[Congressional Record Volume 144, Number 58 (Monday, May 11, 1998)]
[Senate]
[Pages S4625-S4626]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNET TAX FREEDOM ACT
Mr. WYDEN. Madam President, we had a thoughtful discussion on the
floor of the Senate earlier today with Senator McCain and Senator
Dorgan especially with respect to the high-tech issues that will be
coming up over the course of this week.
In a sense, it is ironic that we call it high-tech week here. I am
very pleased that Senator Lott and Senator Daschle have been able to
get an agreement to deal with these issues. And, in a sense, we are
going to be dealing with high-tech issues all year round as we face the
21st century. It is not going to be something that we look at just from
time to time, but it will essentially dominate, in my view, debate
about public policy in the years ahead. And I am particularly hopeful
that this week we will have an opportunity on the Senate floor to
debate the Internet Tax Freedom Act which, as our Presiding Officer
knows, was debated at some length in the Senate Commerce Committee
earlier this year.
My sense is that these tax issues are especially important because it
is so critical that our country lay out a set of ground rules, a set of
principles that will address the question of taxation and the digital
economy.
Right now, you can live in the Dakotas, and if you want to send a
tasty fruit basket from a company in Oregon, you can order it on line,
say, from a firm in Virginia, and pay for it with a Florida bank card,
and you can end up absolutely baffled with respect to how many
jurisdictions may be in a position to impose taxes on this particular
transaction.
We have already heard in testimony before the committee that the
uncertainty surrounding these transactions has caused some businesses
to go under. In particular, we heard from a small business in Tennessee
about the problem. The Wall Street Journal recently reports in a Peat
Marwick survey that many financial executives are uncertain with
respect to how transactions will be handled in cyberspace. This has
contributed to uncertainty and reluctance to go forward and do business
on line.
Recently, one of the prominent analysts, a firm by the name of
Vertex, cited several States where it was really impossible to know how
to proceed with respect to electronic commercial transactions because,
in effect, the rules were so fluid that you would have to get an
interpretation of tax law that really was not written.
So I and others have introduced the Internet Tax Freedom Act. And its
purpose is simple. That is to give consumers and businesses engaged in
electronic commerce a timeout from discriminatory taxes so that our
country can develop a fair and reasonable policy on Internet taxation.
And we are very proud of the strong bipartisan support that this
effort has received. Governor George Bush, for example, from the State
of Texas, has recently spoken out on this issue. Our colleague, Senator
Pat Leahy of Vermont, Steve Forbes--the list of supporters for this
effort literally spans the spectrum.
I believe that the reason it has been possible to generate such
strong bipartisan support for the Internet Tax Freedom Act is that
during this period where there will be a bar on discriminatory taxes on
electronic commerce, all other forms of taxation that are used in the
regular course of business would be allowed to go forward. So during
the period when our country tries to develop a set of ground rules for
taxation of electronic commerce--all of the property taxes, all of the
sales taxes, all of the use taxes, all of the business license fees
that are nondiscriminatory--would stay in place.
For our colleagues that have been following this issue, it is all
laid out very specifically in section 3 of our legislation. For
example, under our legislation if Mr. Brown in South Dakota picks up
the phone and orders a sweater from J.C. Penney in Illinois he would
pay the same sales tax as if he walked into J.C. Penney in Sioux Falls,
SD. South Dakota taxes sales of goods over the Internet the same as
sales of tangible personal property through more traditional channels.
Exactly the same treatment for a transaction, whether it is conducted
over the Internet or whether it is conducted through more traditional
means.
Going further, if you are a chef in Charleston, SC, and you order a
new saucepan from Williams-Sonoma in California, under our legislation
you would pay the same sales tax as if you walked in to the Williams
Sonoma shop in Charleston. South Carolina taxes sales of goods over the
Internet the same as sales of tangible personal property through more
traditional channels.
Now, there has been an effort by some to say that this legislation
would in some way harm Main Street. The fact of the matter is that Main
Street has overwhelmingly come out for this legislation. I will append
to my statement a long list of the business groups that support the
legislation, but every Member of the U.S. Senate has received a letter
from the Chamber of Commerce in recent days with a ringing endorsement
of the Internet tax freedom legislation. And the reason for this very
strong support, in my view, is that Main Street business has come out
strongly for the legislation. I believe the reason that Main Street
businesses are so strongly supporting the Internet Tax Freedom Act is
that for them, the opportunity to do business on-line ensures that
geography will be irrelevant in the 21st century.
A lot of those small businesses on Main Street in rural America--and
I represent many of them in the State of Oregon--do have difficulty
competing today in the global marketplace. One of the reasons they do
is because geography is a very big barrier in terms of their ability to
tap the global economy. With the Internet Tax Freedom Act ensuring that
they are treated fairly both during this period when there is an effort
to come up with new ground rules, and for the 21st century, we give new
opportunity to those small Main Street businesses across America. I
believe that is why they have endorsed this legislation so strongly.
If ever there was an issue that was appropriate for the U.S. Senate
to deal with, it is this question. This is what article 1 of our
Constitution is all about. We have 30,000 taxing jurisdictions in
America. I believe it is fair to say that if a fair number of these
taxing jurisdictions go forward and levy taxes on electronic commerce,
in a discriminatory way this will do enormous damage to what I believe
will be the business infrastructure of the 21st century.
Senator McCain and Senator Dorgan, as I said, had a very thoughtful
discussion of the potential of Internet commerce in the years ahead.
But let us make no mistake about it, if these small businesses all
across this country are going to suddenly have to put on accountants
and various kind of tax specialists to figure out what kind of taxes
they owe in various local jurisdictions across this country, this will
damage electronic commerce and the ability of the small businesses to
compete in a profound way.
If you have a two-person operation, a two-person business operating
out of an individual's home, and they are somehow supposed to collect
scores of different sales and property taxes across this country there
is going to be enormous confusion just as we see the electronic
marketplace take off. I know no Member of the U.S. Senate wants to see
that happen.
The bottom line is that the Internet Tax Freedom Act applies only to
those taxes that are not technologically neutral. Only those taxes that
single out the Internet would be affected, and every business in
America would still have to pay its share of taxes. So if a State has a
3-percent sales tax that a customer has to pay the State when walking
into a store to purchase a product, under the Internet Tax Freedom Act,
section 3 specifically, the State can, in fact, charge a 3-percent
sales tax on goods ordered over the Internet.
I am very hopeful that there will be an opportunity to debate this
issue on the floor of the U.S. Senate. A number of my colleagues,
Senator Dorgan specifically, have important issues that they want to
raise. I and other sponsors of this legislation have sought to address
many of them. But I believe this is one of the most important issues
that this Senate could be dealing with because it is going to frame the
ground work for the digital economy in
[[Page S4626]]
the 21st century and it is important that all businesses are treated
fairly.
It is also important that the U.S. Senate realize the damage that can
be done if you continue to see a growth in the kind of confusion that
the Vertex Company has pointed out with respect to the inability of
businesses to get answers. We will damage Internet commerce if we see
more small businesses like the Tennessee businessman who testified
before the Commerce Committee that he went out of business because of
the confusion on the part of his State with respect to how electronic
commercial transactions ought to be handled.
No Member of the U.S. Senate wants to see that happen. We have an
opportunity to get this issue with respect to the digital economy
right. We have a chance to take a timeout from discriminatory taxes,
come up with a policy for Internet taxation that is fair and makes
sense. Let's not kill the Internet goose that is showing the capacity
to lay an extraordinary number of golden eggs.
I hope we will have a chance to discuss this issue at great length
throughout the course of the week. I especially want to thank my
colleagues, Senator McCain, the chairman of the Senate Commerce
Committee, who has worked diligently with me on this legislation for
more than a year; my colleague, Senator Dorgan, who does have questions
about this legislation but has always been very fair in terms of
raising them. I am very hopeful we will have a chance to debate and
vote on this legislation during the course of this week.
I yield the floor.
The PRESIDING OFFICER (Mr. Allard). The Senator from Florida.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida is recognized.
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