[Congressional Record Volume 144, Number 83 (Tuesday, June 23, 1998)]
[House]
[Pages H5028-H5037]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

  Mr. GEKAS. Mr. Speaker, I move to suspend the rules and pass the bill

[[Page H5029]]

(H.R. 4105) to establish a national policy against State and local 
interference with interstate commerce on the Internet, to exercise 
congressional jurisdiction over interstate commerce by establishing a 
moratorium on the imposition of exactions that would interfere with the 
free flow of commerce via the Internet, to establish a national policy 
against Federal and State regulation of Internet access and online 
services, and for other purposes.
  The Clerk read as follows:

                               H.R. 4105

       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 ``Internet Tax Freedom Act''.

     SEC. 2. MORATORIUM ON CERTAIN TAXES.

       (a) Amendment.--Title 4 of the United States Code is 
     amended by adding at the end the following:

                ``CHAPTER 6--MORATORIUM ON CERTAIN TAXES

``Sec.
``151. Moratorium.
``152. Advisory commission on electronic commerce.
``153. Legislative recommendations.
``154. Expedited consideration of legislative recommendations.
``155. Definitions.

     ``Sec. 151. Moratorium

       ``(a) Moratorium.--For a period of 3 years following the 
     date of the enactment of this chapter, neither any State, nor 
     any political subdivision thereof, shall impose, assess, 
     collect, or attempt to collect--
       ``(1) taxes on Internet access;
       ``(2) bit taxes; or
       ``(3) multiple or discriminatory taxes on electronic 
     commerce.
       ``(b) Exception to Moratorium.--(1) Subject to paragraph 
     (2), the moratorium in subsection (a)(1) shall not apply to 
     the following taxes (as applicable), as in effect on the date 
     of the enactment of this chapter, on Internet access:
       ``(A) State of connecticut.--Section 12-407(2)(i)(A) of the 
     General Statutes of Connecticut.
       ``(B) State of wisconsin.--Section 77.52(2)(a)5 of the 
     Wisconsin Statutes (1995-96).
       ``(C) State of iowa.--Section 422.43(1) of the Code of Iowa 
     (1997).
       ``(D) State of north dakota.--North Dakota Century Code 57-
     39.2 and 57-34.
       ``(E) State of south dakota.--South Dakota Codified Law 
     Annotated 10-45-5.
       ``(F) State of new mexico.--New Mexico Statutes Annotated 
     7-9-3.
       ``(G) State of tennessee.--Tennessee Code Annotated 67-6-
     221, 67-6-102(23)(iii), and 67-6-702(g).
       ``(H) State of ohio.--Chapter 5739 of the Ohio Revised 
     Code.
       ``(2)(A) Paragraph (1) shall apply with respect to a tax 
     referred to in such paragraph only if the referenced State 
     enacts, during the 1-year period beginning on the date of the 
     enactment of this chapter, a law to expressly affirm that 
     such tax is imposed on Internet access.
       ``(B) A State that satisfies the requirement specified in 
     subparagraph (A) shall be deemed to have satisfied such 
     requirement immediately after the enactment of this chapter, 
     except that such State may not impute penalties or interest 
     on any tax accrued during the period beginning on the date of 
     the enactment of this Act and ending on the date such State 
     satisfies such requirement.
       ``(c) Application of Moratorium.--Subsection (a) shall not 
     apply with respect to the provision of Internet access that 
     is offered for sale as part of a package of services that 
     includes services other than Internet access, unless the 
     service provider separately states that portion of the 
     billing that applies to such services on the user's bill.

     ``Sec. 152. Advisory Commission on Electronic Commerce

       ``(a) Establishment of Commission.--There is established a 
     temporary commission to be known as the Advisory Commission 
     on Electronic Commerce (in this chapter referred to as the 
     `Commission'). The Commission shall--
       ``(1) be composed of 31 members appointed in accordance 
     with subsection (b), including the chairperson who shall be 
     selected by the members of the Commission from among 
     individuals specified in subsection (b); and
       ``(2) conduct its business in accordance with the 
     provisions of this chapter.
       ``(b) Membership.--
       ``(1) In general.--The Commissioners shall serve for the 
     life of the Commission. The membership of the Commission 
     shall be as follows:
       ``(A) Three representatives from the Federal Government 
     comprised of the Attorney General, the Secretary of Commerce, 
     and the Secretary of the Treasury, or their respective 
     representatives.
       ``(B) Fourteen representatives from State, local, and 
     county governments comprised of 2 representatives each from 
     the National Governors' Association, the National Conference 
     of State Legislatures, the Council of State Governments, the 
     National Association of Counties, the National League of 
     Cities, and the United States Conferences of Mayors; and 1 
     representative each from the International City/County 
     Management Association and the American Legislative Exchange 
     Council.
       ``(C) Fourteen representatives of taxpayers and business--
       ``(i) 7 of whom shall be appointed jointly by the Speaker 
     of the House of Representatives and the majority leader of 
     the Senate, of whom 3 shall be individuals employed by or 
     affiliated with persons engaged in providing Internet access 
     or communications or transactions that use the Internet, 3 
     shall be individuals employed by or affiliated with persons 
     engaged in electronic commerce (including at least 1 who is 
     employed by or affiliated with a person also engaged in mail 
     order commerce), and 1 shall be an individual employed by or 
     affiliated with a person engaged in software publishing; and
       ``(ii) 7 of whom shall be appointed jointly by the minority 
     leader of the House of Representatives and the minority 
     leader of the Senate, of whom 3 shall be individuals employed 
     by or affiliated with persons engaged in providing Internet 
     access or communications or transactions that use the 
     Internet, 3 shall be individuals employed by or affiliated 
     with persons engaged in electronic commerce (including at 
     least 1 who is employed by or affiliated with a person also 
     engaged in mail order commerce), and 1 shall be an individual 
     employed by or affiliated with a person engaged in software 
     publishing.
       ``(2) Appointments.--Appointments to the Commission shall 
     be made not later than 45 days after the date of enactment of 
     this chapter. The chairperson shall be selected not later 
     than 60 days after the date of the enactment of this chapter.
       ``(c) Acceptance of Gifts and Grants.--The Commission may 
     accept, use, and dispose of gifts or grants of services or 
     property, both real and personal, for purposes of aiding or 
     facilitating the work of the Commission. Gifts or grants not 
     used at the expiration of the Commission shall be returned to 
     the donor or grantor.
       ``(d) Other Resources.--The Commission shall have 
     reasonable access to materials, resources, data, and other 
     information from the Department of Justice, the Department of 
     Commerce, and the Department of the Treasury. The Commission 
     shall also have reasonable access to use the facilities of 
     the Department of Justice, the Department of Commerce, and 
     the Department of the Treasury for purposes of conducting 
     meetings.
       ``(e) Sunset.--The existence of the Commission shall 
     terminate--
       ``(1) when the last of the committees of jurisdiction 
     referred to in section 154 concludes consideration of the 
     legislation proposed under section 153; or
       ``(2) 3 years after the date of the enactment of this 
     chapter;

     whichever occurs first.
       ``(f) Rules of the Commission.--
       ``(1) Sixteen members of the Commission shall constitute a 
     quorum for conducting the business of the Commission.
       ``(2) Any meetings held by the Commission shall be duly 
     noticed at least 14 days in advance and shall be open to the 
     public.
       ``(3) The Commission may adopt other rules as needed.
       ``(g) Duties of the Commission.--The duties of the 
     Commission, to be carried out in consultation with the 
     National Tax Association Communications and Electronic 
     Commerce Tax Project, and other interested persons, may 
     include--
       ``(1) conducting a thorough study of State and local 
     taxation of transactions using the Internet and Internet 
     access;
       ``(2) examining the collection and administration of 
     consumption taxes on remote commerce in other countries and 
     the United States, and the impact of such collection on the 
     global economy;
       ``(3) examining the advantages and disadvantages of 
     authorizing States and local governments to require remote 
     sellers to collect and remit sales and use taxes;
       ``(4) proposing a uniform system of definitions of remote 
     and electronic commerce that may be subject to sales and use 
     tax within each State;
       ``(5) examining model State legislation relating to 
     taxation of transactions using the Internet and Internet 
     access, including uniform terminology, definitions of the 
     transactions, services, and other activities that may be 
     subject to State and local taxation, procedural structures 
     and mechanisms applicable to such taxation, and a mechanism 
     for the resolution of disputes between States regarding 
     matters involving multiple taxation;
       ``(6) examining a simplified system for administration and 
     collection of sales and use tax for remote commerce, that 
     incorporates all manner of making consumer payments, that 
     would provide for a single statewide sales or use tax rate 
     (which rate may be zero), and would establish a method of 
     distributing to political subdivisions within each State 
     their proportionate share of such taxes, including an 
     examination of collection of sales or use tax by small volume 
     remote sellers only in the State of origin;
       ``(7) examining ways to simplify the interstate 
     administration of sales and use tax on remote commerce, 
     including a review of the need for a single or uniform tax 
     registration, single or uniform tax returns, simplified 
     remittance requirements, and simplified administrative 
     procedures;
       ``(8) examining the need for an independent third party 
     collection system that would utilize the Internet to further 
     simplify sales and use tax administration and collection;
       ``(9) reviewing the efforts of States to collect sales and 
     use taxes owed on purchases

[[Page H5030]]

     from remote sellers, as well as review the appropriateness of 
     increased activities by States to collect sales and use taxes 
     directly from customers of remote sellers;
       ``(10) examining the level of contacts sufficient to permit 
     a State to impose a sales or use tax on remote commerce that 
     would subject a remote seller to collection obligations 
     imposed by the State, including--
       ``(A) the definition of a level of contacts below which a 
     State may not impose collection obligations on a remote 
     seller;
       ``(B) whether or not such obligations are applied in a 
     nondiscriminatory manner with respect to nonremote 
     transactions; and
       ``(C) the impact of such obligation on small business 
     remote sellers;
       ``(11) examining making permanent the temporary moratorium 
     described in section 151 with respect to Internet access as 
     well as such other taxes that the Commission deems 
     appropriate;
       ``(12) examining ways to simplify State and local taxes 
     imposed on the provision of telecommunications services;
       ``(13) requiring the Commission to hold a public hearing to 
     provide an opportunity for representatives of the general 
     public, taxpayer groups, consumer groups, State and local 
     government officials, and tax-supported institutions to 
     testify; and
       ``(14) examining other State and local tax issues that are 
     relevant to the duties of the Commission.
       ``(h) Federal Advisory Committee Act.--The Federal Advisory 
     Committee Act shall not apply with respect to the Commission.

     ``Sec. 153. Legislative recommendations

       ``(a) Transmission of Proposed Legislation.--Not later than 
     2 years after the date of the enactment of this chapter, the 
     Commission shall transmit to the President and the Congress 
     proposed legislation reflecting any findings concerning the 
     matters described in such section.
       ``(b) Contents of Proposed Legislation.--The proposed 
     legislation submitted under subsection (a) by the Commission 
     shall have been agreed to by at least 19 members of the 
     Commission and may--
       ``(1) define with particularity the level of contacts 
     between a State and remote seller that the Commission 
     considers sufficient to permit a State to impose collection 
     obligations on the remote seller and the level of contacts 
     which is not sufficient to impose collection obligations on 
     remote sellers;
       ``(2) provide that if, and only if, a State has adopted a 
     single sales and use tax rate for remote commerce and 
     established a method of distributing to its political 
     subdivisions their proportionate share of such taxes, and 
     adopted simplified procedures for the administration of its 
     sales and use taxes, including uniform registration, tax 
     returns, remittance requirements, and filing procedures, then 
     such State should be authorized to impose on remote sellers a 
     duty to collect sales or use tax on remote commerce;
       ``(3) provide that, effective upon the expiration of a 4-
     year period beginning on the date of the enactment of such 
     legislation, a State that does not have in effect a single 
     sales and use tax rate and simplified administrative 
     procedures shall be deemed to have in effect a sales and use 
     tax rate on remote commerce equal to zero, until such time as 
     such State does adopt a single sales and use tax rate and 
     simplified administrative procedures;
       ``(4) include uniform definitions of categories of 
     property, goods, services, or information subject to, or 
     exempt from, sales and use taxes;
       ``(5) make permanent the temporary moratorium described in 
     section 151 with respect to Internet access, as well as such 
     other taxes (including those described in section 151) that 
     the Commission deems appropriate;
       ``(6) provide a mechanism for the resolution of disputes 
     between States regarding matters involving multiple taxation; 
     and
       ``(7) include other provisions that the Commission deems 
     necessary.
       ``(c) Recommendations of the President.--Not later than 45 
     days after the receipt of the Commission's legislative 
     proposals, the President shall review such proposals and 
     submit to the Congress such policy recommendations as the 
     President deems necessary or expedient.

     ``Sec. 154. Expedited consideration of legislative 
       recommendations

       ``(a) Not later than 90 legislative days after the 
     transmission to the Congress by the Commission of the 
     proposed legislation described in section 153, such 
     legislation shall be considered by the respective committees 
     of jurisdiction within the House of Representatives and the 
     Senate, and, if reported, shall be referred to the proper 
     calendar on the floor of each House for final action.
       ``(b) For purposes of this section, the 90-day period shall 
     be computed by excluding--
       ``(1) the days on which either House is not in session 
     because of an adjournment of more than 3 days to a day 
     certain or an adjournment of the Congress sine die; and
       ``(2) any Saturday and Sunday, not excluded under paragraph 
     (1), when either House is not in session.

     ``Sec. 155. Definitions

       ``For the purposes of this chapter:
       ``(1) Bit tax.--The term `bit tax' means any tax on 
     electronic commerce expressly imposed on or measured by the 
     volume of digital information transmitted electronically, or 
     the volume of digital information per unit of time 
     transmitted electronically, but does not include taxes 
     imposed on the provision of telecommunications services.
       ``(2) Computer server.--The term `computer server' means a 
     computer that functions as a centralized provider of 
     information and services to multiple recipients.
       ``(3) Discriminatory tax.--The term `discriminatory tax' 
     means--
       ``(A) any tax imposed by a State or political subdivision 
     thereof on electronic commerce that--
       ``(i) is not generally imposed and legally collectible by 
     such State or such political subdivision on transactions 
     involving similar property, goods, services, or information 
     accomplished through other means;
       ``(ii) is not generally imposed and legally collectible at 
     the same rate by such State or such political subdivision 
     on transactions involving similar property, goods, 
     services, or information accomplished through other means, 
     unless the rate is lower as part of a phase-out of the tax 
     over not more than a 5-year period;
       ``(iii) imposes an obligation to collect or pay the tax on 
     a different person or entity than in the case of transactions 
     involving similar property, goods, services, or information 
     accomplished through other means; or
       ``(iv) establishes a classification of Internet access 
     provider for purposes of establishing a higher tax rate to be 
     imposed on such providers than the tax rate generally applied 
     to providers of similar information services delivered 
     through other means; or
       ``(B) any tax imposed by a State or political subdivision 
     thereof, if--
       ``(i) the use of a computer server by a remote seller to 
     create or maintain a site on the Internet is considered a 
     factor in determining a remote seller's tax collection 
     obligation; or
       ``(ii) a provider of Internet access is deemed to be the 
     agent of a remote seller for determining tax collection 
     obligations as a result of--

       ``(I) the display of a remote seller's information or 
     content on the computer server of a provider of Internet 
     access; or
       ``(II) the processing of orders through the computer server 
     of a provider of Internet access;

       ``(4) Electronic commerce.--The term `electronic commerce' 
     means any transaction conducted over the Internet or through 
     Internet access, comprising the sale, lease, license, offer, 
     or delivery of property, goods, services, or information, 
     whether or not for consideration, and includes the provision 
     of Internet access.
       ``(5) Information services.--The term `information 
     services' has the meaning given such term in section 3(20) of 
     the Communications Act of 1934 as amended from time to time.
       ``(6) Internet.--The term `Internet' means the combination 
     of computer facilities and electromagnetic transmission 
     media, and related equipment and software, comprising the 
     interconnected worldwide network of computer networks that 
     employ the Transmission Control Protocol/Internet Protocol, 
     or any predecessor or successor protocol, to transmit 
     information.
       ``(7) Internet access.--The term `Internet access' means a 
     service that enables users to access content, information, 
     electronic mail, or other services offered over the Internet, 
     and may also include access to proprietary content, 
     information, and other services as part of a package of 
     services offered to consumers. Such term does not include 
     telecommunications services.
       ``(8) Multiple tax.--The term `multiple tax' means:
       ``(A) Any tax that is imposed by one State or political 
     subdivision thereof on the same or essentially the same 
     electronic commerce that is also subject to another tax 
     imposed by another State or political subdivision thereof 
     (whether or not at the same rate or on the same basis), 
     without a credit (for example, a resale exemption 
     certificate) for taxes paid in other jurisdictions. The term 
     `multiple tax' shall not include a sales or use tax imposed 
     by a State and 1 or more political subdivisions thereof 
     pursuant to a law referred to in section 151(b)(1) on the 
     same electronic commerce or a tax on persons engaged in 
     electronic commerce which also may have been subject to a 
     sales or use tax thereon. For purposes of this subparagraph, 
     the term `sales or use tax' means a tax that is imposed on or 
     incident to the sale, purchase, storage, consumption, 
     distribution, or other use of tangible personal property or 
     services as may be defined by laws imposing such tax and 
     which is measured by the amount of the sales price or other 
     charge for such property or service); or
       ``(B) Any tax on Internet access if the State or political 
     subdivision thereof classifies such Internet access as 
     telecommunications or communications services under State law 
     and such State or political subdivision thereof has also 
     imposed a tax on the purchase or use of the underlying 
     telecommunications services that are used to provide such 
     Internet access without allowing a credit for other taxes 
     paid, a sale for resale exemption, or other mechanism for 
     eliminating duplicate taxation.
       ``(9) Remote commerce.--The term `remote commerce' means 
     the sale, lease, license, offer, or delivery of property, 
     goods, services, or information by a seller in 1 State to a 
     purchaser in another State.
       ``(10) Remote seller.--The term `remote seller' means a 
     person who sells, leases, licenses, offers, or delivers 
     property, goods, services, or information from one State to a 
     purchaser in another State.

[[Page H5031]]

       ``(11) State.--The term `State' means any of the several 
     States, the District of Columbia, or any territory or 
     possession of the United States.
       ``(12) Tax.--The term `tax' means--
       ``(A) any levy, fee, or charge imposed under governmental 
     authority by any governmental entity; or
       ``(B) the imposition of or obligation to collect and to 
     remit to a governmental entity any such levy, fee, or charge 
     imposed by a governmental entity.

     Such term does not include any franchise fees or similar fees 
     imposed by a State or local franchising authority, pursuant 
     to section 622 or 653 of the Communications Act of 1934.
       ``(13) Telecommunications services.--The term 
     `telecommunications services' has the meaning given such term 
     in section 3(46) of the Communications Act of 1934, as 
     amended from time to time.''.
       (b) Conforming Amendment.--Title 4 of the United States 
     Code is amended in the table of chapters by adding at the end 
     the following:

``6. Moratorium on Certain Taxes.............................151''.....

     SEC. 3. PROVISION OF INTERNET ACCESS AND ONLINE SERVICES.

       Title II of the Communications Act of 1934 is amended by 
     inserting after section 230 (47 U.S.C. 230) the following new 
     section:

     ``SEC. 231. PROHIBITION ON REGULATION OF INTERNET ACCESS AND 
                   ONLINE SERVICES.

       ``(a) Prohibition.--The Commission shall have no authority 
     or jurisdiction under this title or section 4(i), nor shall 
     any State commission have any authority or jurisdiction, to 
     regulate the prices or charges paid by subscribers for 
     Internet access or online services.
       ``(b) Preservation of Authority.--Nothing in this 
     subsection shall limit or otherwise affect--
       ``(1) the Commission's or State commissions' implementation 
     of the Telecommunications Act of 1996 (Public Law 104-104) or 
     the amendments made by such Act; and
       ``(2) the Commission's or State commissions' authority to 
     regulate telecommunications carriers that offer Internet 
     access or online services in conjunction with the provision 
     of any telephone toll, telephone exchange, or exchange access 
     services as such terms are defined in title I.
       ``(c) Definitions.--As used in this section:
       ``(1) Internet.--The term `Internet' means the combination 
     of computer facilities and electromagnetic transmission 
     media, and related equipment and software, comprising the 
     interconnected world-wide network of computer networks that 
     employ the Transmission Control Protocol/Internet Protocol, 
     or any predecessor or successor protocol, to transmit 
     information.
       ``(2) Internet access.--The term `Internet access' means a 
     service that enables users to access content, information, 
     and other services offered over the Internet, but does not 
     mean a telecommunications service.
       ``(3) Online service.--The term `online service' means the 
     offering or provision of Internet access with the provision 
     of other information services.''.

     SEC. 4. FEDERAL REGULATORY FEES.

       (a) No Regulatory Fees.--Section 9(h) of the Communications 
     Act of 1934 (47 U.S.C. 159(h)) is amended by inserting ``; or 
     (3) providers of Internet access or online service'' after 
     ``(47 C.F.R. Part 97)'' .
       (b) Conforming Amendment.--Section 9(h) of the 
     Communications Act of 1934 (47 U.S.C. 159(h)) is amended by 
     striking ``or'' that appears before ``(2)''.
       (c) Determination.--Not later than 1 year after the date of 
     the enactment of this Act, the National Telecommunications 
     and Information Administration shall determine whether any 
     direct or indirect Federal regulatory fees, other than the 
     fees identified in subsection (a), are imposed on providers 
     of Internet access or online services, and if so, make 
     recommendations to the Congress regarding whether such fees 
     should be modified or eliminated.

     SEC. 5. REPORT ON FOREIGN COMMERCE.

       (a) Contents of Report.--In order to promote electronic 
     commerce, the Secretary of Commerce, in consultation with 
     appropriate committees of the Congress, shall undertake an 
     examination of--
       (1) barriers imposed in foreign markets on United States 
     providers of property, goods, services, or information 
     engaged in electronic commerce and on United States providers 
     of telecommunications services;
       (2) how the imposition of such barriers will affect United 
     States consumers, the competitiveness of United States 
     citizens providing property, goods, service, or information 
     in foreign markets, and the growth and maturing of the 
     Internet; and
       (3) what measures the Government should pursue to foster, 
     promote, and develop electronic commerce in the United States 
     and in foreign markets.
       (b) Public Comment.--For purposes of this section, the 
     Secretary of Commerce shall give all interested persons an 
     opportunity to comment on the matters identified in 
     subsection (a) through written or oral presentations of data, 
     views, or arguments.
       (c) Transmittal to the President.--Not later than 18 months 
     after the date of the enactment of this Act, the Secretary of 
     Commerce shall transmit to the President a report containing 
     the results of the examination undertaken in accordance with 
     subsection (a).
       (d) Recommendations of the President.--Not later than 2 
     years and 45 days after the date of the enactment of this 
     Act, the President shall review the report described in 
     subsection (c) and submit to the appropriate committees of 
     Congress such policy recommendations as the President deems 
     necessary or expedient.

     SEC. 6. DECLARATION THAT THE INTERNET SHOULD BE FREE OF 
                   FOREIGN TARIFFS, TRADE BARRIERS, AND OTHER 
                   RESTRICTIONS.

       It is the sense of the Congress that the President should 
     seek bilateral and multilateral agreements to remove barriers 
     to global electronic commerce, through the World Trade 
     Organization, the Organization for Economic Cooperation and 
     Development, the International Telecommunications Union, the 
     Asia Pacific Economic Cooperation Council, the Free Trade 
     Area of the Americas, and other appropriate international 
     fora. Such agreements should require, inter alia, that the 
     provision of Internet access or online services be free from 
     undue and discriminatory regulation by foreign governments 
     and that electronic commercial transactions between United 
     States and foreign providers of property, goods, services, 
     and information be free from undue and discriminatory 
     regulation, international tariffs, and discriminatory 
     taxation.

     SEC. 7. NO EXPANSION OF TAX AUTHORITY.

       Nothing in this Act shall be construed to expand the duty 
     of any person to collect or pay taxes beyond that which 
     existed immediately before the date of the enactment of this 
     Act.

     SEC. 8. PRESERVATION OF AUTHORITY.

       Nothing in this Act shall limit or otherwise affect the 
     implementation of the Telecommunications Act of 1996 (Public 
     Law 104-104) or the amendments made by such Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Pennsylvania (Mr. Gekas) and the gentleman from Michigan (Mr. Conyers) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Pennsylvania (Mr. Gekas).


                             General Leave

  Mr. GEKAS. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Pennsylvania?
  There was no objection.
  Mr. GEKAS. Mr. Speaker, I yield 10 minutes to the gentleman from 
Virginia (Mr. Bliley) and ask unanimous consent that he may be 
permitted to yield blocks of time therefrom.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Pennsylvania?
  There was no objection.
  Mr. GEKAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I urge support for this piece of legislation. Everyone 
in the world knows that the Internet is a magic system that impacts 
upon every life on the planet in one way or another. The simple 
transfer of information in so many different ways and in every field of 
human endeavor gives great promise for the future. Indeed, the real 
problem is how long government and its influence can be properly 
visited upon this Internet system, and therein lies the problem. What 
if anything should be done to allow taxes or taxation or a series of 
taxes on the access to the Internet? That is a central problem.
  We have grappled with that for quite some time, and the central issue 
has become whether or not we should take our time and really study the 
issue before we look into that dark realm of taxation as it pertains to 
the Internet. So the parties have agreed, to a great extent, for the 
extension of a moratorium on any further action before we really search 
out the facts in this.
  Mr. Speaker, I am certain that the gentleman from Virginia (Mr. 
Bliley) will be telling us more about how the moratorium is to be 
framed and what benefit that will be to the Congress. In the meantime, 
I want to thank everyone who had something to do with this legislation, 
including those who testified at the hearing that we held on this 
matter, representing the several States, the private sector, the 
executive branch and Members of Congress like the gentleman from 
California (Mr. Cox) who have had a searching inquiry into this piece 
of legislation.
  Mr. Speaker, I include the following letter for the Record:

                                         House of Representatives,


                                           Committee on Rules,

                                    Washington, DC, June 23, 1998.
     Hon. Newt Gingrich,
     House of Representatives, Washington, DC.
       Dear Mr. Speaker: I ask that the Committee on Rules be 
     discharged from further consideration of H.R. 4105, the 
     Internet Tax

[[Page H5032]]

     Freedom Act. As you know, the bill was sequentially referred 
     to the Rules Committee on June 22, 1998.
       Specifically, the provisions of Section 154, Expedited 
     Consideration of Legislative Recommendations, fall solely 
     within the jurisdiction of the Committee on Rules. Although 
     the Rules Committee has not exercised its original 
     jurisdiction prerogatives on this legislation, the Committee 
     has discussed these provisions with the other committees of 
     jurisdiction, namely the Commerce and Judiciary Committees. 
     Also, it is the understanding of the Rules Committee that the 
     Leadership intends to schedule this bill for floor 
     consideration in the near future. In recognition of these 
     facts, I request that the Rules Committee be discharged from 
     further consideration of this bill.
       Nevertheles, I reserve the jurisdiction of the Committee on 
     Rules over all bills relating to the rules, joint rules and 
     the order of business of the House, including any bills 
     containing expedited procedures. However, it would also be my 
     intention to have the Rules Committee represented on any 
     conference committee on this bill.
       Thank you for consideration.
           Sincerely,
                                              Gerald B.H. Solomon,
                                                         Chairman.

  Mr. Speaker, I reserve the balance of my time.
  Mr. CONYERS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I strongly support the Internet Tax Freedom Act. 
Electronic commerce over the Internet is one of today's most dynamic 
and important business segments. By approving this bill, the Congress 
will be taking yet another strong action to protect and foster the so-
called information superhighway. The Committee on the Judiciary has 
already approved on a bipartisan basis bills protecting copyright in 
cyberspace and eliminating burdensome encryption controls. This bill 
will help ensure that State taxes do not impede the vibrancy or growth 
of the Internet.
  The Internet Tax Freedom Act ensures that States do not enact 
discriminatory or double taxes which discourage the use of the 
Internet. At the same time, the substitute protects the States' 
legitimate rights to tax Internet sales transactions in the same manner 
they tax the sale of ordinary goods.
  We also create a moratorium on new taxes on access to the Internet. 
Currently a complex patchwork of State and local laws creates an 
impossible situation for online service providers in determining who to 
tax and to whom to remit. There is also a grandfather clause that will 
allow current taxes to stay in place if States reaffirm within the 1-
year period.
  We also set up a balanced commission of representatives from the 
Federal Government, the States and industry to help develop a coherent 
blueprint for interstate taxation of Internet transactions and mail 
order goods in the future. The bill grandfathers those States which 
currently tax Internet access.
  The legislation we are considering today is almost identical to the 
version approved by the Committee on the Judiciary on a bipartisan 
basis and reflects substantial negotiation between the interested 
parties. I thank all of the participants in this important measure.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Washington (Mr. White), a member of the committee who has worked very 
hard on this legislation.
  Mr. WHITE. Mr. Speaker, I thank the gentleman from Virginia for 
yielding me this time and especially for taking me out of order. I 
appreciate that very much.
  Mr. Speaker, we have a short window of opportunity on almost all the 
issues associated with the Internet to do the right thing. The Internet 
is so new. It is not yet subject to all the special interests who want 
to twist our policy one way or another. And so we have a short period 
of time to establish some good, clear, fundamental principles that will 
help us guide the development of the Internet for a long period of 
time. We have got a short period because it is not too long, even in 
the case of the Internet, until the special interests take over.
  I would have to say, Mr. Speaker, that in this particular case, we 
almost missed that window, because if we let this process go on too 
much longer, our bill would be watered down more, there will be more 
exceptions, and the next thing we know, the 30,000 local taxing 
jurisdictions around this country will be able to do whatever they want 
to with the Internet. We want them to get tax revenue from the Internet 
but we want them to do it in the right way. That is why it is high time 
for us to pass this legislation.
  Mr. Speaker, this is a good bill. We should pass it. But it is not a 
perfect bill. I certainly have some reservations about parts of it. We 
started off with a 6 or 7-year moratorium. We have shortened that 
substantially. We now have a commission that in addition to looking at 
just Internet specific issues is going to be looking at all the remote 
commerce issues. I frankly think that is a little bit of a troubling 
concept. But by and large it is high time for us to get this done. If 
we do not take advantage of this window, the window will close and we 
will never be able to do anything. I urge my colleagues to support this 
bill.
  Mr. CONYERS. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Nadler) the ranking member on the Judiciary subcommittee for 
our efforts here today.
  (Mr. NADLER asked and was given permission to revise and extend his 
remarks.)
  Mr. NADLER. Mr. Speaker, I rise in support of the Internet Tax 
Freedom Act. This legislation is the product of long and careful 
negotiations between the States and the emerging Internet businesses. 
It strikes a careful balance between the right of States and local 
jurisdictions to tax commerce within their borders and the need to 
protect new and developing businesses from discriminatory and multiple 
overlapping taxes.

                              {time}  1700

  It contains a moratorium of limited duration and provides for a 
balanced commission to study the very complicated questions involved in 
taxing these new types of transactions. That commission will report 
back to Congress, and we will then have the benefit of their work to 
consider how best to proceed in this new arena.
  Congress should tread very carefully when it intrudes into areas 
involving State power to tax, but it is also the responsibility of the 
Federal Government to ensure that interstate commerce is not 
overwhelmed by local taxes which cumulatively could have a disastrous 
national impact. This legislation strikes an appropriate balance 
between these important concerns and sets the stage for more thoughtful 
and careful look at this question. Most importantly, it ensures that 
the Internet will be free to develop and to continue as a vital new 
force in the economy, and I congratulate those on the committee and on 
the Committee on Commerce who have worked on it, and I urge its 
adoption.
  Mr. GEKAS. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio 
(Mr. Chabot) one of the members of the committee who has been one of 
the leaders in creating the momentum that brought us to this floor.
  (Mr. CHABOT asked and was given permission to revise and extend his 
remarks.)
  Mr. CHABOT. Mr. Speaker, I rise in strong support of this bipartisan 
legislation, and I would like to thank the gentleman from California 
(Mr. Cox) and the gentleman from Illinois (Mr. Hyde) and the gentleman 
from Pennsylvania (Mr. Gekas) and many others who have worked 
diligently on this particular legislation. I believe that it is 
important that we move this legislation forward quickly and enact some 
type of Internet tax moratorium as soon as possible. Many of us are 
concerned that many of the 30,000 State and local governments who are 
beginning to explore the possibility of imposing significant taxes and 
regulations on the Internet might do so, thus severely hampering the 
ability of this exciting medium to expand in the future.
  Mr. Speaker, the Internet is a rapidly growing high-tech industry 
that many feel represents the future of commerce. In fact, with sales 
through the Internet expected to reach as high as $600 billion by the 
year 2002, the Internet provides American companies, consumers and 
taxpayers opportunities that were inconceivable just a few years ago.
  I would again like to emphasize that this legislation represents a 
compromise. There are still some issues of

[[Page H5033]]

contention that remain. For example, I am not completely comfortable 
with the grandfather clause. I am concerned because if this provision 
remains, it will reward a handful of State tax administrators who 
rushed to tax the Internet access, placing the cost of Internet access 
out of reach of many American families.
  We took a step in the right direction in the Committee on the 
Judiciary by stripping out the grandfather exception for cities, but 
more work needs to be done. I hope that our colleagues in the other 
body act to further restrict the ability of States to re-enact these 
taxes. Mr. Speaker, hard-working Ohioans currently pay roughly $30 
million in taxes annually for the privilege of signing on to the 
Internet, and I would like to see those taxes cut, not codified.
  Again, I urge my colleagues to support this bipartisan, pro-Internet, 
pro-taxpayer legislation, and I again thank the gentleman from 
California (Mr. Cox), the gentleman from Pennsylvania (Mr. Gekas) and 
the gentleman from Illinois (Mr. Hyde) and many others.
  Mr. CONYERS. Mr. Speaker, I ask unanimous consent that the ranking 
member, the gentleman from New York (Mr. Nadler) be permitted to manage 
the bill from this point on and control the time.
  The SPEAKER pro tempore (Mr. Everett). Is there objection to the 
request of the gentleman from Michigan?
  There was no objection.
  Mr. GEKAS. Mr. Speaker, I reserve the balance of my time.
  Mr. BLILEY. Mr. Speaker, I yield myself 3 minutes.
  Mr. Speaker, I rise in support of H.R. 4105, the Internet Tax Freedom 
Act. The Committee on Commerce is engaged in an extensive review of all 
electronic commerce issues. We have been gathering information from 
Federal and State agencies, holding hearings and moving legislative 
proposals that stimulate the development of an electronic market place 
for the next century. Consideration of H.R. 4105 today is consistent 
with our overall electronic commerce agenda, and the legislation will 
set an invaluable precedent on how Internet-related activities should 
be addressed in the future.
  At a recent hearing we were told that electronic commerce is 
predicted to grow at an incredible pace in the near future, doubling 
every year. Estimates of the total value of economic activity conducted 
electronically for the year 2002 ranged from $200 billion to more than 
$500 billion. Compare these figures with a mere $2.6 billion of 
economic activity in 1996. Clearly this level of economic activity will 
have significant impact on job growth in the United States.
  As the Committee on Commerce explores ways to promote electronic 
commerce, we must also identify potential burdens. H.R. 4105 addresses 
two of them, unnecessary regulations and excessive taxation.
  As a result of the Federal Government largely staying out of the way, 
we are seeing the development and growth of new markets for Internet 
access and on-line services. These markets are fully competitive today, 
and consumers have more choice than ever in selecting access providers 
and in selecting providers of general or proprietary information. The 
last thing we need right now is for Federal and State governments to 
interfere with the development of these markets. H.R. 4105 makes a 
preemptive strike against such government interference with the 
Internet.
  The other potentially burdensome situation for electronic commerce is 
State and local taxation. Many States have found ways to tax Internet-
related activities, and they do so in an inconsistent manner. For 
example, some States tax Internet access as computer and data 
processing services. Other States tax it as either a telecommunications 
service or information service.
  These classification differences are only part of the problem. Given 
the way data is transmitted over the Internet, some States have 
challenged fundamental constitutional doctrines in order to assert 
substantial nexus over out-of-state vendors. Because of these problems, 
many executives have argued that the taxation of Internet-related 
activities is the single most significant impediment to the development 
of electronic commerce in the United States.
  H.R. 4105 presents a balanced approach between regulation and 
taxation of Internet access, on-line services and electronic commerce. 
It prohibits the FCC and States from regulating the prices of Internet 
access and on-line services. It also calls for a time out on taxing the 
Internet and asks for a group of experts to be assembled to study long-
term solutions on Internet taxation issues.
  I would like to thank the chairman, the gentleman from Illinois (Mr. 
Hyde), for his leadership on this matter and for sustaining the bill's 
momentum. I would also like to thank the gentleman from Louisiana (Mr. 
Tauzin) and the gentleman from California (Mr. Cox) and the gentleman 
from Washington (Mr. White) for their dedication, and I look forward to 
working with the other Members as we continue to move the bill through 
the legislative process.
  Mr. NADLER. Mr. Speaker, I yield 3 minutes to the gentleman from 
Massachusetts (Mr. Markey).
  Mr. MARKEY. Mr. Speaker, I thank the gentleman for yielding this time 
to me.
  Mr. Speaker, I rise in support of this legislation. I want to commend 
the gentleman from Virginia (Mr. Bliley), the gentleman from Michigan 
(Mr. Dingell), and the gentleman from Louisiana (Mr. Tauzin) of the 
Subcommittee on Telecommunications for their work on this issue, and to 
single out the gentleman from California (Mr. Cox) for his leadership 
on this issue, along with the gentleman from Michigan (Mr. Conyers) and 
others, including the gentleman from New York (Mr. Nadler), because we 
really have put something together here that I think really moves along 
the discussion on this issue. And I would like to single out Senator 
Wyden over on the Senate side, as well, who introduced legislation to 
this effect with the gentleman from California (Mr. Cox) last year.
  During the Committee on Commerce consideration of this legislation I 
expressed support for a moratorium on new Internet-specific taxes, but 
at the time I believed that the bill needed to be clearer in its scope 
and its definitions to ensure that no unintended harm was done in the 
process to any Federal or State regulatory authority to fully implement 
the provisions of the Telecommunications Act of 1996. All the 
regulatory fees, tax provisions and, in particular, the universal 
service provisions of the Telecommunications Act that were 
painstakingly deliberated upon and subsequently enacted are fully 
protected by this savings clause contained in the pending bill before 
us today.
  In addition we have attempted to ensure that this tax bill does not 
do unintended harm to telecommunications policy. I think that this goal 
is also achieved in the current version of the bill.
  This legislation before us this afternoon has been extensively 
changed since it was introduced and since our initial markup in the 
Subcommittee on Telecommunications, Trade, and Consumer Protection. The 
new legislation correctly limits the tax moratorium to Internet access, 
and the language in the bill more carefully defines such terms so that 
it is clear for the purposes of this legislation that it does not 
encompass other activities or services such as telecommunications or 
telecommunication services.
  Moreover, the legislation merely limits FCC and State authority to 
regulate prices charged directly to subscribers for Internet access or 
on-line services, but preserves FCC and State authority over any 
telecommunications carrier which bundles Internet access or on-line 
services in combination with telephone service.
  The legislation offered this evening also fully protects universal 
service support mechanisms by adding the savings clause that nothing in 
this legislation shall limit or otherwise affect the implementation of 
the Telecommunications Act. The legislation makes clear that Section 
254 of the Telecommunications Act, which was added by the act of 1996, 
is fully protected. The Telecommunications Act for the first time 
specifically codified the principle of universal service and delineated 
Federal and State responsibilities, rights and obligations for 
universal service support.
  On the tax front the legislation now has a 3-year moratorium on taxes 
and Internet access.

[[Page H5034]]

  I think we now begin the dialogue with States and municipalities and 
governors as this process moves forward. I want to congratulate 
everyone here as we move this hurry-up offense right before the Fourth 
of July break, but I think we have tremendous potential if the Senate 
acts.


                             General Leave

  Mr. BLILEY. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days to insert statements in the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Virginia?
  There was no objection.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Louisiana (Mr. Tauzin) the chairman of the subcommittee.
  Mr. TAUZIN. I thank the gentleman for yielding this time to me.
  Mr. Speaker, let me first of all thank the gentleman from Virginia 
(Mr. Bliley) and the chairman, the gentleman from Illinois (Mr. Hyde) 
for coming together on this very important piece of legislation, 
bringing our two committees into focus here, and to thank the gentleman 
from Michigan (Mr. Dingell) and the gentleman from Massachusetts (Mr. 
Markey) for working so closely at subcommittee and full committee level 
with us on the Committee on Commerce to make this happen.
  The first bill, as my colleagues know, was heard by the committee and 
reported last October, and I think in that regard historically we need 
to credit the gentleman from California (Mr. Cox) and the gentleman 
from Washington (Mr. White) for the 2-year effort they put into 
bringing this issue to the House floor today, in trying to resolve what 
could be a sticky problem of how to make the Internet work with E-
commerce in a world of 30,000 different taxing jurisdictions.
  As my colleagues know, when the computer married up with the 
telephone, a whole new world opened up to Americans and to the world 
community. All of a sudden, when computers married up to telephones, 
cellular telephone service and PCS service became available, and all of 
a sudden the whole world became a much smaller place.
  Now we are beginning to see the marriage of computers and this 
incredible telephone industry and the television itself in a world of 
computers and Internet services that will increasingly bring America 
and the world closer in the world of commerce. We have gone from the 
industrial age indeed to the communications or information age, and now 
we are beginning to see the fruits of it in E-commerce, as electronic 
commerce becomes the means by which more and more Americans and 
citizens of this world will do business.
  It is critical at this juncture just for us to call a time out to 
make sure that policy works, that this wonderful world of computers 
which has delivered so much value to Americans, which has been 
generally an unregulated world, which has increased in value and 
dimension and service not only to our citizens but to citizens of the 
world as it marries up to this highly-regulated world of telephones and 
television, that we do not make a lot of mistakes that would kill the 
goose that laid the golden egg.
  This moratorium is critical to the progress of electronic customers. 
I urge the passage of this bill.
  Mr. NADLER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California (Ms. Lofgren).
  Ms. LOFGREN. Mr. Speaker, I rise in support of the Internet Tax 
Freedom Act and urge my colleagues to support the measure.
  As my colleagues know, a friend of mine in Silicon Valley that I have 
the privilege of representing here along with the gentlewoman from 
California (Ms. Eshoo), my colleague, analogized the Internet to the 
``big bang'' and said that after the ``big bang'' the planets formed 
and we are about at that time now. The planets are just forming up 
after the explosion of the Internet. We do know that the Internet will 
change everything. It will change the way we do business, it will 
change the way we learn, it will change the way grandparents 
communicate with grandchildren.

                              {time}  1715

  It will change everything in our ordinary life, and it is absolutely 
essential that we do nothing to impair or hinder the growth of this 
wonderful technology.
  I am actually very proud that we have been able to work together on a 
bipartisan basis in the Committee on the Judiciary as well as in the 
Committee on Commerce to achieve this moratorium on taxes. Like my 
colleague, the gentleman from Ohio (Mr. Chabot), I do not think this 
measure is absolutely perfect, but it is not bad. It is certainly 
worthy of our support. I would hope that we can pass it promptly, and 
that the Senate will join with us and send it on to the President, who 
I know will support it as well.
  I would say also just this: Having been in local government for 14 
years before my service here in Congress, I do understand the bind that 
local governments find themselves in. So often they are scrambling for 
revenue to meet the tremendous service needs that they face. I am 
sympathetic with those needs, but I understand that really it is in no 
one's interest that we do anything to impair the growth of the 
Internet, not in the interests of cities, counties, states, the United 
States or any of us.
  So I commend this bill. I thank my colleagues for bringing it 
forward.
  Mr. NADLER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California (Ms. Eshoo).
  Ms. ESHOO. Mr. Speaker, I rise in strong support of the Internet Tax 
Freedom Act, and I especially want to compliment my colleague, the 
gentleman from California (Mr. Cox), for his tremendous efforts to get 
this bill to the House floor. It has not really been an easy process, 
even though we are all singing the praises of the bill tonight. I 
salute our committee chairman, the gentleman from Virginia (Mr. 
Bliley), the subcommittee chairman, the gentleman from Louisiana (Mr. 
Tauzin), and the ranking members.
  Mr. Speaker, the legislation tackles two very complicated subjects, 
the Internet and taxes. To explain legislation about either one in the 
brief period of time is difficult enough; put them together, and the 
complexity increases exponentially. That is why this bill, which calls 
for a time-out on Internet taxation, is so important.
  It is clear that precedents are already being set as taxing 
authorities around the country search for creative ways to define and 
tax the Internet. States and localities have targeted the Internet as a 
new resource for funds, given the tremendous growth in electronic 
commerce over the past few years, but it is time for the activity 
really to come to a stop, at least until we all have a better 
understanding of the ramifications that taxation will have on the 
future of the global information infrastructure.
  Representing Silicone Valley, I can tell you that it is rare that 
high technology companies, particularly Internet companies, come and 
ask the Federal Government to become more involved in their business. 
When they do, it is a good indication that a problem exists that could 
damage the future viability of their industry, and this is an industry 
that represents the fastest growing segment of our economy.
  So this legislation that we are considering today is a sound approach 
to dealing with the development of inconsistent and, in many cases, 
unworkable taxation of the Internet. It gives us a chance to study the 
issue, moving forward only when we fully understand what effects 
taxation will have on the development of what is becoming a global 
resource that must be protected.
  Mr. Speaker, I urge all of my colleagues to support it.
  Mr. BLILEY. Mr. Speaker, I yield the balance of my time, 3\1/2\ 
minutes, to the gentleman from California (Mr. Cox), who has put 2 
years of hard work on this to bring us to this point.
  Mr. GEKAS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from California (Mr. Cox).
  Mr. COX of California. Mr. Speaker, I thank the gentlemen for 
yielding me time.
  Mr. Speaker, I asked for about 45 minutes so I could read the names 
of all the people that it is important to thank. Because I have a 
limited period of time, I want to thank certainly those that are here 
that were the leaders in the effort to bring it to the floor, in 
particular my chairman, the gentleman from Virginia (Mr. Bliley), my 
ranking member, the gentleman from

[[Page H5035]]

Michigan (Mr. Dingell), as well as the chairman of the Committee on the 
Judiciary, the gentleman from Illinois (Mr. Hyde), who has shown so 
much leadership on this, and the gentleman from Michigan (Mr. Conyers), 
for their diligent efforts.
  We have the subcommittee chairmen, the gentleman from Pennsylvania 
(Mr. Gekas) and the gentleman from Louisiana (Mr. Tauzin), to thank for 
this as well, and governors, both early on, and, eventually, almost all 
of them later. But early on, Governor Wilson of California, my 
Governor, Pete Wilson, was a leader, as were many of our statewide 
elected officials in this effort to prevent the Internet from being 
taxed; the Governor of New York, Governor Pataki; Governor Cellucci in 
Massachusetts, and Governor Weld before him; Governor Gilmore in 
Virginia, Governor Allen before him; Governor Bush in Texas; and my 
partner in all of these negotiations, the Governor of Utah, who also 
negotiated on behalf of the National Governors Association, Mike 
Leavitt.
  This is now a consensus bill. It is a balanced approach between our 
national interest in preventing parochial taxation of the Internet and 
Federal regulation of the Internet, and the concern of State and local 
governments who want to make sure that they retain their prerogatives.
  As we enter the Information Age, the digital age, we are establishing 
in law a very important principle; that information should be made 
available as freely and widely as possible throughout the world; it 
should not be taxed and it should not be regulated. This bill addresses 
itself to both problems.
  It says not only that we will not have new special discriminatory and 
multiple taxes on the Internet, but also that the FCC, now the Federal 
Communications Commission, shall not become the ``Federal Computer 
Commission.'' We will not give the FCC, and we expressly state this in 
the legislation, the power to regulate the Internet.
  Some long time ago, Michael Faraday, the very, very famous inventor, 
a century-and-a-half ago, had become sufficiently well-known in his own 
day that he won an audience with the king, King William IV. He had 
invented the dynamo, the first electric motor, by rotating a current-
bearing wire around a magnet, and the king wanted to see him. The king 
was fascinated with his invention, the dynamo, but he addressed himself 
to Michael Faraday and said, ``But, after all, of what use is it?'' 
Faraday replied, ``Sir, I do not know, but of this I am certain: One 
day you will tax it.''
  We are a long way further down the road in the revolution wrought by 
that wonderful revolution of electricity that Faraday helped to 
perfect, but, without question, the 30,000 State and local tax 
jurisdictions that could tax the Internet are just as anxious to, so as 
was the tax collector back in the days of King William IV. We are 
preventing that today. We might just say tonight, ``Read our e-mail; no 
new taxes.''
  Mr. Speaker, may I just say that there is one other person that 
deserves thanks, who is an alumnus of this body. He is now a Senator, 
Ron Wyden. This is my legislation in the House, but he and I teamed up 
together to do this, and it is as much his idea as it is my own. I am 
anxious that the other body move this bill after we give it strong 
bipartisan if not overwhelming support here tonight and tomorrow, and I 
think he should be recognized for his efforts as well; an alumnus not 
only of the House, but of our Committee on Commerce.
  Mr. NADLER. Mr. Speaker, to advance the bipartisan support for this 
bill, in addition to the support given by King William, I yield 2 
minutes to the gentleman from Massachusetts (Mr. Delahunt).
  Mr. DELAHUNT. Mr. Speaker, I should note that my first name is also 
William, and I do support this bill that puts a moratorium on taxes.
  Mr. Speaker, I also want to acknowledge the leadership of the 
gentleman from California (Mr. Cox), who has clearly played a key role 
in bringing forth this particular proposal. As others have indicated, 
we are certainly witnessing today the emergence of a vast new global 
electronic marketplace, which is profoundly transforming the way in 
which both goods and information are exchanged. Government can either 
foster this development through wise policies, or impede it through 
foolish policies. I believe, as others, that it would be very foolish 
for us to allow the Internet to become encumbered with a patchwork of 
duplicative and overlapping taxes.
  The moratorium provided under the bill before us would ensure instead 
that policymakers have the opportunity to develop a coherent and 
uniform policy for the taxation of electronic commerce in the years to 
come.
  As I noted earlier in a hearing of the subcommittee chaired by the 
gentleman from Pennsylvania (Mr. Gekas) this past July, the matter is 
of immense importance to Massachusetts, a world leader in advanced 
technology, that is second only to Silicone Valley as a home to 
software producers and other high-tech companies. Last year, some 2,200 
Massachusetts-based software companies had 130,000 employees and 
combined revenues of $7.8 billion. This is a large slice of our State 
economy and a boon to our Nation's balance of trade.
  Massachusetts was among the first States to adopt legislation 
exempting Internet access services from State sales tax. However, until 
more States follow Massachusetts' lead, Internet users in the 
Commonwealth remain vulnerable to discriminatory taxes from 
jurisdictions outside our borders. That is why this particular proposal 
is so desperately needed, and I urge our colleagues to give it their 
support.
  Mr. NADLER. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Texas (Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, the power to tax is indeed the power to 
destroy. The Internet not only offers us an amazing way of 
communication, but it offers a tremendous potential, a revolutionary 
potential for electronic commerce.
  With the Internet still in its rather fragile youth, hasty or 
excessive use of taxation could easily destroy this wonderful new 
wellspring of free speech and economic enterprise.
  Suppose a Texan finds on the Internet a new software package that 
could double her business potential and decides to buy it over the 
Internet. She is sitting at a computer in Texas. The company which 
produces the product is headquartered in Washington State, and she uses 
an Internet server that is located in Illinois. Washington, Illinois 
and Texas and all of their subdivisions that are relevant have a claim 
to somehow tax this transaction. In a way, the transaction has taken 
place in each of these three States. Will my neighbor in Austin get a 
tax bill from all three, plus their subdivisions, or will the States 
somehow have to fight it out over who gets to tax the most-and-the-
first test?
  Well, I believe that the current situation is really a mess. We have 
the potential of over 30,000 jurisdictions that could be doing the 
taxing. If we do not enact this moratorium, it will mean up to 30,000 
hands in the cookie jar, and when all these governments have taken out 
all the taxes they want, the consumers and the businesses who want to 
rely on the Internet will have only a few crumbs.
  Last year, our bipartisan Information Technology Working Group that I 
founded with the gentleman from Virginia (Mr. Davis) focused attention 
on this problem and had experts from around the country come in and 
discuss it.

                              {time}  1730

  That is both in my work there and as a representative of central 
Texas, which is at the forefront of the high-tech economy. I have seen 
firsthand the tremendous economic potential of the Internet. I believe 
that the Internet is at its best when government interference is at its 
least.
  The Internet is at its best only when government is at its least. We 
call for a time out from taxes and a time on for perfecting electronic 
commerce. I urge my colleagues to support this legislation, which will 
allow us a 3-year period in which to work together and devise a 
bipartisan and equitable solution to the future of electronic commerce 
in this country.
  Mr. NADLER. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman 
from Texas (Ms. Jackson-Lee).
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman for 
yielding me the time.

[[Page H5036]]

  Mr. Speaker, let me rise in support of this legislation, for if we 
pass this very important Internet Tax Freedom Act, the Congress will be 
taking yet another strong action to protect the important highway that 
we have all been trying to get on, and that is the information 
superhighway.
  I am delighted for the leadership of the gentleman from California 
(Mr. Cox) and others who have worked so very diligently on this 
legislation. The Committee on the Judiciary has already approved on a 
bipartisan basis bills protecting copyright in cyperspace and 
eliminating burdensome encryption controls. This bill will help ensure 
that State taxes do not impede the vibrancy of growth of the Internet.
  However, Mr. Speaker, having come from local government, I am fully 
aware of the needs for local income. But it is important that States do 
not enact discriminatory or double taxes which discourage the use of 
the Internet. It is also important that we give some time, some 
breathing room. This bill creates a moratorium on new taxes on access 
to the Internet.
  Currently, a complex patchwork of State and local laws create an 
impossible situation for online service providers in determining who to 
tax and whom to not tax. Let me also say, Mr. Speaker, that the 
grandfather clause will allow current taxes to stay in place, and if 
States reaffirm within one year. This is an important aspect of this 
legislation.
  I have come from local government, being a member of the Houston City 
Council, and I realize how important income-enhancing activities are to 
our local governments. I think it is very important that this bill has 
in it a balanced commission which represents the Federal government, 
the States, and the industry, to help develop a coherent blueprint for 
interstate taxation of Internet transactions, mail order goods, in the 
future.
  I am interested particularly, however, in our local city governments 
and our local county governments. I would like to enter into a colloquy 
with the gentleman from California (Mr. Cox) on this very issue.
  I would say to the gentleman from California, I would like to raise 
the question, as the gentleman well knows, in addition to States within 
their county and city boundaries, I have worked as a member of the 
National League of Cities and also with the National Conference of 
Mayors.
  I would like to know that in the setting up of the balanced 
commission, we would have the opportunity to have the involvement of 
those organizations.
  Mr. COX of California. Mr. Speaker, will the gentlewoman yield?
  Ms. JACKSON-LEE of Texas. I yield to the gentleman from California.
  Mr. COX of California. Mr. Speaker, I thank the gentlewoman for 
yielding to me.
  The gentlewoman is exactly correct, that is the way the commission is 
set up. There will be 14 representatives from State, local, and county 
governments, including representatives from the National League of 
Cities, also the National Governors' Association, the National 
Conference of State Legislatures, the Council of State Governments, the 
National League of Cities, the National Association of Counties, the 
United States Conference of Mayors, the International City/County 
Management Association, and the American Legislative Exchange Council.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman.
  Reclaiming my time, let me add my applause for this compromise, and 
the fact that we are moving into the 21st century in promoting the 
Internet.
  Mr. NADLER. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. NADLER asked and was given permission to revise and extend his 
remarks.)
  Mr. NADLER. Mr. Speaker, I want to take this opportunity to say, 
having talked about the merits of the bill and why it is necessary, and 
that it is in fact a good compromise between the undoubted necessity of 
the States and local governments to have the ability to tax the 
Internet once, and the necessity on the Federal level of having a 
moratorium now to make sure that we do not have overlapping and 
commercially destructive rival taxation, this is a good bill.
  I want to say a word about the process. First of all, I want to thank 
and congratulate the chairman of the committee, the Committee on the 
Judiciary, the gentleman from Illinois (Mr. Hyde), and the gentleman 
Pennsylvania (Mr. Gekas) from the subcommittee, for the cooperative and 
bipartisan manner which this bill was moved, and the cooperation they 
have afforded to the gentleman from Michigan (Mr. Conyers) as ranking 
member of the Committee on the Judiciary, and myself as ranking member 
of the subcommittee.
  I also want to point out for the Record that this bill is entirely 
and completely within the jurisdiction of the Committee on the 
Judiciary, and that interstate taxation is within the core jurisdiction 
of the Committee on the Judiciary, and that the Committee on the 
Judiciary reported the bill to the floor, and the bill that we have 
before us now is virtually identical to that bill, and that the bill 
that the Committee on Commerce reported was stripped of all interstate 
taxation matters and Internet taxation matters by the Committee on the 
Judiciary because they have no jurisdiction, and we do not want any 
precedent set for the future on this bill.
  So it is a good bill. I am glad some members of the Committee on 
Commerce cooperated on this, but the record should reflect that this 
bill came through the Committee on the Judiciary, and we will have a 
full record of the history and the extension in the Record, because we 
should not permit a further diminution or attempted diminution of the 
jurisdiction of the Committee on the Judiciary on this worthy bill.
  I urge my colleagues to vote for this bill.
  Mr. GEKAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, the gentleman from New York is quite correct, that the 
process that was engaged in in order to bring us to this point was 
emblematic of some of the cooperation that we can determine from both 
sides of the aisle, and to help the public understand more of a very 
complex issue.
  I was impressed by the witnesses that we had in our particular 
hearing, because they brought every single perspective possible on the 
whole world of Internet. That helped us to build the momentum to which 
I referred earlier which finally led to the compromises and the 
moratorium that will now be in place when we finally vote on this 
measure.
  Mr. DAVIS of Virginia. Mr. Speaker, I rise today in strong support of 
H.R. 4105, the Internet Tax Freedom Act. I am proud to have been an 
original co-sponsor of the pre-cursor to this legislation and believe 
that it is crucial to the continued development of the Internet.
  In the last 5 years, the growth of the Internet has created an 
entirely new method of communicating: electronic commerce. With this 
rapid growth we have seen tremendous benefits and revolutionary 
technology, presenting unprecedented social and economic issues. These 
changes are forcing national and State legislators to quickly catch up 
with this growth from a policy-making perspective. The taxation of 
everyday sales transactions presents many complex economic and 
constitutional issues that should be resolved in a deliberate and 
holistic process, rather than a patchwork of rules and court decisions 
that would likely accompany future efforts by State and local 
governments to tax Internet transactions and services.
  The Internet Tax Freedom Act will give Congress and the technology 
industry the opportunity to examine Internet taxation issues thoroughly 
during a 3-year moratorium on State and local Internet taxation. It 
reflects the truly admirable spirit of cooperation between its chief 
sponsor, Representative Chris Cox, and State and local policymakers who 
were able to come together and work hard on a matter which has multi-
faceted consequences on retail businesses, State and local treasuries, 
continued technological development, and our judicial system, to name a 
few.
  The Internet is a revolutionary technology that has become an 
integral part of our nation's economic growth. And it promises to 
expand beyond anything we could imagine. It would be detrimental, I 
believe, to our nation's leadership in this industry if we were to 
allow taxation issues to stunt the growth of the Internet. For this 
reason, I am very pleased that we have been able to bring the Internet 
Tax Freedom Act to the floor today. And I particularly want to commend 
Mr. Cox for his foresight in introducing this legislation that we will 
be voting on today.
  Mr. THOMAS. Mr. Speaker, I rise to address an issue which will have a 
dramatic impact on our children, small businesses, and

[[Page H5037]]

the global economy--the taxation of the Internet. The Internet has not 
reached its full potential, but electronic commerce has already 
generated $1 billion. Congress should support H.R. 4105, the Internet 
Tax Freedom Act, because unwarranted taxation of the Internet would 
only stifle the growth of this young and dynamic communications system.
  This bill is crucial to communications in the 21st Century. Taxation 
leads to a lack of competition, with the telephone industry as a 
perfect example. The Internet is a valuable resource to which as many 
people as possible should have access. If competition is hindered, less 
people will be able to utilize this important communications tool.
  There are many problems with Internet taxation. Several States tax 
Internet access under existing statutes, including Iowa, Connecticut, 
Illinois, and the District of Columbia. We need this legislation now 
because the number of States taxing this industry could expand very 
quickly as States search for new means to expand their tax base. This 
bill needs to be passed as a proactive measure, and not a reactive 
measure after every State has adopted different taxation laws. There 
are more than 4,000 Internet Service Providers in this country, and 
most of them are small businesses. How can these small businesses 
survive when individual States are playing with different tax codes?
  The Internet has no specific boundaries and its transmissions are 
therefore vulnerable to multiple taxation from States and localities. 
If everyone takes a cut from different points of creation, then State 
and local taxes will kill the goose that laid the golden egg. Multiple 
taxation would cause confusion and would provide a disincentive for 
free dissemination of information and ideas. Because of the Internet's 
easy accessibility from anywhere in the world, home-bound, disabled, 
and elderly people have access to information and resources that they 
would not otherwise have.
  American providers of this service need a level playing field in 
order to remain competitive with other global providers. The growth of 
Internet and online services will increase the productivity of many 
different businesses, making them more competitive globally and 
therefore expanding U.S. sales of new products and services. As we are 
move toward international agreements on Internet taxation, we must 
first move to come to a consensus on how we tax the Interet within our 
own country. Finally, the Internet has shown great possibilities in the 
future for commercial users. It allows people to create their ``own'' 
market.
  Our goal is not to permanently make Internet transactions tax-free. 
We simply want to provide safeguards against multiple or special 
taxation. We are not trying to make Internet transactions tax-free. 
Rather, we want to stop multiple or special taxation. For example, a 
business selling goods in a retail store operates under a single set of 
tax rules, but a business selling goods over the Internet is subject to 
much more uncertainty. It is also potentially subject to thousands of 
State and local taxing jurisdictions.
  H.R. 4105 would establish a moratorium on State and local taxes which 
specifically target the Internet, such as taxes on Internet access or 
online services. It would also commission a 2-year study of sub-
national and foreign taxation of Internet commerce. This study would 
ensure that lawmakers do not enact new taxes without proper data. Last, 
the bill calls on the Clinton administration to be as aggressive as 
possible in keeping the Internet free from anti-competitive taxes and 
tariffs.
  I urge Congress to support H.R. 4105, the Internet Tax Freedom Act. 
If we allow the Internet to be taxed at different points along the way, 
we are ultimately restricting access to it. Americans already pay 
enough taxes. Why should we expose them to multiple taxes on the 
Internet when it will only restrict the access to, growth of, and 
competition in this essential resource?
  With that, Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Pennsylvania (Mr.  Gekas) that the House suspend the 
rules and pass the bill, H.R. 4105.
  The question was taken; and (two-thirds having voted in favor 
thereof), the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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