Congressional Record, Volume 144 Issue 83 (Tuesday, June 23, 1998)

[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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