the most 
elegant, not new particularly, but well-done.
    Let me see if we can get some basic consensus on issues 
here. And I do this in the context of many other hearings. But 
do we have a basic consensus among the panelists, for instance, 
that the Internet is one of the major drivers for economic 
growth in America?
    Ms. Wagnon?
    Ms. Wagnon. I would agree with that.
    Mr. Cannon. Well, we have unanimous view on that, which is 
good because that means we are all in America, we are all 
recognizing what is going on.
    Is there unanimity on the idea that there is a tendency for 
ideas on the Internet--remember, we have these hierarchies. You 
have got business-to-business as far as you getting taxes paid. 
And I think Mr. Isaacson laid those out. And I don't think 
there is much disagreement with that.
    But in the environment where you are getting new ideas on 
the Internet, is there any disagreement by anybody on the panel 
that the tendency of those new ideas as they succeed is to 
become multi-channel, which means they tend to become not just 
clicks, but clicks and bricks?
    Ms. Wagnon?
    Ms. Wagnon. I think there are going to continue to be a 
rise in the number of pure Internet retailers. The figures that 
I saw in the New York Times last week----
    Mr. Cannon. Pardon me. I agree with you on that. But the 
question is as you get this increase in retailers, is there a 
tendency for those to--as they become successful, is there a 
tendency to move into bricks so that you have nexus.
    Ms. Wagnon. And I would not agree with that. I think we 
have seen a number who have registered that are in that 
situation where they are multi-channel clicks and bricks. But 
there are many out there that are going to never adopt that 
model. So I would dispute that.
    Mr. Cannon. Can you tell me what is it about those that 
means they won't adopt the model?
    Ms. Wagnon. They don't want a brick and mortar store. They 
like to remain pure Internet sellers.
    Mr. Cannon. But if they succeed and they brand themselves, 
won't they tend to want to become multi-channel?
    Ms. Wagnon. I don't think you can State that universally, 
no, sir.
    Mr. Cannon. No, no, no, this is not universal. I am 
suggesting there is a tendency. I think I used the word trend 
or tendency for successful stores to go multi-channel.
    Ms. Wagnon. I think the trend is that the stores that are 
successful--the most recent one that was announced in the paper 
was like Cabella's, which have separated everything. They are 
going to multi-channeling so that you can return the goods in 
the stores.
    Mr. Cannon. Right.
    Ms. Wagnon. So if you have a store there, the tendency is 
to adopt that. But you also have to understand that that is not 
going to solve your tax problem if you haven't broken in yet.
    Mr. Cannon. Okay. But we are just looking for broad 
consensus on trends here. And Cabella's, of course, is a great 
example because the fact is--and I think Wal-Mart was probably 
the first that tried to have separate channels and then went 
back to a merging because people want to return their items to 
a store. It is easier to return to a store than it is to put it 
back in a box.
    But that would argue for the underlying trend. Now, you may 
have boutique operations forever, but an operation that has 
less than $5 million in revenue is exempted, so you don't care 
about those little guys.
    Ms. Wagnon. Well, Amazon doesn't have a store that I am 
aware of.
    Mr. Cannon. Amazon is one of the uniques, I grant you that.
    Ms. Wagnon. And they are huge. So I think there are two 
trends, sir. That is my point.
    Mr. Cannon. No, no, the point is not that all stores will 
become multi-channel. And clearly, Amazon is one of those very 
interesting cases where they are struggling and trying to 
figure out where they are going. They are competing with 
companies that have advantages because they have clicks and 
bricks.
    And so, Barnes and Noble is where somebody can go and drink 
coffee and read a book and then decide to buy it. Barnes and 
Noble is a place where you can just stop on your way to work 
and pick up a book if there is something you wanted to read. So 
there are advantages to both places.
    Mr. Zakrzewski?
    Ms. Sanchez. Zakrzewski.
    Mr. Zakrzewski. Zakrzewski.
    Mr. Cannon. Do you pronounce the second z?
    Mr. Zakrzewski. Zakrzewski.
    Mr. Cannon. Zakrzewski, okay. Mr. Zakrzewski, do you agree 
that there is a broad trend to go multi-channel and therefore, 
if you are successful on the Internet to create bricks as well 
as clicks?
    Mr. Zakrzewski. What you have described is stores like 
Barnes and Noble, stores like L.L. Bean, Eddie Bauer and stores 
that began as bricks going to clicks. I am trying to sit here 
and think of an example of a pure Internet retailer, though, 
that----
    Mr. Cannon. Well, actually, Eddie Bauer was a catalogue 
that went to Internet and then went to bricks, I think, after 
they went to the Internet.
    Mr. Zakrzewski. They had a store----
    Mr. Cannon. Okay, I can see we don't have broad consensus 
on this.
    Mr. Zakrzewski. I don't think you do.
    Mr. Cannon. So let me just say that it is my view of the 
world that success in American markets--this debate could go on 
eternally. I see that my time is expired.
    I will reserve the right to participate in the second round 
if new issues would arise, Madam Chair. And I yield back.
    Ms. Sanchez. I thank you, Mr. Cannon, for being so 
cognizant of your time.
    Mr. Cannon. The Chair could have poked the Ranking Member 
and I would have recognized sooner that my time had expired.
    Ms. Sanchez. You were just over the 5-minute mark. We are 
not going to hold it against you.
    There is sufficient interest in a second round of 
questions.
    And I will recognize Mr. Delahunt.
    Mr. Delahunt. Yes, I would like to follow up on the respect 
that was implied in a question by my friend from Utah, Mr. 
Cannon. And we are talking about Eddie Bauer. We are talking 
about L.L. Bean. You know, I have a concern.
    The small, independent business that I think adds something 
to the community--I am not saying that Eddie Bauer does not. I 
am not saying that Barnes and Noble doesn't. But there is 
something more than just the economic factor in this particular 
equation.
    As I said in my opening remarks, I think this is, you know, 
Norman Rockwell home town small business protection act. I 
really do. If we are going to have a space for the continued 
existence of that kind of entity that, I think, is a 
significant piece of what we know in terms of the American 
experience, how are they going to compete when they are put at 
a competitive disadvantage ranging from 3, 4, 5, 6, I think it 
is 8 percent in Florida?
    Mr. Rauschenberger?
    Mr. Rauschenberger. I think your point is well taken. This 
bill, your bill levels the playing field and makes the 
amazon.coms of the world play by the same set of rules that the 
open hearth bookstore in a little town plays by. What is more, 
it also for the first time obligates States to pay reasonable 
reimbursement, reasonable compensation to businesses for 
collecting their sales taxes.
    I mean, those are two important strides forward. You know, 
we don't know what the products that are going to be in the 
marketplace 3 years from now, let alone 30 years from now. So 
this is exactly the right thing to do.
    Mr. Delahunt. I mean, one only has to look at the economy 
in terms of mergers, acquisitions, consolidations, et cetera. I 
think we lose something as a society when, you know, I can't go 
into the local drug store anymore like I did when I was a child 
and go to the soda fountain and sit down and communicate with 
Mr. Johnson and have him ask about, you know, how is mom and 
dad. That is not happening today in this country. And I think 
we miss something as a result of it.
    You know, Mr. Isaacson spoke about, you know, core 
constitutional--or erosion, if you will, of core constitutional 
safeguards.
    I mean, Secretary Wagnon, I read the Quill decision. And it 
said to me, ``Congress, do something about it.'' Can you 
explain to me--do you have an understanding of the 
constitutional erosion of core values?
    Ms. Wagnon. I think the Supreme Court was very clear in the 
Quill decision saying that when simplification and the burden 
is removed, Congress can require that. In fact, the Supreme 
Court threw this back in your lap. And I think we have come to 
you today to say we have achieved those simplifications. We can 
certainly achieve more.
    But we have a functioning board. We have a functioning 
process. We have gone a long way. And it is time to recognize 
that you make a burden across all businesses equal, large to 
small. So, yes, you are right.
    Mr. Delahunt. Again, Secretary Wagnon and any panelist, I 
mean, I keep hearing about how complicated it is. Seventy-five 
hundred taxing jurisdictions. You know, to be perfectly candid, 
I think that is fooforall.
    I mean, I am hearing from--what you are saying is one 
simple form, one simple reporting form. I mean, don't give me 
that when somehow you have done it and people are voluntarily 
complying.
    Mr. Rauschenberger. But every one of those sellers uniquely 
has a zip code, which is the source of the taxing. The States 
have agreed to match every zip code to a tax rate. So the 
question of one rate or complications or allowing States to 
sovereignly decide to allow governments, municipalities to 
impose sales taxes is over. It is no more complicating than 
saying do you realize Members of Congress vary by height by 
more than seven inches.
    Mr. Delahunt. But at the same time--and you make a point--
you are taking the burden or the cost of collection away from 
the remote seller. Am I accurate?
    Ms. Wagnon. Yes.
    Mr. Delahunt. I mean, I guess I am frustrated. I have been 
involved in this particular issue for 7 years. To me it just--
well, I don't know.
    Does anyone have an opinion on the small business 
exemption? Because this is a small business bill.
    And, you know, Mr. Isaacson, I presume that Mr. Cannon is 
going to give you some time. But I don't know.
    Ms. Sanchez. And, Mr. Delahunt, your time has expired. But 
I will allow the panelists to answer.
    Mr. Delahunt. Well, thank you so much. The question is we 
do have the small business exemption, which would require 
businesses in excess of $5 million nationwide and gross taxable 
sales in excess of $100,000. Would you alter that? Would you 
tweak that?
    You know, we are open. I mean, I am trying to protect small 
businesses in this country. I want them to continue to exist 
and be able to flourish and grow and to prosper. Can we help.
    Secretary Wagnon?
    Ms. Wagnon. I think the small business exemption is 
important to have. Whether it needs to be stated in the 
congressional act as to exactly what the limit is, it could 
perhaps be decided by the governing board. You could put that 
in section 6 of the bill and then let the governing board 
adjust that exemption as economic times change. But I believe 
you need to protect those small businesses. And there are 
several ways to get around it.
    We have had proposals come before the governing board about 
what ought to be that deminimus rule. I believe the governing 
board is the best place to have that debated.
    Mr. Delahunt. Thank you.
    Thank you, Madam Chair.
    Ms. Sanchez. Thank you. The gentleman's time has expired.
    Mr. Cohen is recognized for 5 minutes.
    Mr. Cohen. Thank you, Madam Chair. I am going to go back to 
Mr. Rauschenberger and ask him. This whole thing with origin 
and destination--that is a Tennessee issue, too. That hasn't 
been resolved, has it?
    Mr. Rauschenberger. Unfortunately, it is the nexus, it is 
the point of most of the problems. If a State chooses to source 
the sale at the location of the seller, there is no way to 
avoid the seller moving his presence or his official office to 
a non-tax jurisdiction.
    So every State that has a traditional or historical origin, 
you know, retailer-based sale origination is going to have to 
adjust that if you are going to solve the problem of remote 
sellers because sales taxes, unlike what some people may think, 
are not imposed on the seller. They are imposed on the 
purchaser and collected by the seller.
    So States should have to go through some measure of 
political pain and reform. You can't have reform without 
change. But sourcing is going to be tough for all States. It is 
California's challenge. It is Illinois' challenge and part of 
Tennessee's challenge. But if you don't move the sourcing of 
the sale to the address of the buyer, you can't get at the 
fundamental inequities because the seller simply moves his Web 
site, his mailing address to the Cayman Islands.
    Mr. Cohen. What my memo says is that Tennessee wants to 
have an origin rule or a portion origin rule. How would that 
differ from the destination?
    Mr. Rauschenberger. Well, the streamline sales tax in one 
of those 170 or 140 amendments that they are considering, which 
are good because they are about--that is how we debate in the 
process--are considering what might be a bifurcated rule where 
the sourcing for sales that occur both from an in-state seller 
and an in-state buyer would be sourced on an origin basis but 
sales originating from outside of the State's jurisdiction 
would use a destination source or a bifurcated rule.
    The fundamental problem of that are two things. Number one, 
there is a question of equal protection under the U.S. 
Constitution. Can you treat different sellers in a different 
way under your law? You know, there is a question there, which 
probably Secretary Wagnon probably is better expert at that 
than I am what our chances are there as well as there is some 
question of in States which have multiple rates, whether they 
will have to adopt a blended rate or one rate for all incoming 
sales.
    Mr. Cohen. So are we talking about more of an intrastate 
sales issue?
    Mr. Rauschenberger. Yes.
    Mr. Cohen. I can see where Tennessee would have a problem 
with that.
    Mr. Rauschenberger. And the solution is elegantly simple 
but really politically difficult. So it is normal. It is right 
that States are struggling with this. But----
    Mr. Cohen. The other issue--apparently there are 19 
simplification requirements in this bill. And my notes inform 
me that so far six have been met. Is that accurate? No? How 
many have been met?
    Ms. Wagnon. All but one.
    Mr. Cohen. All but one?
    Ms. Wagnon. And the issues and resolution, dispute 
resolution is the only one we have not addressed.
    Mr. Cohen. Okay, well, that is good. For a minute I was 
concerned you all weren't doing any better than the Shia and 
the Sunni. But that is good. Thank you.
    Madam, I yield.
    Ms. Sanchez. The gentleman yields back his time.
    Mr. Cannon is recognized for 5 minutes.
    Mr. Cannon. Thank you. Let me just make one point for the 
record. The political problem in a State for adjusting between 
the source of the sale and the destination of the sale is that 
often cities have created incentives for big box companies and 
instead of the sales receipts coming to the city that gave 
those incentives, they go to the city where the person came to 
buy. So rich cities end up buying more stuff from big boxes and 
getting more money. And the other cities end up tending toward 
bankruptcy, which is one of, I think, the fundamental problems.
    I suspect, by the way, that the current governor of Utah, 
Governor Huntsman, opposes the SST. I am not sure he has been 
on record with that. But we certainly have moved in the other 
direction in Utah.
    We have talked a lot about the leveling of the playing 
field. The fact is the playing field is level unless you 
disagree with me. And raise your hand or something if you do. 
The cost of delivery pretty much--wait a minute. Let me get the 
statement out, you know, the particular. Let us get the 
particular out so you can particularly disagree.
    I know that there are some interests here. I am astonished 
at the idea that this would be called a small business bill 
when we have JCPenney's here and we have Staples pushing this 
and other companies around the country. People that want this 
done are people that are working hard to create a rigid system 
where they can continue to succeed.
    But the cost of doing business on the Internet is greater 
because it is on the Internet. So you have a delivery cost, 
which is roughly equal to the cost of sales. That is not 5 
minutes, was it, Madam Chair?
    Ms. Sanchez. No.
    Mr. Cannon. Is that not true that the cost of doing 
business is relatively equal because the cost of delivery is 
more or less the same as the cost of tax for an Internet 
company?
    Mr. Zakrzewski. That is not necessarily true.
    Mr. Cannon. Well, how far off true is it?
    Mr. Zakrzewski. Well, I mean, it is going to depend on what 
the individual business model is. But you have still got to get 
delivered goods to the customer through a store or through----
    Mr. Cannon. Well, that is right because the customer walks 
into the store. That is the point.
    Mr. Zakrzewski. But you have got--there is still a delivery 
cost built into the cost of goods that you can sell in your 
store.
    Mr. Cannon. Sure, but when you deliver a truckload of goods 
to a store that is not the same as delivering an item to a 
buyer across the country.
    Mr. Zakrzewski. But it is not true that there is a pure 
additional incremental cost for that delivery charge.
    Mr. Cannon. Wait, wait, wait. You are saying it is not true 
that there is--you are saying that there is not a clear 
delivery cost for an item that is sold online and shipped 
across the country?
    Mr. Zakrzewski. No, I am saying that it is not true that 
there is a pure difference that is equal dollar for dollar to 
that delivery cost.
    Mr. Cannon. But we are talking about more or less here. But 
we are not talking more or less. We are just talking about the 
cost of delivery. You would not disagree that there is a 
significant cost to deliver something that has been ordered on 
the Internet.
    Mr. Zakrzewski. That is true.
    Mr. Cannon. Well, thank heavens. We got some consensus 
here. Amazing.
    Is there any disagreement that if we did an SST interstate 
compact that that would create the second biggest tax 
collection agency in the history of mankind, the Federal 
Government being the first, Steve? Yes. No?
    Mr. Rauschenberger. It isn't comtemplated at all.
    Mr. Cannon. Who is going to collect the taxes?
    Ms. Wagnon. The States.
    Mr. Rauschenberger. The 50 States, the same ones----
    Mr. Cannon. No, no, no, the SST is going to collect and 
distribute the taxes.
    Ms. Wagnon. No.
    Mr. Rauschenberger. No.
    Mr. Cannon. No. Explain to me how this works.
    In fact, Mr. Isaacson, you have been very clear on these 
points. Would you mind explaining how it works? You think he 
would learn something in the process.
    Mr. Isaacson. What, you are going to have 7,600 different 
tax jurisdictions that are now going to be allowed to 
administer their tax systems in 49 other States. And so, you 
are, in fact, going to create one of the largest and most 
complex tax systems in the world. And perhaps it will be one 
that challenges the Federal Government's.
    Mr. Cannon. Well, Mr. Rauschenberger, please do respond, 
but briefly.
    Mr. Rauschenberger. I don't know where he has been because 
that is not what it does. The city of Elgin in Illinois is not 
a book on its way out to Lands End or to L.L. Bean to tell them 
how to manage their store.
    Mr. Cannon. But part of----
    Mr. Rauschenberger. If you source the sale to my zip code, 
all it is going to tell you is 6.75 percent is my sales tax 
rate, collect it, and remit it. I mean----
    Mr. Cannon. Where does he remit it?
    Mr. Rauschenberger. Well, it depends whether he chooses----
    Mr. Cannon. Where does the dealer remit?
    Mr. Rauschenberger. If L.L. Bean chooses to hire a 
certified service provider, the service provider assumes the 
liability and does all the collection and the remittance and 
the tax forms for them at no cost. If he chooses to adopt a 
certified software, he would collect the seller's discount, the 
reward, the compensation for doing it. And he would collect and 
remit.
    Mr. Cannon. Thank you. I suspect that what would really 
happen in this context is that we would tend to homogenize 
sales taxes. And I find that disconcerting in the least.
    Governor Spitzer called taxing Internet sales a tax 
increase. What we are dealing with here is, in fact, taxes that 
are taking more taxes out of the pockets of consumers. You 
know, one of the things I just don't understand--let me put 
this on the record.
    I have talked to many individual State tax commissioners. 
And we have had, I think, pretty broad consensus. It seems to 
me that the interest of the States is to encourage an 
environment which has made them flushed, by the way. Virtually 
all the States are flushed with cash. It has created an 
environment of economic growth. The Internet does that.
    Why would you want to poke the baby in the eye as it is 
beginning to grow? That is one of the facts I can't understand. 
Or I understand how as a group States would have wanted to tend 
to do this. But individually if they thought about it, there 
ought to be a tendency to say we have a great economy that is 
growing, let us encourage innovation online and----
    Ms. Sanchez. Mr. Cannon?
    Mr. Cannon. Now it actually has expired, hasn't it?
    Ms. Sanchez. Your time has expired.
    Mr. Cannon. Thank you. What remains I yield back.
    Ms. Sanchez. No time, so we will put that in the negative 
account, and we will charge you for that later.
    We are being summoned across the street to vote. But I do 
have one quick question that I think will clarify a statement 
that Mr. Cannon just made. So I recognize myself for 5 minutes, 
but won't take that entire time.
    Mr. Rauschenberger, I am particularly concerned about the 
statements similar to the ones Mr. Cannon just made about 
people thinking that this is a new tax on consumers. And can 
you please clarify exactly what the SST does?
    Mr. Rauschenberger. The enemies of this reform in States 
across the country--and you will hear, I think, in Congress 
that this is a tax increase. But nothing, in my opinion, could 
be further from the truth.
    These are taxes that the Supreme Court says States legally 
have the right to levy. And they have the right to collect as 
long as there is reasonable notice to the seller.
    We have cured the rise, the increased bar that Bellis Hess 
and the Quill decision raised of simplifying our system so that 
it is not a burden on interstate commerce and crossing that 
threshold to be, hopefully, to be blessed by Congress. So this 
is about--I mean, the same argument could be used of abolishing 
the IRS and not requiring people to mail in their tax returns.
    Ms. Sanchez. Mr. Rauschenberger, I wouldn't go there 
because there are Members who would be in favor of that.
    Mr. Rauschenberger. Well----
    Mr. Cannon. If I could figure it out.
    Mr. Rauschenberger. These are legally levied taxes that are 
due from the customers. Sales taxes are not taxes that are 
unpopular. They win referendum time after time. When local 
governments--the state of Michigan when they chose to change 
the way they funded education by referendum, they selected the 
sales tax. People perceive the sales tax as relatively fair. It 
is less regressive than property taxes because at least it has 
indexed the amount of income because you spend more as you earn 
more. So it is not a tax increase in any way that I can agree 
to.
    Ms. Sanchez. Thank you. I appreciate that. I will yield 
back my time.
    And I want to thank----
    Mr. Cannon. Madam Chair, may I ask unanimous consent to 
introduce two articles into the record? One, an A.P. article 
entitled, ``Spiked Clarification and Tax Law Aimed to Collect 
from Web Sales'' and one from Forbes, ``Point, Click, Pay 
Tax''?
    Ms. Sanchez. Without objection, so ordered. I want to thank 
all of the witnesses for their testimony today and for being 
patient during the interruption to go vote.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    Ms. Sanchez. Without objection, Members will have 5 
legislative days to submit any additional written questions, 
which we will forward to the witnesses and ask that you answer 
as promptly as possible so that they can be made a part of the 
record. Without objection, the record will remain open for 5 
legislative days for the submission of any additional material.
    And because this is the last planned hearing of the 
Subcommittee before the winter recess, I want to take this time 
to thank my Ranking Member, the Members on the dais, and their 
staff for all of the hard work. And I want to wish everybody a 
safe and happy holiday season. And with that, this hearing on 
the Subcommittee of Commercial and Administrative Law is 
adjourned.
    [Whereupon, at 12:29 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

  Responses to Post-Hearing Questions submitted to Joan Wagnon by the 
Honorable Linda T. Sanchez, a Representative in Congress from the State 
     of California, and Chairwoman, Subcommittee on Commercial and 
                           Administrative Law













                                

 Responses to Post-Hearing Questions submitted to Wayne Zakrzewski by 
 the Honorable Linda T. Sanchez, a Representative in Congress from the 
  State of California, and Chairwoman, Subcommittee on Commercial and 
                           Administrative Law







                                

Responses to Post-Hearing Questions submitted to George Isaacson by the 
Honorable Linda T. Sanchez, a Representative in Congress from the State 
     of California, and Chairwoman, Subcommittee on Commercial and 
                           Administrative Law


                                

 Responses to Post-Hearing Questions submitted to the Honorable Steven 
 J. Rauschenberger by the Honorable Linda T. Sanchez, a Representative 
in Congress from the State of California, and Chairwoman, Subcommittee 
                  on Commercial and Administrative Law







                                

   Prepared Statement of Paul Misener, Vice President, Global Public 
                           Policy, Amazon.com























                                

    Letter from Steve DelBianco, Executive Director, The NetChoice 
                               Coalition







                                

    Prepared Statement of Brian Bieron, Senior Director of Federal 
                    Government Relations, eBay Inc.















                                

         Letter from the United States Telecom Association and 
                     CTIA--The Wireless Association





                                 
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