[Congressional Record Volume 144, Number 136 (Friday, October 2, 1998)]
[Senate]
[Pages S11305-S11310]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

  The PRESIDING OFFICER (Mr. Allard). The clerk will report the pending 
business.
  The assistant legislative clerk read as follows:

       A bill (S. 442) to establish national policy against State 
     and local government interference with interstate commerce on 
     the Internet or interactive computer services, and to 
     exercise Congressional jurisdiction over interstate commerce 
     by establishing a moratorium on the imposition of exaction 
     that would interfere with the free flow of commerce via the 
     Internet, and for other purposes.

  The Senate resumed consideration of the bill.
  The PRESIDING OFFICER. Under the previous order, the committee 
amendments reported by the Finance and the Commerce Committees are 
agreed to. The bill is considered original text for the purpose of 
further amendment.
  Who seeks recognition?
  Mr. McCAIN. Mr. President, I am pleased that the Senate is today 
beginning debate on S. 442, the Internet Tax Freedom Act. Shortly, 
Senator Bumpers will come to the floor to propose his amendment, and we 
expect further amendments following that.
  Before I summarize the bill, I want to note for the record the 
importance of this measure. The reality is that this bill could 
determine the fate of electronic commerce. Without it, the economic 
revolution we are hoping for may never take place. Without it, 
electronic commerce may--and we are in fact seeing this occur--be 
hampered by politicians who see it as not as revolutionary, but as a 
source of new tax revenue.
  First, I want to commend Senator Wyden for his extraordinary 
leadership

[[Page S11306]]

in moving this legislation forward. He kept all of the interested 
parties at the negotiating table when on many occasions it appeared as 
though we were at an impasse. After months of hard work and 
determination, we have come much closer to appeasing the National 
Governors' Association and other state and local organizations. Without 
Senator Wyden's assistance, the bill may never have made it this far.
  This bill will do the following: It would prohibit state and local 
governments from imposing any Internet access tax, bit tax or any 
multiple or discriminatory tax on electronic commerce for a two-year 
period.
  The bill would establish a 16 member Advisory Commission on 
Electronic Commerce comprised of 4 Federal representatives (the 
Secretaries of Commerce, State, Treasury and USTR); 6 representatives 
of State and local government, as well as 6 representatives of 
electronic industry and consumer groups, all to be appointed by the 
Speaker of the House, the House Minority Leader, and the Senate 
Majority and Minority Leaders.
  The Commission would exist for 18 months to study and develop policy 
recommendations on the appropriate domestic and international taxation 
and tariff treatment of transactions using the Internet, Internet 
access, and other comparable or international sales. The Commission's 
findings and any legislative recommendations are required to be 
transmitted to the Congress within 18 months after the bill's 
enactment.
  The bill also includes a sense of the Congress that there should be 
no new federal taxes on the Internet; a requirement that electronic 
commerce be examined as part of USTR's annual trade estimates report; a 
declaration that the Internet should be free of foreign tariffs and 
other barriers; and a provision stating that nothing in this bill is 
intended to affect implementation of the 1996 Telecommunications Act.
  Mr. President, we find ourselves at a critical juncture in the 
evolution of our economy and our society. The information technology 
industry, driven by the growth of the Internet, is connecting people 
and businesses around the world in ways we never dreamed possible.
  At this critical juncture, we are faced with a choice. We can choose 
to hamper the growth of this vital medium by imposing old ways of 
thinking that just do not apply. Or we can seek new principles to 
govern in this new era of ubiquitous access to information, people, 
products, and services.
  Mr. President, I hope that Congress will take this opportunity to 
establish new principles and ways of thinking and governing that will 
allow this vibrant medium to grow and flourish.
  I believe we must embrace three fundamental principles: There must be 
no piecemeal regulation of the Internet, a medium with interstate and 
global reach. There must be no discrimination between goods sold over 
the Internet and goods sold by other means. There must be no tax on the 
right to access information.
  The vast potential of the Internet can no longer be denied. According 
to one recently released research report, it took radio almost 40 years 
to reach 50 million listeners in the United States, while broadcast and 
cable television took about 13 and 10 years, respectively, to reach 
that many viewers. The number of Internet users in the U.S. reached 50 
million users in just five years.
  By the end of 1998, an estimated 100 million users will be connected 
worldwide. Some estimate that the Internet will soon reach 500 million 
users--nearing universal connectivity and access.
  According to a recent Business Week article, online sales are 
expected to reach nearly $5 billion this year--double that of 1997. 
From computer software and airplane tickets to cars and investing, 
people are taking advantage of the Internet in new ways each day.
  Now is not the time to allow complicated and unadministrable taxes to 
kill the tremendous potential of electronic commerce.
  The Internet is creating tremendous value for business as well as 
consumers. The innovative use of the internet enables thousands of 
businesses--big and small--to establish internal networks, or 
intranets, that link geographically dispersed workers and information 
within an enterprise. Lockheed Martin and Boeing Aircraft collaborating 
over an Intranet developed the Darkstar aircraft in 11 months with 50 
people, a process that would normally require hundreds of designers and 
years of work.
  But a business need not be the sizer of a Lockheed Martin or a Boeing 
to utilize the advantages of the Internet. With the Internet, even 
small local companies can obtain a global reach that would otherwise 
have been unthinkable. A small supply company in Pennsylvania, the 
Lehigh Valley Safety Supply Company, realized a 150 percent increase in 
revenue when they placed 50 of their items for sale on the Internet.
  Given the tremendous potential of the Internet, I see no reason for 
partisanship on an issue which is so vitally important to the future of 
America. I know we are in agreement that we want to see the Internet 
grow and expand. Everyone, including the experts, is astonished at how 
quickly the Internet has grown. Literally, every expert who has studied 
this industry has underestimated the growth that has taken place in the 
past few years. So it is very likely that they are underestimating the 
dramatic changes and growth that we will see in the future.
  That is why we need a moratorium on Internet taxation as proposed in 
the Internet Tax Freedom Act. This bill will allow the various experts 
from industry and government to sit down and do the difficult work of 
determining how the Internet is different from other media and under 
what circumstances it should be taxed.
  The time to act is now. Over the last several months, individuals 
representing government, consumers, and industry have been working 
tirelessly to make this a bill that achieves the goal of a temporary 
moratorium on confusing Internet taxing schemes while preserving the 
states' rights to continue collecting taxes. Those states that have 
been collecting Internet access taxes have been specifically 
grandfathered in the amendment that Senator Wyden and I offer today so 
they can continue to collect those taxes during the moratorium.
  The Commission created by this bill will address the issues of how 
the Internet and all remote commerce should be taxed. This Commission 
will make recommendations to Congress on how best to proceed. By 
working to create a clear taxing scheme for the Internet, we will 
continue to set an example for the world on how to nurture this vibrant 
medium.
  Mr. President, the Internet Tax Freedom Act will allow the Internet 
to continue to develop and ultimately reach its full potential. Given 
the importance of this goal to consumers, businesses, and our global 
economy, I urge my colleagues to support this legislation.
  Mr. President, on September 4, we received ``An Open Letter To 
Congress'' in support of the Internet tax moratorium legislation. It is 
paid for by the National Taxpayers Union, American Conservative Union, 
American Council of the Blind, American Legislative Exchange Council--
some 60 organizations.
  Mr. President, I ask unanimous consent this be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                       An Open Letter to Congress

                           September 4, 1998.

       Congress is considering various versions of Internet tax 
     moratorium legislation. Some Members are attempting to add an 
     issue onto these bills which we oppose. We, the undersigned 
     organizations, oppose efforts to force vendors to collect 
     out-of-state sales taxes when they do not have any physical 
     presence in a state. This position is consistent with the 
     landmark Quill decision by the Supreme Court, which we 
     support.
       The laudable goal behind Internet tax moratorium 
     legislation is to create a no-new-taxes moratorium for the 
     Internet. It would be ironic, to say the least, if Congress 
     added a provision to this legislation that even raises the 
     possibility for businesses, many of them quite small, to 
     become tax collectors for the government.
       Americans now pay more in taxes than they do for food, 
     clothing, shelter, and transportation combined. The members 
     of our organizations, like all Americans, already pay enough 
     taxes. Some of our members are home bound, or otherwise lack 
     the ability to visit retail stores. They like to shop at 
     home. We strongly urge you not to add the out-of-state sales 
     tax issue to Internet moratorium legislation.
           Sincerely,
         National Taxpayers Union; 60 Plus Association; American 
           Conservative Union;

[[Page S11307]]

           American Council of the Blind; American Legislative 
           Exchange Council; Americans for Hope, Growth and 
           Opportunity; Americans for Tax Reform; Association of 
           Concerned Taxpayers; Christian Coalition; Citizens for 
           a Sound Economy; Coalitions for America; Council for 
           Affordable Health Insurance; Council for Citizens 
           Against Government Waste; Empower America; Food 
           Distributors International; Independent Insurance 
           Agents of America.
         Bill Price, Independent Living for the Handicapped; 
           National Association for Home Care; National 
           Association of Manufacturers; National Association of 
           People with AIDs; National Association of Wholesaler-
           Distributors; National Federation of Nonprofits; 
           National Grange; National Tax Limitation Committee; 
           Seniors Coalition; Small Business Survival Committee; 
           United Seniors Association; Vietnam Veterans of 
           America; Women for Tax Reform.


                             Cloture Motion

  Mr. McCAIN. Mr. President, in an effort to conclude this bill in a 
timely fashion, and with appropriations bills and other important 
legislation waiting in the wings for Senate action, I sent a cloture 
motion to the desk to S. 442, the Internet tax bill.
  The PRESIDING OFFICER. The cloture motion having been presented under 
rule XXII, the Chair directs the clerk to read the motion.
  The legislative clerk read as follows:

                             Cloture Motion

       We the undersigned Senators, in accordance with the 
     provisions of Rule XXII of the Standing Rules of the Senate, 
     do hereby move to bring to a close debate on Calendar No. 
     509, S. 442, the Internet tax bill;
         Trent Lott, John McCain, Wayne Allard, Connie Mack, 
           Gordon Smith, Paul Coverdell, Spencer Abraham, Mike 
           DeWine, Conrad Burns, James Inhofe, Judd Gregg, Rod 
           Grams, Craig Thomas, Olympia Snowe, Rick Santorum, and 
           Larry E. Craig.

  Mr. McCAIN. For the information of all Senators, this cloture vote 
will occur on Tuesday, or if cloture is invoked on the motion to 
proceed to H.R. 10, the financial modernization bill, then this cloture 
vote will occur immediately following the adoption of the motion to 
proceed to H.R. 10. All Members will be notified as to the exact time.
  I now ask unanimous consent the mandatory quorum under rule XXII be 
waived.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. Mr. President, we expect Senator Bumpers momentarily to 
propose his amendment. We would like to have a vote on that amendment 
as soon as Senator Bumpers is able to describe that amendment 
adequately. We will have a rather brief response.
  I thank Senator Dorgan for his continued efforts to reach a 
compromise on some of the differences we have had, as well as Senator 
Graham of Florida and Senator Gregg of New Hampshire. We are close to 
agreement on several issues. I hope we can dispatch this legislation in 
an orderly fashion without having to go to cloture. It is just not 
something that we enjoy doing, because it prevents people, over time, 
from getting the attention to their amendments that they deserve. So I 
hope we will have an agreement and not have to have a cloture vote, and 
conclude this legislation as soon as possible.
  Again, I thank Senator Dorgan. I yield the floor knowing that the 
Senator from Oregon has some important comments. I hope all of us 
understand as soon as Senator Bumpers gets here we will move to his 
amendment as quickly as possible.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, first let me thank the chairman of the full 
committee, Senator McCain. I introduced S. 442 in March of 1997. 
Chairman McCain and his staff have worked almost nonstop with me since 
that time to try to put together a bipartisan bill. I thank Chairman 
McCain for all of these efforts. I share his views. We are anxious to 
get to the Bumpers amendment this morning. I have a few brief comments 
and, hopefully, we will be able to move to that expeditiously.
  If ever there was an issue that called out for treatment as 
interstate commerce, it is the Internet. The Internet, as we all know, 
knows no boundaries--not Federal boundaries, not State boundaries, in 
effect not even global boundaries. But what we have tried to do in our 
efforts over the last few months, and we have done it through more than 
30 separate changes, is try to be fair to all parties--the States that 
are trying to look thoughtfully at the ground rules for the new economy 
and small businesses who overwhelmingly have endorsed this legislation. 
For the small businesses, the Internet is a chance to compete with the 
Wal-Marts and other big guys because geography becomes irrelevant. So, 
small businesses have supported it. I think that is why we have 
fashioned a bill with so much bipartisan support.
  The essence of this bill is that in the 21st century the new digital 
economy should be built on the principle of technological neutrality. 
The Internet should get no preference, nor should the Internet be the 
target of selective discrimination. Unfortunately, around the country 
we have seen instances, for example, where if you purchase a newspaper 
the traditional way, what is called snail mail, it is sent to you in 
your home and you pay no tax. But if you subscribe to the same 
newspaper via the Internet, you pay a hefty tax as a result.
  Depending on what State you are in, electronic commerce may be taxed 
as a telecommunications service, computer service, information service, 
or some combination, and there are different rates around the country. 
My concern has long been that if a significant number of the 30,000 
taxing jurisdictions in America all decide to take a bite out of the 
Internet, or if we have 50 States going at it individually, the 
Internet is going to look like Dodge City before the marshals showed 
up.
  Chairman McCain was very right, that Internet growth is going to be 
enormous. There is a fair amount of Internet commerce going on today, 
but it is going to grow dramatically in the years ahead. That is why in 
our legislation we seek to come up with some ground rules for the new 
economy, and to do it before we have to react to critical problems.
  I submit the greatest beneficiaries of this legislation are not the 
affluent and the powerful. The affluent and the powerful have lots of 
tax lawyers and specialists who, if they run up against a crazy quilt 
of taxes on the Internet, they are not going to have any problem using 
all of their legions of tax specialists to deal with that kind of 
situation. The people who are really going to benefit from this 
legislation are folks like home-based businesses, one of the fastest 
growing sectors of our economy. My home State of Oregon has more than 
100,000 home-based businesses, and in meeting with them, many of them 
have said that electronic commerce is the key to their survival.

  For rural communities and at-home parents and disabled individuals, 
the online world is a gateway to economic opportunity. If somebody in a 
rural community has a home-based business, for example, selling fruit 
or jam or something of this nature, I cannot believe that there is a 
single Member of the U.S. Senate who would want to subject that kind of 
person to a score of different taxes. I don't think there is a Senator 
who would want to do that. That is why we have this legislation before 
the Senate today, to come up with a set of ground rules.
  Mr. President, here is the kind of example we are going to be talking 
about: If the present Senator in the chair wants to send a gift basket 
from Harry and David's in Medford, OR, to his cousin, say, in Florida, 
paying for it with a bank card in New York, using America Online in 
Virginia, how many jurisdictions would have the opportunity to impose a 
tax on that kind of transaction?
  There really are no ground rules for that sort of thing today, and if 
there were to be a hodgepodge of large, new taxes on electronic 
commerce, it would be especially punitive on those folks in rural 
States, like Colorado and Oregon. That is one of the reasons that I and 
Senator McCain and others who have worked on this legislation have 
sought to bring this to the floor expeditiously.
  I would like to take a minute to explain exactly what is in the bill 
and what is before the Senate.
  First, the legislation is not going to preempt existing State and 
local taxes as long as they are technologically neutral. What that 
means is, if the authority is there for someone to pay a 5-percent 
sales tax when they buy a sweater in a particular jurisdiction, under 
the Internet tax freedom proposal, they will pay exactly the same

[[Page S11308]]

kind of tax if they order it on the Internet.
  States that impose and enforce taxes on Internet access in place 
today are going to be able to keep them. None of the States that tax 
Internet access today actually has a law on the books that expressly 
authorizes the taxation of Internet access, but as we heard in the 
hearings before the Commerce Committee, there are a variety of problems 
already cropping up as a result of administrative rulings and 
reinterpretations of existing law.
  In fact, there is one major firm, Vertex, which has tried to sort 
through the status at the State level of how the Internet is being 
taxed. In a number of States, they basically said that they couldn't 
give a clear answer, but if anybody was interested in doing a business 
deal, a deal involving electronic commerce that touched on that 
particular State, they would be wise to get a consultation.
  The legislation will not allow any State to attempt to impose or 
assess or attempt to collect a tax on Internet access after October 1, 
1998, unless it already had done that with a tax in effect.
  It is very clear that we are trying to be sensitive to the laws in 
place and the concerns of the States, but at the same time making sure 
that there is not going to be an opportunity for discriminatory taxes 
on electronic commerce.
  In effect, what this legislation does is it ensures a timeout so that 
the commission of experts called for in the legislation can study these 
complicated questions and make sound policy recommendations to the 
Congress. But during that time, we take steps that we believe will be 
critically important to the development of electronic commerce as it 
relates to the smallest concerns in America. For example, the 
legislation assures that a web site is treated exactly like a mail-
order catalog for purposes of interstate sales, so the taxing 
jurisdiction cannot attempt to impose a tax on a web site with respect 
to an out-of-State computer server.
  The fact is, the online world is racing past outdated policies. The 
ground rules that we seek to establish here are just the beginning of 
what I think is going to be needed for the digital economy.
  We have begun to debate in the Commerce Committee a variety of other 
issues. Yesterday, an important bill of Senator Bryan's was passed 
dealing with online privacy concerns as they relate to children. We may 
hear more about that before the end of the session, but I think that 
with this legislation we will begin to get the common definitions, the 
more clearly defined principles and standards, that are going to be 
essential for Internet commerce to go forward.
  Recently, I was home and met with some small businesses, and one of 
them said that he was very excited about the work that we were doing on 
this legislation. He said: ``Just understand that I am not going to be 
able to grow my Internet business if there are 30,000 taxing 
jurisdictions all with their hands in our pocket.''
  The American taxpayers made it clear of late how they regard the IRS. 
If we were to have thousands of small jurisdictions collecting Internet 
taxes, I think that the concern we would have with respect to the IRS 
would be multiplied many times over at the thought of thousands of 
mini-IRS-taxing authorities collecting Internet taxes.
  I see that Senator Bumpers has arrived. I want to say, as Senator 
Bumpers comes to the floor and prepares his amendment, that I have 
agreed with him on a great many concerns over the years. I have agreed 
with Senator Bumpers about Social Security and the many times that he 
has led this body to take on spending boondoggles, environmental 
concerns, and the like. We don't happen to agree on this issue. I think 
it would be a mistake to let each State have its own sales tax 
arrangement for the Internet. It would certainly jack up taxes 
dramatically on the 100,000 home-based businesses in my State and the 
thousands of others across the country. I do think that if we have the 
States going off in their own directions, we do run the real risk of 
having the Internet look like Dodge City before the marshals showed up.
  I will conclude by way of saying that Senator Bumpers has worked very 
closely with this Senator, knowing that it is particularly important to 
me. We have gotten agreement on a number of key questions, and that was 
critical to getting the legislation to the floor.
  I want the Senator to know that he is going to be somebody whom this 
Senator will miss very, very much next year when I cannot look over and 
see Senator Bumpers and get his counsel on everything from Social 
Security to spending boondoggles. I thank him, because he has been 
aware that this legislation has been a priority of mine. I know he has 
strong feelings about it, and he was gracious enough to let it come 
forward and let us get these matters resolved. I express my 
appreciation to Senator Bumpers.
  Mr. President, I yield the floor.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER (Mr. Gorton). The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I have not made an opening statement on 
this piece of legislation. I will do that at some future point. I want 
to allow the Senator from Arkansas to proceed with his amendment. I 
will, at some more convenient time, make an opening statement.
  I have some very strong thoughts about a whole range of issues, 
including the issue that is going to be raised by the Senator from 
Arkansas.
  But I think in an attempt to try to move this along--we want to get 
to a first vote on this at some point--I will ask the Senator from 
Arkansas to proceed and then at some point in the proceeding I will 
make an opening statement.


                           Amendment No. 3677

(Purpose: To authorize collection of certain State and local taxes with 
 respect to the sale, delivery, and use of tangible personal property)

  Mr. BUMPERS. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Arkansas [Mr. Bumpers], for himself and 
     Mr. Graham, proposes an amendment numbered 3677.

  Mr. BUMPERS. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. BUMPERS. Mr. President, first, let me thank my very good friend, 
my distinguished colleague from the great State of Oregon, Mr. Wyden, 
for his very kind and gracious comments. He talked about how he is 
going to miss me. Rest assured, wherever I am, if he will just raise 
the window, he can probably hear me.
  But on a more serious note, I consider Senator Wyden to be one of the 
finest additions to the U.S. Senate in my 24-year tenure here. He is 
truly becoming a great Senator, but more than anything else he has 
great values. Great values are the first thing you have to have to be a 
good Senator. So while I am prepared to leave at the end of this year, 
Senator Wyden is one of the Senators I will certainly miss.
  Let me just start off by saying, this amendment deals with the rights 
of States to require mail-order catalog houses to collect sales taxes 
on merchandise shipped into their States.
  L.L. Bean, which does over $1 billion a year, ships a lot of 
merchandise into my State of Arkansas, as does Lands' End, as does 
6,000 or 7,000 other mail-order catalog houses; and they do not pay one 
cent of tax to the State of Arkansas. They do not pay one cent of tax 
to any State. And I will tell you why.
  In 1967, the Supreme Court said, in the National Bellas Hess v. 
Department of Revenue case, that States may not require mail-order 
catalog houses to collect use taxes for them because it violates the 
due process clause in the Constitution, No. 1, and, No. 2, it violates 
the interstate commerce clause of the Constitution--finis, end of 
story.
  In 1992, as mail-order catalogs sales began to mushroom in this 
country, and States could see that their tax base was being eroded--
incidentally, we depend on the sales tax in our State for 50 percent of 
our educational funds--being eroded by this constant stream of catalogs 
coming into people's homes every day through the mailbox--I have been 
checking; I have been averaging between 5 and 10 a day

[[Page S11309]]

for the past year--North Dakota said, ``Enough is enough.'' So they 
brought a lawsuit that resulted in the Quill decision in 1992.
  They tried to get the Supreme Court to reverse the Bellas Hess 
decision that prohibited States from making mail-order houses collect 
sales tax. It is called a use tax. It is the same thing, but if it 
comes from out of State we call it a use tax. And the Supreme Court, in 
a very rare remarkable case of sanity, said, ``We hereby reverse the 
National Bellas Hess case to the extent that we hold that the 
requirement of a State to make mail-order houses collect sales taxes on 
goods coming into their States no longer--no longer--violates the due 
process clause. However, we are not removing our objection to the fact 
that we believe the State's right to tax mail-order houses still is a 
violation of the interstate commerce clause.'' Now because the Commerce 
Clause grants Congress exclusive authority over interstate commerce, 
Congress may, if it chooses, grant the states the authority to require 
out-of-state tax collection.
  So here we are on October 2, 1998, about my sixth year to try to do 
something about this patently unfair proposition, asking Congress, 
please, do not impose a tax. My amendment does not impose a tax on 
anybody; it does not require the States to impose a tax on anybody. It 
simply does what the Supreme Court said in 1992 we had a right to do, 
and that is to give the States the right to require out-of-state 
sellers to collect sales tax on any goods they ship into that State. 
And what is wrong with that?
  You know, in 1995, I offered this amendment to the unfunded mandates 
bill, stood right here where I am standing now, made the same speech I 
am making today. You remember the distinguished Senator from Idaho, 
Senator Kempthorne, offered the unfunded mandates bill. I never saw as 
many tears shed in the U.S. Senate in my life as I saw during that 
debate--crocodile tears, of course--for those poor States and counties 
and municipalities that the Government was always imposing mandates on. 
We passed laws, and we said to the States and the counties and the 
cities, ``You have got to do this; you must do that.'' And it was 
costing the States ``gazillions.'' They said, ``Let's get that old, 
mean Federal Government off the backs of the States and local 
governments. And in the future, any time Congress passes a law that 
mandates that the States and local governments do anything, we will 
make a computation of what it is going to cost the States to comply 
with it, and we will send them the money.'' I did not vote for that. I 
did not vote for it for a lot of reasons. I am not here to debate that 
one all over again. That is a done deal.
  But the interesting thing is, when I offered this amendment on the 
unfunded mandates bill, I said, ``Here is a mandate that you're 
imposing on the States by doing nothing. If you're so concerned about 
the States and local governments, why don't you help them with the 
biggest unfunded mandate of all?'' It is about $4 billion a year we 
impose on the States by saying, you cannot collect taxes on anybody but 
the poor old sucker on Main Street who collects the tax on every sale, 
every bag of groceries, every refrigerator, every automobile, if he 
happens to live in your hometown or your State.
  Yes, I was a Main Street merchant as well as a jackleg lawyer. I had 
a hardware, furniture and appliance store. And the catalog houses were 
my biggest competitors, not the guy down the street--the catalog sales. 
I was President of the Chamber of Commerce.
  I arranged for the annual banquet. I was in charge of the Christmas 
parade. I was on the school board. I did all of those things to make my 
town a decent place to raise my children. And I made everybody who 
bought a dollar's worth of goods pay 3, 4 or 5 cents in sales taxes. It 
went to teachers' salaries. It went to law enforcement, police 
officers, and to sweep the streets. It went to test the purity of the 
water we drank. That is what we depended on, the sales tax. But only, 
of course, if you happen to live there.
  Now, think about the fact that mail-order houses in this country are 
selling over $100 billion worth of goods through the mail. There are a 
few who collect this tax. Do you know why? Because they know it is 
right. Ask Senator Bennett from Utah, a big stockholder and one of the 
original finders of a big mail-order house called Franklin Quest about 
collecting use taxes. Don't take my word for it. Ask Senator Bennett 
what they did. I will tell you and let him ratify it. They sat around 
the table and said, ``Shall we or shall we not collect sales taxes for 
the States in which we sell merchandise?'' He said they discussed it 
and they concluded that, as good citizens, they should. And they did. I 
said, ``Bob, when I was chairing the Small Business Committee and held 
hearings on this subject, they always talked about how complicated and 
difficult it was because there are 7,000 taxing jurisdictions in this 
country.'' He said, ``Don't be fooled by that. Every month we push a 
computer button and it is done. It isn't complicated at all.''
  Now, 7 or 8 years ago when I started this, that was the principal 
debate--``It is so complicated. It is just so much paperwork, we can't 
do it.'' You rarely hear that argument anymore, since Senator Bennett 
came and since I have enlightened this body about what he said. He is 
immensely respected here.
  The NFIB--I don't know where they are now--in 1995, they said only 
about 35 percent of their people wanted Congress to take this action. I 
was getting ready to say something unkind, but I won't pursue that any 
further.
  I simply want to say to my colleagues, where do you think this 
country is headed? The underlying bill is to give all sales on the 
Internet a free ride. The bill before the Senate is a 2-year 
moratorium. There will be amendments offered here to extend the 
moratorium to 3 or 5 years.
  Listen to this, colleagues, because as I say, I am not lambasting 
Senator Wyden's bill on Internet taxes. I am simply fortifying the 
argument I want to make on remote sales. That is, right now in 1997 
Internet sales were roughly $8 billion. It is now estimated that by the 
year 2002 Internet sales will be $300 billion. You can buy an 
automobile on the Internet, no sales tax; you can buy a refrigerator; 
you can buy your furniture; you can buy anything you want on the 
Internet.
  Now, if we are looking at Internet sales of $300 billion a year by 
the year 2002, what will they be at the end of 5 years and how much 
revenue will the States have lost? I ask my colleagues, why in the name 
of God will you go back home and tell the chamber of commerce your 
heart is in the right place, you are for small business, you are for 
Main Street merchants, and turn right around and put them at a 
hopeless, competitive disadvantage? Why? Why should I organize the 
Christmas parade, pay my taxes to go to the schools, taxes for law 
enforcement, the fire department, while other people ship 4 million 
tons of catalogs into the States for them to dispose of?
  Ask any mayor, any Governor, what is their biggest headache? Almost 
invariably, it will come back, ``We need more money.'' Secondly, ``Our 
biggest headache is the landfill.'' Not only do states have to dispose 
of 4 million tons of catalogs, they also have to handle the boxes and 
the crates that the merchandise comes in. How can the catalog people 
tell us, ``We don't cause a burden. We are no burden to the local 
jurisdictions. Why do you want to tax us? We don't send our children to 
school in Charleston, AR. Why should we pay sales taxes?''
  I will tell you precisely why they should. Because the revenue base 
of the States and local jurisdictions of this country is being eroded 
to the point where it will wind up being about half of what it is right 
now or less. Let me ask you a better question: Why shouldn't they pay a 
sales tax and compete with the people who live in those communities 
that have to pay taxes? It is a mystery to me.
  I don't take on these causes that I continue to lose for the fun of 
it. I take them on because I feel strongly about them. In 1995, the 
Senator from Maine, Mr. Cohen--who is now Secretary of Defense--and I 
got into a debate here. They said the Finance Committee had not even 
held a hearing. Of course, the Finance Committee hadn't held a hearing, 
the chairman of the Finance Committee doesn't favor this bill.
  Do you know something else? Somebody else said, let's study this. 
That is always the way out, ``Let's study it.'' For 7 years on the 
mining laws, they

[[Page S11310]]

said we need to study this. We have been studying the mining laws since 
1872, and the law is still fully intact, just as crass, just as base, 
just as unfair now as it was in 1872, and we are still studying it.
  We will study this some more. Somebody will make the suggestion, ``We 
have to study this. We don't know what the full impact of it is.''
  Let me shift gears a moment to another item, and this is always 
shocking to anybody you tell it to. Unhappily, most things said on the 
U.S. Senate floor don't get any higher than the dome here. Nobody hears 
it. Forty-five States in this country have a use tax. Arkansas has one. 
It says to L.L. Bean, if you ship merchandise into Arkansas, the person 
you sell it to is liable for the Arkansas use tax. It is the same thing 
as a sales tax. In my State, it is 5 percent.

  How many people in Arkansas do you think realize that when they buy 
something from a remote seller, they are responsible for that use tax? 
Maybe about 1 in 200,000. Nobody knows it. Yet, 45 States have it. Just 
10 to 15 States--I forget which number--but it was 10 in 1995; so it is 
maybe 15 or 20 by now--have laws that say you must report on your State 
income tax whether or not you bought anything from out of State.
  Now, the State of Maine does something that is really unique and, in 
my opinion, patently unconstitutional. If you live in Maine, when you 
fill out your income tax return, there is a line that says, ``Did you 
buy anything from out of State?'' You put in ``yes'' or ``no,'' and if 
the answer is yes, you put the amount down.
  Let's assume you bought some furniture for $1,000. I don't know what 
the sales tax is in Maine, but if it is 5 percent, you are liable for 
$50. ``Please multiply 5 percent times the amount you bought.'' And so 
everybody kind of routinely ignores that because they don't want to pay 
it and they don't have to admit that they bought anything from out of 
State.
  So do you know what else Maine does? They say that if this line is 
empty and you don't report having bought anything out of State from a 
mail-order house, please multiply .0366 times whatever your income is. 
If you make $30,000 a year, you put $11 on that line.
  As I say, in my opinion, that is powerfully unconstitutionally. That 
is a tax that nobody ought to have to pay, and it is the wrong way to 
do it. A lot of people get rude awakenings. One couple from Florida 
went up to North Carolina because they saw this big catalog saying, 
``Buy your furniture at the factory in North Carolina and pay no sales 
tax.'' Not many people do this anymore. When I started in on this issue 
years ago, it was very common. Or, ``Buy your tile or your linoleum for 
your kitchen from''--such-and-such--``no sales tax.''
  So this couple went from Florida to North Carolina and bought $25,000 
to $35,000 worth of furniture. Later on, the North Carolina furniture 
company is audited and they find that they have sold this couple in 
Florida, as well as couples in a lot of other places, $25,000 worth of 
furniture. They notify Florida, and Florida calls these people up and 
say, ``You owe us $1,000,'' or whatever it is. Now, that is a rude 
awakening, isn't it? You thought you bought something that was tax free 
and you find out, to your regret, that you didn't.
  Well, Mr. President, I have just been handed a note that the majority 
leader wants to have a vote. Frankly, I don't like being interrupted in 
the middle of a debate. It is nothing but a bed check vote. But the 
majority leader apparently wants the floor by 10:30 and they want me to 
yield the floor. I got a note that I was going to yield so that Senator 
Leahy and somebody else could talk about a judicial nomination. I don't 
see Senator Leahy here. I don't see Senator Hatch here. Neither one of 
them is half as entertaining as I am either.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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