[Congressional Record Volume 144, Number 139 (Wednesday, October 7, 1998)]
[Senate]
[Pages S11651-S11670]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

  The Senate continued with the consideration of the bill.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the pending 
Coats amendment be 20 minutes in length, 10 minutes on either side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. I yield the floor.
  Mr. COATS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Indiana.


                           Amendment No. 3695

   (Purpose: To exempt from the moratorium on Internet taxation any 
persons engaged in the business of selling or transferring by means of 
   the World Wide Web material that is harmful to minors who do not 
              restrict access to such material by minors)

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

       The Senator from Indiana (Mr. Coats) proposes an amendment 
     numbered 3695.

  Mr. COATS. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 17, between lines 15 and 16, insert the following:
       (c) Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply in the 
     case of any person or entity who in interstate or foreign 
     commerce is knowingly engaged in the business of selling or 
     transferring, by means of the World Wide Web, material that 
     is harmful to minors unless such person or entity requires 
     the use of a verified credit card, debit account, adult 
     access code, or adult personal identification number, or such 
     other procedures as the Federal Communications Commission may 
     prescribe, in order to restrict access to such material by 
     persons under 17 years of age.
       (2) Scope of exception.--For purposes of paragraph (1), a 
     person shall not be considered to engaged in the business of 
     selling or transferring material by means of the World Wide 
     Web to the extent that the person is--
       (A) telecommunications carrier engaged in the provision of 
     a telecommunications service;
       (B) a person engaged in the business of providing an 
     Internet access service;
       (C) a person engaged in the business of providing an 
     Internet information location tool; or
       (D) similarly engaged in the transmission, storage, 
     retrieval, hosting, formatting, or translation (or any 
     combination thereof) of a communication made by another 
     person, without selection or alteration of the communication.
       (3) Definitions.--In this subsection:
       (A) By means of the world wide web.--The term ``by means of 
     the World Wide Web'' means by placement of material in a 
     computer server-based file archive so that it is publicly 
     accessible, over the Internet, using hypertext transfer 
     protocol, file transfer protocol, or other similar protocols.
       (B) Engaged in the business.--The term ``engaged in the 
     business'' means that the person who sells or transfers or 
     offers to sell or transfer, by means of the World Wide Web, 
     material that is harmful to minors devotes time, attention, 
     or labor to such activities, as a regular course of trade or 
     business, with the objective of earning a profit, although it 
     is not necessary that the person make a profit or that the 
     selling or transferring or offering to sell or transfer such 
     material be the person's sole or principal business or source 
     of income.
       (C) 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.
       (D) Internet access service.--The term ``Internet access 
     service'' 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.

[[Page S11652]]

       (E) Internet information location tool.--The term 
     ``Internet information location tool'' means a service that 
     refers or links users to an online location on the World Wide 
     Web. Such term includes directories, indices, references, 
     pointers, and hypertext links.
       (F) Material that is harmful to minors.--The term 
     ``material that is harmful to minors'' means any 
     communication, picture, image, graphic image file, article, 
     recording, writing, or other matter of any kind that--
       (i) taken as a whole and with respect to minors, appeals to 
     a prurient interest in nudity, sex, or excretion;
       (ii) depicts, describes, or represents, in a patently 
     offensive way with respect to what is suitable for minors, an 
     actual or simulated sexual act or sexual contact, actual or 
     simulated normal or perverted sexual acts, or a lewd 
     exhibition of the genitals; and
       (iii) taken as a whole, lacks serious literary, artistic, 
     political, or scientific value for minors.
       (G) Sexual act; sexual contact.--The terms ``sexual act'' 
     and ``sexual contact'' have the meanings given such terms in 
     section 2246 of title 18, United States Code.
       (H) Telecommunications carrier; telecommunications 
     service.--The terms ``telecommunications carrier'' and 
     ``telecommunications service'' have the meanings given such 
     terms in section 3 of the Communications Act of 1934 (47 
     U.S.C. 153).

  Mr. McCAIN. Mr. President, I ask unanimous consent to vitiate the 
unanimous consent agreement.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 3695, As Modified

  Mr. COATS. Mr. President, I also send a modification to this 
amendment to the desk and ask unanimous consent that my amendment No. 
3695 be considered as modified.
  I might just explain the amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The amendment (No. 3695), as modified, is as follows:

       On page 17, between lines 15 and 16, insert the following:
       (c) Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply in the 
     case of any person or entity who in interstate or foreign 
     commerce is knowingly engaged in the business of selling or 
     transferring, by means of the World Wide Web, material that 
     is harmful to minors unless such person or entity requires 
     the use of a verified credit card, debit account, adult 
     access code, or adult personal identification number, or such 
     other procedures as the Federal Communications Commission may 
     prescribe, in order to restrict access to such material by 
     persons under 17 years of age.
       (2) Scope of exception.--For purposes of paragraph (1), a 
     person shall not be considered to engaged in the business of 
     selling or transferring material by means of the World Wide 
     Web to the extent that the person is--
       (A) a telecommunications carrier engaged in the provision 
     of a telecomunications service;
       (B) a person engaged in the business of providing an 
     Internet access service;
       (C) a person engaged in the business of providing an 
     Internet information location tool; or
       (D) similarly engaged in the transmission, storage, 
     retrieval, hosting, formatting, or translation (or any 
     combination thereof) of a communication made by another 
     person, without selection or alteration of the communication.
       (3) Definitions.--In this subsection:
       (A) By means of the world wide web.--The term ``by means of 
     the World Wide Web'' means by placement of material in a 
     computer server-based file archive so that it is publicly 
     accessible, over the Internet, using hypertext transfer 
     protocol, file transfer protocol, or other similar protocols.
       (B) Engaged in the business.--The term ``engaged in the 
     business'' means that the person who sells or transfers or 
     offers to sell or transfer, by means of the World Wide Web, 
     material that is harmful to minors devotes time, attention, 
     or labor to such activities, as a regular course of trade or 
     business, with the objective of earning a profit, although it 
     is not necessary that the person make a profit or that the 
     selling or transferring or offering to sell or transfer such 
     material be the person's sole or principal business or source 
     of income.
       (C) Internet.--The term ``Internet'' means collectively the 
     myriad of computer and telecommunications facilities, 
     including equipment and operating software, which comprise 
     the interconnected world-wide network of networks that employ 
     the Transmission Control Protocol/Internet Protocol, or any 
     predecessor or successor protocols to such protocol, to 
     communicate information of all kinds by wire or radio.
       (D) Internet access service.--The term ``Internet access 
     service'' 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.
       (E) Internet information location tool.--The term 
     ``Internet information location tool'' means a service that 
     refers or links users to an online location on the World Wide 
     Web. Such term includes directories, indices, references, 
     pointers, and hypertext links.
       (F) Material that is harmful to minors.--The term 
     ``material that is harmful to minors'' means any 
     communication, picture, image, graphic image file, article, 
     recording, writing, or other matter of any kind that--
       (i) taken as a whole and with respect to minors, appeals to 
     a prurient interest in nudity, sex, or excretion;
       (ii) depicts, describes, or represents, in a patently 
     offensive way with respect to what is suitable for minors, an 
     actual or simulated sexual act or sexual contact, actual or 
     simulated normal or perverted sexual acts, or a lewd 
     exhibition of the genitals; and
       (iii) taken as a whole, lacks serious literary, artistic, 
     political, or scientific value for minors.
       (G) Sexual act; sexual contact.--The terms ``sexual act'' 
     and ``sexual contact'' have the meanings given such terms in 
     section 2246 of title 18, United States Code.
       (H) Telecommunications carrier; telecommunications carrier 
     service.--The terms ``telecommunications carrier'' and 
     ``telecommunications service'' have the meanings given such 
     terms in Section 3 of the Communications Act of 1934 (47 
     U.S.C. 153).

  Mr. COATS. The modification is a technical amendment.
  The underlying Finance Committee substitute was previously modified 
changing the definition of ``Internet,'' and the modification that I am 
sending to the desk simply brings my definition in my amendment in line 
with the underlying amendment now as modified by the underlying 
amendment.
  Mr. President, I also ask for the yeas and nays on this amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. COATS. Thank you, Mr. President.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I send an amendment in the second degree to 
the desk.
  The PRESIDING OFFICER. Is there objection to the consideration of the 
second-degree amendment?
  Without objection, it is so ordered.
  Mr. McCAIN. Mr. President, did the Senator from Connecticut need 
unanimous consent in order for this amendment to be considered?
  The PRESIDING OFFICER. The Senator may call up a previously filed 
amendment. He needs consent to modify it.
  Mr. McCAIN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. Mr. President, I also ask unanimous consent that the 
amendment be considered as read and, further, that my colleague from 
Indiana proceed to speak on his amendment. Then when he completes his 
discussion, I will make some comments on the amendment that I am 
offering.


         Amendment No. 3780 to Amendment No. 3695, as modified

  (Purpose: To provide an exception to the moratorium with respect to 
    Internet access providers who do not offer customers screening 
                               software)

  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Connecticut (Mr. Dodd) proposes an 
     amendment numbered 3780 to amendment No. 3695, as modified.

  Mr. DODD. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the amendment, add:
       (d) Additional Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply with 
     respect to an Internet access provider, unless, at the time 
     of entering into an agreement with a customer for the 
     provision of Internet access services, such provider offers 
     such customer (either for a fee or at no charge) screening 
     software that is designed to permit the customer to limit 
     access to material on the Internet that is harmful to minors.
       (2) Definitions.--In this subsection:

[[Page S11653]]

       (A) Internet access provider.--The term `Internet access 
     provider' means a person engaged in the business of providing 
     a computer and communications facility through which a 
     customer may obtain access to the Internet, but does not 
     include a common carrier to the extent that it provides only 
     telecommunications services.
       (B) Internet access services.--The term `Internet access 
     services' means the provision of computer and communications 
     services through which a customer using a computer and a 
     modem or other communications device may obtain access to the 
     Internet, but does not include telecommunications services 
     provided by a common carrier.
       (C) Screening software.--The term ``screening software'' 
     means software that is designed to permit a person to limit 
     access to material on the Internet that is harmful to minors.
       (3) Applicability.--Paragraph (1) shall apply to agreements 
     for the provision of Internet access services entered into on 
     or after the date that is 6 months after the date of 
     enactment of this Act.

  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. Mr. President, I don't believe we will need all 20 
minutes. There may be other Members who want to speak on this. But I 
will summarize this in the interest of time, because essentially what 
we are doing here is something that has already been done in the 
Senate. It has been passed unanimously by the Senate. But it is not 
attached to legislation that has as much chance of succeeding, or at 
least, if that legislation succeeds, we are not sure what the Senate 
has passed is going to survive the process. It might be dropped from 
that.
  Let me begin by summarizing this just to refresh my colleagues' 
memory of what we have done before.
  This amendment exempts from the moratorium which, if this bill 
passes--and I believe it will--will be applied to any kind of a 
taxation on the World Wide Web--my amendment simply exempts from that 
moratorium any commercial porn site on the World Wide Web that does not 
comply with the reasonable requirements that are incorporated in this 
amendment to restrict access by children to sexually explicit material 
on the site.
  The amendment establishes specific measures that porn site 
operators--commercial porn site operators--must take to restrict 
access. These restrictions represent standard technology already on the 
web, and they reflect the technology and the requirements acknowledged 
by the Court as both technically and economically feasible.
  In the Reno v. ACLU case--that is, the Court's decision that struck 
down the indecency provisions of the Communications Decency Act--the 
Court said there were two problems with that act.
  That act, by the way, is the one that was passed by the Senate in I 
think a nearly unanimous vote. It was labeled the Exon-Coats amendment, 
offered in the last Congress by the Senator from Nebraska, the Democrat 
Senator from Nebraska, Senator Exon, and myself. We included in that 
amendment--which passed both the House and the Senate and was endorsed 
wholeheartedly by the President and the administration but did not 
survive a Court challenge for two reasons:
  One, the Court said that the restrictions had to apply only to those 
engaged in the business; that is, those commercial providers.
  Second, it said that our standard of indecency as described in the 
material not suitable for children was not acceptable, violated first 
amendment concerns, and they proscribed then a standard as harmful to 
minors, or suggested that.
  We went back and adjusted that Communications Decency Act which was 
passed by the Congress, signed into law, but rejected by the Court. We 
revised it to comply with the Court's concerns, so that now it, we 
believe, will meet the constitutional standard. We have applied it 
strictly to commercial sites. We have adopted the requirements for 
establishing the types of technology that the commercial porn providers 
and the net can require that one will have to comply with and the other 
require, and we have adopted the definition of ``harmful to minors'' as 
outlined in the famous case on this issue, the Ginsberg, New York 
Ginsberg case. That defined ``harmful to minors'' in a way that means 
you have to be under 17, it has to be patently offensive as to what is 
suitable for minors, taken as a whole lacking serious literary, 
artistic, political, and scientific value for minors and appealing to 
prurient interests.
  This is a standard that we are all familiar with. It has been the 
standard applied in obscenity cases now for several decades, and it is 
the generally accepted standard. That is the standard we have put into 
this bill.
  So to summarize, what we are doing here is attaching to this 
legislation, which provides a tax moratorium for users of the World 
Wide Web, we are saying that that moratorium does not exist, will not 
be available to those who use the World Wide Web for the purpose of 
providing sexually explicit material to minors and have not put in 
place in terms of their provision to all other users restrictions which 
are technically feasible and already used, which are economically 
feasible, but restrictions which allow them to certify that the person 
requesting the material is, in fact, an adult; that is, 17 years and 
older.
  This is exactly the language which was adopted unanimously by this 
Senate in this Congress. And so everyone here has already read it, 
understood it, voted for it, supported it. We are simply transferring 
it now over to this particular bill and applying it in a somewhat 
different way by denying the tax exemption.
  It is inconceivable that we would grant a massive tax perk to 
commercial porn sites that make their smut available to children. We 
are going to give a golden egg to commercial entities on the Internet, 
or giving them a tax shelter, at least a moratorium for a tax shelter 
for a period of time, but to think that we would give that same tax 
break to those who are providing obscene material to minors without 
requiring any good-faith effort on their part to make sure that minors 
do not have free access to this material is unthinkable. That is the 
bottom line.
  S. 442, the underlying bill that we are talking about, holds out a 
massive tax shelter to on-line businesses. The question is, Is the 
Senate going to extend this tax shelter to pornographers who are making 
their material available to every child in America.
  People say, well, look, I mean, this is a proactive thing. Why don't 
the parents take control and control what their child clicks into and 
orders up.
  Mr. President, I will not display this on the Senate floor because I 
think it is obscene, and whether or not you agree it is obscene for 
adults, I think it is absolutely not only obscene but totally 
inappropriate for minors. This is material that is available free. This 
is before you click in and say I want to purchase your material or send 
me more. These are the teasers. The teasers are almost beyond 
description, and it is something we don't want to talk about here.
  There is no excuse in saying, well, an 11-year-old, if he clicks in 
to find out about a school project and uses the wrong word, all it is 
is a verbal version; he has to take a proactive effort to obtain the 
material. That is not true. That youngster, that child, whether they 
are in the library, whether they are in their school classroom, whether 
they are at home, is immediately given the most graphic of images and 
the most graphic of language as a teaser for them to go forward and 
obtain the material. We are saying that there has to be a provision 
whereby the provider of this material puts in place reasonable 
restrictions to assure that the person asking for the material is 
someone who is 17 years old or older.
  We have complied with the Court requirements. This is language that 
has already been adopted by the Senate, and I hope my colleagues will 
see it in that light and support this vote that is coming up in the 
next few moments.
  Mr. President, I do not see any other Members on our side who are 
wishing to speak at this particular time. And I am asking how much time 
is remaining of the Senator's time and I would reserve that time.
  The PRESIDING OFFICER. The Senator has 52 minutes left under cloture.
  Mr. DODD. Parliamentary inquiry, Mr. President.
  There was no unanimous consent time agreement on this amendment?
  The PRESIDING OFFICER. That is correct.
  Mr. COATS. That is correct. It was asked, agreed to and vitiated.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. DODD addressed the Chair.

[[Page S11654]]

  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. I commend my colleague from Indiana who is in his closing 
days in this body, having made the decision not to seek reelection. A 
lot of Members, as they wind down, spend their last few days winding up 
work and not being actively involved in the legislative process. It is 
a tribute to Senator Coats that in his remaining days in this body, he 
is still very active and involved in issues he has cared deeply about. 
This is one such issue. I commend him for this amendment. I think it is 
a very creative way to advance this issue and provide some safety for 
young people who are being exposed today to an alarming amount of 
pornography on the Internet.
  I strongly support his amendment. Now, let me put my amendment in a 
framework for some people. My amendment is a second degree amendment, 
and really complements the Coats amendment. My amendment requires that 
Internet access providers either provide free of charge, or for a fee, 
screening software at the time they make sales to customers. Internet 
access providers that don't do this, as with the Coats amendment, would 
be denied the benefits of the tax breaks in the underlying bill. This 
amendment also relies on the Ginsberg definition that has been used in 
the Coats amendment.
  How big is this problem, people say? Let me just put it in 
perspective for you. According to Wired Magazine, there are 28,000 web 
sites worldwide that have soft- or hard-core pornography on them. And, 
fifty new web sites with such material are added to the Internet every 
single day--50 a day.
  My colleague from Indiana has some material he wisely decided not to 
show on the floor, but suffice to say, most Americans would find it 
highly offensive, to put it mildly. The idea that this material is 
available to children is something that ought to be a cause of alarm to 
all of us. Sadly, many of our children are unwittingly and accidentally 
exposed to such sites while surfing the web. They type in search terms 
as innocuous as ``toys''--pretty innocuous--only to find graphic images 
and language on their display terminals.
  Mr. President, the Internet is profoundly changing the way we learn 
and communicate with people. Today our children have unprecedented 
access to educational material through the Internet. It provides 
children with vast opportunities to learn about art and culture and 
history. The possibilities are endless. It is an incredibly valuable 
technology for children all across this country and across the globe.
  But as with any technology, Mr. President, this advanced technology 
also brings with it a dark side for our children. Many of these young 
people are browsing the net, often unaccompanied by an adult, and come 
across material that is unsuitable, to put it mildly. It is oftentimes 
very sexually explicit.
  Every parent worries about strangers approaching their children in 
their neighborhood or on a playground at school.
  And they teach their children how to avoid these strangers. But 
today, these strangers can literally enter our homes via the Internet. 
They are only a mouse click away from our children. In our libraries 
and bookstores, we store reading material that is harmful to minors in 
areas accessible only to adults. Yet, in cyberspace, these same 
materials are as accessible to a child as his or her favorite bedtime 
story. Pornographic images and sexual predators are now reaching our 
children, via the Internet, in the privacy and safety of their own 
homes and classrooms. This kind of access to our children is alarming, 
and this invasion of our children's privacy and innocence is 
unconscionable.
  Just a few weeks ago, law enforcement agents in a sting operation 
apprehended 200 members of an Internet pornography ring that possessed 
and distributed sexually explicit images of children. Members of this 
ring traded inappropriate images of children on the Internet. One of 
the sites raided was in my own State of Connecticut. As I noted a 
moment ago, there are 50 new sites a day added to the Web that contain 
pornography, these sites are added to the 28,000 that already exist. 
Despite this successful operation by law enforcement agents, their raid 
only represents the elimination of approximately four days of new 
sites.
  We, as a nation, have an obligation to ensure that surfing the web 
remains a safe and viable option for our children. We have a 
responsibility to make sure that they are able to learn and grow in an 
environment free of sexual predators and pornographic images. Clearly, 
there is no substitute for parental supervision; yet, I think we can 
all agree that many parents know less about the Internet than their 
children do. Parents are convinced of the Internet's educational value, 
but they also feel anxious about their ability to supervise their 
children while they use it. In my view, it is important that we 
encourage parents and children to use the Internet together. But 
clearly, it is difficult for any adult to monitor children on line all 
the time.
  Therefore, I believe we need to provide our parents with tools that 
will help them to protect and to guide their children on the Internet. 
The amendment I have offered here is a modest measure. It is not a 
cure-all by any stretch of the imagination. It is a modest idea and 
just requires that Internet access providers make screening software 
available to customers purchasing Internet access services.
  The amendment would allow customers to have the opportunity, as I 
said, to either buy or obtain free of charge, as determined by the 
provider, screening software that permits customers to limit access to 
material on the Internet that is harmful to minors. Like going to a 
pharmacy and being asked if you want to buy a childproof lid for 
prescription medication, my bill will require that Internet access 
providers ask parents whether they would like to obtain screening 
software to protect them from the very kind of dangers that we see on 
the 28,000 existing web sites and the 50 new ones that are added each 
day. This is a serious problem, and providing this kind of tool to 
parents is one way we can begin to combat the problem.
  At any rate, I hope my colleagues will see fit to support this 
amendment. It has been offered once before on the floor and passed the 
Senate overwhelmingly and, not unlike the Coats amendment, we need to 
have it included in this bill today.
  Again, I commend my colleague from Indiana for his fine work on many 
issues, but once again on this particular issue, and hope as well this 
second-degree amendment will be adopted.
  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. I am more than happy to accept the amendment offered by 
the Senator from Connecticut. I thank him for his tireless work on 
behalf of children. It has been my pleasure to serve with him on both 
sides, the majority and minority, of the Children and the Families 
Committee; under his chairmanship as ranking member, and now as 
chairman, with Senator Dodd as ranking member. He has been a tireless 
advocate of children and addressing the particular concerns that 
children have to deal with, the problems they have to deal with growing 
up, and his support for this legislation and the amendment to my 
amendment, which I think strengthens what we are attempting to do and 
is very reasonable, earlier offered by Senator McCain, to utilize the 
advantages of software that allows for blocking.
  We see this as, certainly, a useful tool. It is not a totally useful 
tool because there are a myriad of ways of defeating it. As we speak, 
there are undoubtedly computer people far more savvy than this Senator, 
looking for ways to bypass this and looking for ways to defeat it. But 
it is a helpful tool, and it should be available to parents to help 
them in their efforts to protect their children from material that they 
do not deem appropriate and that certainly is not appropriate.
  I will be more than happy to accept the amendment. I do not know that 
we need a rollcall vote on both. We can combine the two and I think we 
will have a very worthwhile amendment.
  The PRESIDING OFFICER. Is there further debate on the Dodd amendment, 
No. 3780? The Senator from Montana.
  Mr. BURNS. Mr. President, if my friend from Indiana and my friend 
from Connecticut will yield, I am not going to oppose this amendment. I 
congratulate both of them, as they have been dedicated to raising the 
awareness of the garbage that we have on the Internet. No technology 
that we can devise,

[[Page S11655]]

that stays in place very long, is going to actually protect our young 
children from the pitfalls of the stuff that we find on there. The only 
thing that we can do, and I think both of them have done this very 
well, is to raise the awareness of the need for adult supervision 
whenever young people go on the Internet. That is the only way. That is 
the only way we are going to get protection and also a public awareness 
and a public feeling that we are not going to do business with Internet 
providers who offer this stuff.
  We cannot protect and use this great tool called the glass highway 
and bring any integrity to it unless, No. 1, we secure it when I send a 
message to you. Of course, that is the encryption issue, and that is an 
issue we have to fight another day, as far as law enforcement 
surveillance and this type of thing is concerned. But we cannot be 
lulled or rocked into a position of where we are in a basket of 
comfort, thinking we have done the job and protected our children from 
the pedophiles and the garbage that we find on the Internet, because 
the Internet is going to reflect what we have in society. No matter 
where you go, you will find what you are looking for. It is going to be 
there, too, just like it is downtown or any place in America.
  So, I am not going to oppose this amendment. I do have some 
reservations about it because, No. 1, I think it is overreaching a 
little bit into industrial policy, as far as what we should be doing. 
But I tell Americans, don't get comfortable in this basket of security 
because we have this amendment or that we have this legislation, that 
we are still going to be susceptible to the people who prey on the 
Internet with garbage. We will never solve that problem. The only place 
it will be solved is through parents and us talking about it and 
raising the awareness that it is there. Parental supervision, 
supervision in our schools and our libraries, that is the only way we 
defeat this. Because basically we are decent people, that is what will 
defeat it. That is what will finally crowd it off of there, and also 
secure it, so maybe there will not be any room for it. I hope that 
would be the case, also.
  I congratulate the Senator from Indiana. I will miss him and his 
service in the next U.S. Senate. But nobody has a more stellar record 
than Senator Coats on these issues of family and decency in the public 
place. I appreciate that.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, first, before my friend from Montana 
leaves the floor, I want to tell him how much I appreciate his work as 
chairman of the telecommunications subcommittee on the Commerce 
Committee. My friend from Montana and I have had spirited discussions 
and debates on this overall issue. I understand his deeply held views, 
and I appreciate them. There is great attraction to his argument. There 
is a fine line in America between the prevention of material which is 
offensive being forced on our young people and censorship. So I 
understand the arguments that the Senator from Montana has made. But 
let me say that it is a huge problem, and the Senator from Montana 
knows it as well as I do. It is a huge problem.
  Anyone who operates the Internet today sees this proliferation of 
incredible trash that occurs, which is terribly, terribly disturbing to 
all of us--all of us on both sides of the aisle--because of the 
influence that it has on young Americans, not to mention older 
Americans.
  We had a hearing in the Commerce Committee. There was testimony that 
there is a direct relation between pedophilia and the Internet. There 
are documented cases where pedophiles have corresponded with young 
people on the Internet and enticed them into meeting. These stories are 
so terrible and graphic that I am reluctant to discuss them on the 
floor of the U.S. Senate.
  It is a problem in American society when you look at the growth of 
the Internet in America. All of us, especially those of us who serve on 
the Commerce Committee, are aware of the incredible potential of the 
Internet, the unbelievable effects it is going to have on the Nation 
and the world. With the wiring of schools and libraries in America, for 
the first time, every child in America, no matter whether they come 
from the Navajo Reservation and Chinlee High School or whether they 
attend Beverly Hills High School, are going to have access to knowledge 
and information like never before.
  When you dial in the word ``teen'' on the Internet, or when you dial 
in the word ``nurse'' and the search engine comes up with a 
proliferation of pornography and advertisements for it, we have to try 
to address this problem.
  The Senator from North Dakota has discussed this issue in committee 
hearings, the Senator from Oregon--all of us who are familiar with it. 
I will tell you right now, Mr. President, one of the problems is that a 
lot of us don't use the Internet like the now tens of millions of 
Americans do, so we are not aware of this problem. And, no, none of us 
would support censorship. No one is in favor of censorship.
  I will tell you that when we have actual testimony before our 
committee by detectives who say that they go out and they find people 
who entice young children through the Internet to meet with them and 
then terrible things ensue, then obviously we have a problem. Recently 
in Phoenix, AZ, a young boy who was on the Internet viewing pornography 
walked out and molested a 4-year-old child. It is a fact. It is a 
documented fact. Or parents in the library see pornography as they walk 
by and their children are in the library and see this.
  I am not sure I know the answers. I don't know the answers, but I 
firmly believe that we at least ought to make an effort to provide 
parents with the tools and institutions with the tools at least to 
filter out some of this garbage, which brings me to the Senator from 
Indiana.
  I know of no one who is more involved in the issues of families and 
morals and decency in America than is Senator Coats. I miss many of my 
colleagues when they leave; some of them I don't miss. But the fact is, 
the majority of them I do. I will miss Senator Coats because I view him 
as a moral compass around here.
  When Senator Coats speaks on these issues, we all listen because he 
is a living example of what we want families in America to be about. 
Senator Coats has been involved in this particular effort on this piece 
of legislation for a long, long time.
  I believe there may be some question about the bill's 
constitutionality. Fine, we will let the courts decide that. I have 
some questions myself. But it is a sad, but inescapable fact that 
material harmful to children is pervasive on the Internet in America 
today. It is an indisputable fact. There is no Member of the Senate who 
is more qualified and has more credibility to address this issue than 
the Senator from Indiana.
  It is my understanding that the Senator from Montana is not going to 
seek a recorded vote on the second-degree amendment of the Senator from 
Connecticut. Fairly shortly, if there is no other debate on this 
amendment, we will move to a vote around noon.
  Mr. President, I ask unanimous consent that after adoption of the 
Dodd second-degree amendment that the Senate vote at 12 noon on the 
Coats amendment.
  Mr. COATS. Reserving the right to object, I would like to reserve 1 
minute for summation on the amendment that is being offered before the 
vote. Hopefully, I can do that before 12 o'clock. In case I can't, I 
would like that 1 minute.
  Mr. McCAIN. I amend my unanimous consent request that the Senator 
from Indiana have 2 minutes prior to the vote.
  The PRESIDING OFFICER (Mr. Burns). Without objection, it is so 
ordered.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I will take 1 minute. I want to use this 
unique opportunity to add my comments about the Senator from Indiana. I 
have told people that I am enormously proud to serve in this body. One 
of the major reasons for that is the men and women with whom I serve, 
both Republicans and Democrats, liberals and conservatives, I think are 
the best men and women I have been associated with in my entire life.
  One of those is the Senator from Indiana. We became acquainted in 
1981 when we both were elected to the House of Representatives in the 
same election, and although we perhaps have

[[Page S11656]]

agreed and disagreed many times on many issues throughout the years, I 
have deep admiration for Senator Coats and his family.
  When he leaves the Senate, as is the case with so many of our 
colleagues, the Senate will have lost a very important contributor on a 
good many issues, this one most notable. He has been persistent on this 
issue and, as the Senator from Arizona just described, we have had 
hearings in the Commerce Committee about this issue. It desperately 
needs attention, desperately needs a solution, and the Senator from 
Indiana has been a significant contributor in that effort. I did not 
want to let this moment pass without sharing my respect for Senator 
Coats. I yield the floor.
  Mr. COATS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. Mr. President, I appreciate the kind words from my 
colleagues--the Senator from Connecticut, the Senator from North Dakota 
and the Senator from Arizona. I am also appreciative of their support 
for this effort.
  I don't know if any of us has a perfect answer to this. We do see the 
Internet, the World Wide Web, as one of the most extraordinary 
invasions in the history of mankind. It can provide access to 
information that can revolutionize our world and provide opportunities 
for people who heretofore have not had those opportunities for 
knowledge and for learning that are extraordinary.
  At the same time, there is a dark side to the Internet. As with most 
new technology, it can be used for good; it can be used for evil. 
Unfortunately, the Internet is no exception. None of us want to put 
ourselves in the position of being a censor. We decry that material. We 
don't think it sends the right kind of moral message. We wish we didn't 
have it.
  Yet, as a country dedicated to the freedom of speech, enshrined in 
its Constitution, we have to accept certain types of material that some 
of us consider offensive, but doesn't necessarily meet the obscenity 
test that the Court has laid out, which is a pretty stringent test.
  By the same token, surely--surely--we as a society can address the 
issue of how we protect the innocence of our children and whether we 
can use reasonable means to give parents tools to protect that 
innocence. That is what this amendment is about.
  Software is an attempt to do that. We know from documented evidence 
that software is only a partial solution, that it can be defeated, but 
I think it is helpful and we ought to utilize that and encourage it.
  Beyond that, however, we need a sanction, a sanction that imposes 
some requirements--technologically feasible requirements and 
economically feasible requirements--on those who seek to bypass the 
effort to put any kind of restrictions on the availability of this 
material to children.
  We passed legislation earlier, the Communications Decency Act. Even 
though the Congress and the people of America and the President 
supported it, the Court did not support it. It struck it down. We have 
carefully modified and changed this language in this bill that I 
offered earlier that the Senate passed to comply with those Court 
restrictions.
  We have made sure that it applies to minors; that the requirements 
put in place meet the Court's standard; that the language harmful to 
minors meets the Court-ordered test that was given to us years ago in 
the Ginsberg case. We believe we have something here that not only is 
acceptable to the American people and to the Congress of the United 
States and to the administration, but hopefully acceptable to the 
standards imposed by the Supreme Court. So I thank my colleagues for 
their generous words. I thank them for their support.

  The hour of 12 noon having approached, if there is any time left, I 
yield it back and hope we can go to a vote and pass this unanimously 
and send the kind of signal that we need to send, and that is that this 
country and this Congress is not going to stand for obscene material to 
be pushed into children's minds through the Internet without reasonable 
restrictions on that material.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The question now occurs on agreeing to the 
Dodd amendment No. 3780 to the Coats amendment, as modified.
  The amendment (No. 3780) was agreed to.
  Mr. DODD. I move to reconsider the vote.
  Mr. McCAIN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


          Vote on Amendment No. 3695, As Modified, As Amended

  The PRESIDING OFFICER. The question now occurs on agreeing to the 
Coats amendment No. 3695, as modified and as amended. The yeas and nays 
have been ordered. The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is 
necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 98, nays 1, as follows:

                      [Rollcall Vote No. 303 Leg.]

                                YEAS--98

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Coats
     Cochran
     Collins
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Enzi
     Faircloth
     Feingold
     Feinstein
     Ford
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Helms
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                                NAYS--1

       
     Leahy
       

                             NOT VOTING--1

       
     Glenn
       
  The amendment (No. 3695), as modified, as amended, was agreed to.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mrs. HUTCHISON. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mrs. HUTCHISON. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant 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.


 Amendments Numbered 3734; 3723, as modified, 3717, 3713, 3710, 3712, 
                      3735; and 3721, as Modified

  Mr. McCAIN. Mr. President, I understand the following amendments 
which were filed earlier are acceptable to both sides.
  Therefore, I ask unanimous consent that the following amendments be 
considered en bloc, and agreed to:
  Amendments numbered 3734, 3723, as modified, 3717, 3713, 3710, 3712, 
3735, and 3721, as modified.
  The PRESIDING OFFICER. Is there objection?
  Mr. DORGAN. Mr. President, reserving the right to object, I shall not 
object, the amendments have been cleared on our side. We have no 
objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 3734; 3723, as modified, 3717, 3713, 3710, 3712, 
3735; and 3721, as modified) were agreed to, as follows:


                           amendment no. 3734

             (Purpose: To modify the Commission membership)

       Beginning on page 18, line 17, strike all through page 19, 
     line 21, and insert:
       (B) Eight representatives from State and local governments 
     (1 of whom shall be from a State or local government that 
     does not impose a sales tax) and 8 representatives of the 
     electronic commerce industry, telecommunications carriers, 
     local retail businesses, and consumer groups, comprised of--

[[Page S11657]]

       (i) five representatives appointed by the Majority Leader 
     of the Senate;
       (ii) three representatives appointed by the Minority Leader 
     of the Senate;
       (iii) five representatives appointed by the Speaker of the 
     House of Representatives; and
       (iv) three representatives appointed by the Minority Leader 
     of the House of Representatives.


                    amendment no. 3723, as modified

 (Purpose: To establish the relationship between the bill and certain 
  other provisions of existing law, and to set forth the role of the 
           National Commission on Uniform State Legislation)

       On page 25, between lines 6 and 7, insert the following:
       (3) Effect on the Communications Act of 1934.--Nothing in 
     this section shall include an examination of any fees or 
     charges imposed by the Federal Communications Commission or 
     States related to--
       (A) obligations under the Communications Act of 1934 (47 
     U.S.C. 151 et seq.); or
       (B) the implementation of the Telecommunications Act of 
     1996 (or of amendments made by that Act).
       (h) National Tax Association Communications and Electronic 
     Commerce Tax Project.--The Commission shall, to the extent 
     possible, ensure that its work does not undermine the efforts 
     of the National Tax Association Communications and Electronic 
     Commerce Tax Project.


                           amendment no. 3717

     (Purpose: To add a severability provision for the entire bill)

       At the end of the bill, add the following:

     SEC.  . SEVERABILITY.

       If any provision of this Act, or any amendment made by this 
     Act, or the application of that provision to any person or 
     circumstance, is held by a court of competent jurisdiction to 
     violate any provision of the Constitution of the United 
     States, then the other provisions of that section, and the 
     application of that provision to other persons and 
     circumstances, shall not be affected.


                           amendment no. 3713

    (Purpose: To correct a reference to ``interstate'', rather than 
                        ``electronic'' commerce)

       On page 22, line 25, strike ``interstate'' and insert 
     ``electronic''.


                           amendment no. 3710

     (Purpose: To correct a reference to ``consumers'' to refer to 
                               ``users'')

       On page 28, line 6, strike ``consumers.'' and insert 
     ``users.''.


                           amendment no. 3712

               (Purpose: To define the term ``Internet'')

       On page 27, strike lines 14 through 23, and insert the 
     following:
       (4) Internet.--The term ``Internet'' means collectively the 
     myriad of computer and telecommunications facilities, 
     including equipment and operating software, which comprise 
     the interconnected world-wide network of networks that employ 
     the Transmission Control Protocol/Internet Protocol, or any 
     predecessor or successor protocols to such protocol, to 
     communicate information of all kinds by wire or radio.


                           amendment no. 3735

  (Purpose: To make it clear that the delayed effective date for the 
   Children's Online Privacy Act is keyed to the filing date of the 
                              application)

       In section 208(2) of title II of the bill, as added by 
     amendment, insert ``filed'' after ``application'' the first 
     place it appears.
  Mr. BRYAN. Mr. President, this bill was reported out of Committee 
last week by voice vote. Because of time constraints at the end of the 
session, we have been unable to file a committee report before offering 
it as an amendment on the Senate floor. Accordingly, I wish to take 
this opportunity to explain the purpose and some of the important 
features of the amendment.
  In a matter of only a few months since Chairman McCain and I 
introduced this bill last summer, we have been able to achieve a 
remarkable consensus. This is due in large part to the recognition by a 
wide range of constituencies that the issue is an important one that 
requires prompt attention by Congress. It is due to revisions to our 
original bill that were worked out carefully with the participation of 
the marketing and online industries, the Federal Trade Commission, 
privacy groups, and first amendment organizations.
  The goals of this legislation are: (1) to enhance parental 
involvement in a child's online activities in order to protect the 
privacy of children in the online environment; (2) to enhance parental 
involvement to help protect the safety of children in online fora such 
as chatrooms, home pages, and pen-pal services in which children may 
make public postings of identifying information; (3) to maintain the 
security of personally identifiable information of children collected 
online; and (4) to protect children's privacy by limiting the 
collection of personal information from children without parental 
consent. The legislation accomplishes these goals in a manner that 
preserves the interactivity of children's experience on the Internet 
and preserves children's access to information in this rich and 
valuable medium.
  I ask unanimous consent that a section-by-section summary be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                       Section-by-Section Summary

     Section 1. Short title
       This Act may be cited as the ``Children's Online Privacy 
     Protection Act of 1998.''
     Section 202. Definitions
       (1) Child: The amendment applies to information collected 
     from children under the age of 13.
       (2) Operator: The amendment applies to ``operators.'' This 
     term is defined as the person or entity who both operates an 
     Internet website or online service and collects information 
     on that site either directly or through a subcontractor. This 
     definition is intended to hold responsible the entity that 
     collects the information, as well as the entity on whose 
     behalf the information is collected. This definition, 
     however, would not apply to an online service to the extent 
     that it does not collect or use the information.
       The amendment exempts nonprofit entities that would not be 
     subject to the FTC Act. The exception for a non-profit entity 
     set forth in Section 202(2)(B) applies only to a true not-
     for-profit and would not apply to an entity that operates for 
     its own profit or that operates in substantial part to 
     provide profits to or enhance the profitability of its 
     members.
       (7) Parent: The term ``parent'' includes ``legal 
     guardian.''
       (8) Personal Information: This is an online children's 
     privacy bill, and its reach is limited to information 
     collected online from a child.
       The amendment applies to individually identifying 
     information collected online from a child. The definition 
     covers the online collection of a first and last name, 
     address including both street and city/town (unless the 
     street address alone is provided in a forum, such as a city-
     specific site, from which the city or town is obvious), e-
     mail address or other online contact information, phone 
     number, Social Security number, and other information that 
     the website collects online from a child and combines with 
     one of these identifiers that the website has also collected 
     online. Thus, for example, the information ``Andy from Las 
     Vegas'' would not fall within the amendment's definition of 
     personal information. In addition, the amendment authorizes 
     the FTC to determine through rulemaking whether this 
     definition should include any other identifier that permits 
     the physical or online contacting of a specific individual.
       It is my understanding that ``contact'' of an individual 
     online is not limited to e-mail, but also includes any other 
     attempts to communicate directly with a specific, 
     identifiable individual. Anonymous, aggregate information--
     information that cannot be linked by the operator to a 
     specific individual--is not covered by this definition.
       (9) Verifiable Parental Consent: The amendment establishes 
     a general rule that ``verifiable parental consent'' is 
     required before a web site or online service may collect 
     information online from children, or use or disclose 
     information that it has collected online from children. The 
     amendment makes clear that parental consent need not be 
     obtained for each instance of information collection, but 
     may, with proper notice, be obtained by the operator for 
     future information collection, use and disclosure. Where 
     parental consent is required under the amendment, it means 
     any reasonable effort, taking into consideration available 
     technology, to provide the parent of a child with notice of 
     the website's information practices and to ensure that the 
     parent authorizes collection, use and disclosure, as 
     applicable, of the personal information collected from that 
     child.
       The FTC will specify through rulemaking what is required 
     for the notice and consent to be considered adequate in light 
     of available technology. The term should be interpreted 
     flexibly, encompassing ``reasonable effort'' and ``taking 
     into consideration available technology.'' Obtaining written 
     parental consent is only one type of reasonable effort 
     authorized by this legislation. ``Available technology'' can 
     encompass other online and electronic methods of obtaining 
     parental consent. Reasonable efforts other than obtaining 
     written parental consent can satisfy the standard. For 
     example, digital signatures hold significant promise for 
     securing consent in the future, as does the World Wide Web 
     Consortium's Platform for Privacy Preferences. In 
     addition, I understand that the FTC will consider how 
     schools, libraries and other public institutions that 
     provide Internet access to children may accomplish the 
     goals of this Act.
       As the term ``reasonable efforts'' indicates, this is not a 
     strict liability standard and looks to the reasonableness of 
     the efforts made by the operator to contact the parent.
       (10) Website Directed to Children: This definition 
     encompasses a site, or that portion of a site or service, 
     which is targeted to children under age 13. The subject 
     matter, visual content, age of models, language or other 
     characteristics of the site or service, as well

[[Page S11658]]

     as off-line advertising promoting the website, are all 
     relevant to this determination. For example, an online 
     general interest bookstore or compact disc store will not be 
     considered to be directed to children, even though children 
     visit the site. However, if the operator knows that a 
     particular visitor from whom it is collecting information is 
     a child, then it must comply with the provisions of this 
     amendment. In addition, if that site has a special area for 
     children, then that portion of the site will be considered to 
     be directed to children.
       The amendment provides that sites or services that are not 
     otherwise directed to children should not be considered 
     directed to children solely because they refer or link users 
     to different sites that are directed to children. Thus a site 
     that is directed to a general audience, but that includes 
     hyperlinks to different sites that are directed to children, 
     would not be included in this definition but the child 
     oriented linked sites would be. By contrast, a site that is a 
     child-oriented director would be considered directed to 
     children under this standard. However, it would be 
     responsible for its own information practices, not those of 
     the sites or services to which it offers hyperlinks or 
     references.
       (12) Online Contact Information: This term means an e-mail 
     address and other substantially similar identifiers enabling 
     direct online contact with a person.
     Section 203. Regulation of unfair and deceptive acts and 
         practices
       This subsection directs the FTC to promulgate regulations 
     within one year of the date of enactment prohibiting website 
     or online service operators or any person acting on their 
     behalf from violating the prohibitions of subsection (b). The 
     regulations shall apply to any operator of a website or 
     online service that collects personal information from 
     children and is directed to children, or to any operator 
     where that operator has actual knowledge that it is 
     collecting personal information from a child.
       The regulations shall require that these operators adhere 
     to the statutory requirements set forth in Section 203(b)(1):
       1. Notice--Operators must provide notice on their sites of 
     what personal information they are collecting online from 
     children, how they are using that information, and their 
     disclosure practices with regard to that information. Such 
     notice should be clear, prominent and understandable. 
     However, providing notice on the site alone is not sufficient 
     to comply with the other provisions of Section 202 that 
     require the operator to make reasonable efforts to provide 
     notice in obtaining verifiable parental consent, or the 
     provisions of Section 203 that require reasonable efforts to 
     give parents notice and an opportunity to refuse further use 
     or maintenance of the personal information collected from 
     their child. These provisions require that the operator make 
     reasonable efforts to ensure that a parent receives notice, 
     taking into consideration available technology.
       2. Prior Parental Consent--As a general rule, operators 
     must obtain verifiable parental consent for the collection, 
     use or disclosure of personal information collected online 
     from a child.
       3. Disclosure and Opt Out for a Parent Who Has Provided 
     Consent: Subsection 203(b)(1)(B) creates a mechanism for a 
     parent, upon supplying proper identification, to obtain: (1) 
     disclosure of the specific types of personal information 
     collected from the child by the operator; and (2) disclosure 
     through a ``means that is reasonable under the 
     circumstances'' of the actual personal information the 
     operator has collected from that child. It would be 
     inappropriate for operators to be liable under another source 
     of law for disclosures made in a good faith effort to fulfill 
     the disclosure obligation under this subsection. Accordingly, 
     subsection 203(a)(2) provides that operators are immune from 
     liability under either federal or state law for any 
     disclosure made in good faith and following procedures that 
     are reasonable. If the FTC has not issued regulations, I 
     expect that such procedures would be judged by a court based 
     upon their reasonableness.
       Subsection 203(b)(1)(B) also gives that parent the ability 
     to opt out of the operator's further use or maintenance in 
     retrievable form, or future online collection of information 
     from that child. The opt out of future collection operates as 
     a revocation of consent that the parent has previously given. 
     It does not prohibit the child from seeking to provide 
     information to the operator in the future, nor the operator 
     from responding to such a request by seeking (and obtaining) 
     parental consent. In addition, the opt out requirement 
     relates only to the online site or sites for which the 
     information was collected and maintained, and does not apply 
     to different sites which the operator separately maintains.
       Subsection 203(b)(3) provides that if a parent opts out of 
     use or maintenance in retrievable form, or future online 
     collection of personal information, the operator of the site 
     or service in question may terminate the service provided to 
     that child.
       4. Curbing Inducements to Disclose Personal Information: 
     Subsection 203(b)(1)(C) prohibits operators from inducing a 
     child to disclose more personal information than reasonably 
     necessary in order to participate in a game, win a prize, or 
     engage in another activity.
       5. Security Procedures: Subsection 203(b)(1)(D) requires 
     that an operator establish and maintain reasonable procedures 
     to protect the confidentiality, security, and integrity of 
     personal information collected online from children by that 
     operator.
       Exceptions to Parental Consent: Subsection 203(b)(2) is 
     intended to ensure that children can obtain information they 
     specifically request on the Internet but only if the operator 
     follows certain specified steps to protect the child's 
     privacy. This subsection permits an operator to collect 
     online contact information from a child without prior 
     parental consent in the following circumstances: (A) 
     collecting a child's online contact information to respond on 
     a one-time basis to a specific request of the child; (B) 
     collecting a parent's or child's name and online contact 
     information to seek parental consent or to provide parental 
     notice; (C) collecting online contact information to respond 
     directly more than once to a specific request of the child 
     (e.g., subscription to an online magazine), when such 
     information is not used to contact the child beyond the scope 
     of that request; (D) the name and online contact information 
     of the child to the extent reasonably necessary to protect 
     the safety of a child participant in the site; and (E) 
     collection, use, or dissemination of such information as 
     necessary to protect the security or integrity of the site or 
     service, to take precautions against liability, to respond to 
     judicial process, or, to the extent permitted under other 
     provisions of law, to provide information to law enforcement 
     agencies or for an investigation related to public safety.
       For each of these exceptions the amendment provides 
     additional protections to ensure the privacy of the child. 
     For a one-time contact, the online contact information 
     collected may be used only to respond to the child and then 
     must not be maintained in retrievable form. In cases where 
     the site has collected the parents' online contact 
     information in order to obtain parental consent, it must not 
     maintain that information in retrievable form if the parent 
     does not respond in a reasonable period of time. Finally, if 
     the child's online contact information will be used, at the 
     child's request, to contact the child more than once, the 
     site must use reasonable means to notify parents and give 
     them the opportunity to opt out.
       In addition, subsection (C)(ii) also allows the FTC the 
     flexibility to permit the site to recontact the child without 
     notice to the parents, but only after the FTC takes into 
     consideration the benefits to the child of access to online 
     information and services and the risks to the security and 
     privacy of the child associated with such access.
       Paragraph (D) clarifies that websites and online services 
     offering interactive services directed to children, such as 
     monitored chatrooms and bulletin boards, that require 
     registration but do not allow the child to post personally 
     identifiable information, may request and retain the names 
     and online contact information of children participating 
     in such activities to the extent necessary to protect the 
     safety of the child. However, the company may not use such 
     information except in circumstances where the company 
     believes that the safety of a child participating on that 
     site is threatened, and the company must provide direct 
     parental notification with the opportunity for the parent 
     to opt out of retention of the information. For example, 
     there have been instances in which children have 
     threatened suicide or discussed family abuse in such fora. 
     Under these circumstances, an operator may use the name 
     and online contact information of the child in order to be 
     able to get help for the child.
       Throughout this section, the amendment uses the term ``not 
     maintained in retrievable form.'' It is my intent in using 
     this language that information that is ``not maintained in 
     retrievable form'' be deleted from the operator's database. 
     This language simply recognizes the technical reality that 
     some information that is ``deleted'' from a database may 
     linger there in non-retrievable form.
       Enforcement.--Subsection 203(c) provides that violations of 
     the FTC's regulations issued under this amendment shall be 
     treated as unfair or deceptive trade practices under the FTC 
     Act. As discussed below, State Attorneys General may enforce 
     violations of the FTC's rules. Under subsection 203(d), state 
     and local governments may not, however, impose liability for 
     activities or actions covered by the amendment if such 
     requirements would be inconsistent with the requirements 
     under this amendment or Commission regulations implementing 
     this amendment.
     Section 204. Safe harbors
       This section requires the FTC to provide incentives for 
     industry self-regulation to implement the requirements of 
     Section 203(b). Among these incentives is a safe harbor 
     through which operators may satisfy the requirements of 
     Section 203 by complying with self-regulatory guidelines that 
     are approved by the Commission under this section.
       This section requires the Commission to make a 
     determination as to whether self-regulatory guidelines 
     submitted to it for approval meet the requirements of 
     Commission regulations issued under Section 203. The 
     Commission will issue, through rulemaking, regulations 
     setting forth procedures for the submission of self-
     regulatory guidelines for Commission approval. The 
     regulations will require that such guidelines provide the 
     privacy protections set forth in Section 203. The Commission 
     will assess all elements of proposed self-regulatory 
     guidelines, including

[[Page S11659]]

     enforcement mechanisms, in light of the circumstances 
     attendant to the industry or sector that the guidelines are 
     intended to govern.
       The amendment provides that, once guidelines are approved 
     by the Commission, compliance with such guidelines shall be 
     deemed compliance with Section 203 and the regulations issued 
     thereunder.
       The amendment requires the Commission to act upon requests 
     for approval of guidelines for safe harbor treatment within 
     180 days of the filing of such requests, including a period 
     for public notice and comment, and to set forth its 
     conclusions in writing. If the Commission denies a request 
     for safe harbor treatment or fails to act on a request within 
     180 days, the amendment provides that the party that sought 
     Commission approval may appeal to a United States district 
     court as provided for in the Administrative Procedure Act, 5 
     U.S.C. Sec. 706.
     Section 205. Actions by States
       State Attorneys General may file suit on behalf of the 
     citizens of their state in any U.S. district court of 
     jurisdiction with regard to a practice that violates the 
     FTC's regulations regarding online children's privacy 
     practices. Relief may include enjoining the practice, 
     enforcing compliance, obtaining compensation on behalf of 
     residents of the state, and other relief that the court 
     considers appropriate.
       Before filing such an action, an attorney general must 
     provide the FTC with written notice of the action and a copy 
     of the complaint. However, if the attorney general determines 
     that prior notice is not feasible, it shall provide notice 
     and a copy of the complaint simultaneous to filing the 
     action. In these actions, state attorneys general may 
     exercise their power under state law to conduct 
     investigations, take evidence, and compel the production of 
     evidence or the appearance of witnesses.
       After receiving notice, the FTC may intervene in the 
     action, in which case it has the right to be heard and to 
     file an appeal. Industry associations whose guidelines are 
     relied upon as a defense by any defendant to the action may 
     file as amicus curiae in proceedings under this section.
       If the FTC has filed a pending action for violation of a 
     regulation prescribed under Section 3, no state attorney 
     general may file an action.
     Section 206. Administration and applicability
       FTC Enforcement: Except as otherwise provided in the 
     amendment, the FTC shall conduct enforcement proceedings. The 
     FTC shall have the same jurisdiction and enforcement 
     authority with respect to its rules under this amendment as 
     in the case of a violation of the Federal Trade Commission 
     Act, and the amendment shall not be construed to limit the 
     authority of the Commission under any other provisions of 
     law.
       Enforcement by Other Agencies: In the case of certain 
     categories of banks, enforcement shall be carried out by the 
     Office of the Controller of the Currency; the Federal 
     Reserve Board, the Board of Directors of the Federal 
     Deposit Insurance Corporation, the National Credit Union 
     Administration Board, and the Farm Credit Administration. 
     The Secretary of Transportation shall have enforcement 
     authority with regard to any domestic or foreign air 
     carrier, and the Secretary of Agriculture where certain 
     aspects of the Packers and Stockyards Act apply.
     Section 207. Review
       Within 5 years of the effective date for this amendment, 
     the Commission shall conduct a review of the implementation 
     of this amendment, and shall report to Congress.
     Section 208. Effective date
       The enforcement provisions of this amendment shall take 
     effect 18 months after the date of enactment, or the date on 
     which the FTC rules on the first safe harbor application 
     under section 204 if the FTC does not rule on the first such 
     application filed within one year after the date of 
     enactment, whichever is later. However, in no case shall the 
     effective date be later than 30 months after the date of 
     enactment of this Act.


       list of supporters of children's internet privacy language

       The Federal Trade Commission.
       The Direct Marketing Association (representing 3,500 
     domestic members).
       GeoCities.
       Time Warner.
       Commercial Internet eXchange Association.
       Disney.
       AOL.
       Highlights for Children.
       American Academy of Pediatrics.
       American Advertising Federation.
       American Association of Advertising Agencies.
       Center for Democracy & Technology.
       Center for Media Education.
       Viacom.


                    amendment no. 3721, as modified

 (Purpose: To make minor changes in the commission established by the 
                                 bill)

       On page 17, beginning with line 18, strike through line 21 
     on page 19 and insert the following:
       (a) Establishment of Commission.--There is established a 
     commission to be known as the Advisory Commission on 
     Electronic Commerce (in this title referred to as the 
     ``Commission''). The Commission shall--
       (1) be composed of 19 members appointed in accordance with 
     subsection (b), including the chairperson who shall be 
     selected by the members of the Commission from among 
     themselves; and
       (2) conduct its business in accordance with the provisions 
     of this title.
       (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) 3 representatives from the Federal Government, 
     comprised of the Secretary of Commerce, the Secretary of the 
     Treasury, and the United States Trade Representative (or 
     their respective delegates).
       (B) 8 representatives from State and local governments (one 
     such representative shall be from a State or local government 
     that does not impose a sales tax * * *) and one 
     representative shall be from a state that does not impose an 
     income tax.
       (C) 8 representatives of the electronic commerce industry, 
     telecommunications carriers, local retail businesses, and 
     consumer groups, comprised of--
       (i) 5 individuals appointed by the Majority Leader of the 
     Senate;
       (ii) 3 individuals appointed by the Minority Leader of the 
     Senate;
       (iii) 5 individuals appointed by the Speaker of the House 
     of Representatives; and
       (iv) 3 individuals appointed by the Minority Leader of the 
     House of Representatives.

                           Amendment No. 3722

 (Purpose: To direct the Commission to examine model State legislation)

  Mr. McCAIN. Mr. President, I ask unanimous consent that amendment 
numbered 3722 be the pending business.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arizona (Mr. McCain), for himself, Mr. 
     Gregg, and Mr. Lieberman, proposes an amendment numbered 
     3722.

  Mr. McCAIN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 23, beginning with line 14, strike through line 2 
     on page 25 and insert the following:
       ``(D) an examination of model State legislation that--
       ``(i) would provide uniform definitions of categories of 
     property, goods, service, or information subject to or exempt 
     from sales and use taxes; and
       ``(ii) would ensure that Internet access services, online 
     services, and communications and transactions using the 
     Internet, Internet access service, or online services would 
     be treated in a tax and technologically neutral manner 
     relative to other forms of remote sales; and''.

  Mr. McCAIN. Mr. President, this amendment is simple. It is offered by 
myself for Senators Gregg and Lieberman. The amendment instructs the 
commission created in this bill to examine model state legislation and 
provide definitions of what should be subject to or exempt from 
taxation. Additionally, the Commission would be instructed to look 
specifically at Internet transactions.
  Some would like to see the scope of the commission expanded. This is 
not necessary. The Commission may look at any form of remote sales, but 
it is not forced to.
  This bill is about the Internet, and its potential as a new 
technology--but more importantly, as a medium for electronic commerce. 
The Internet is not like the mail. It is not a monopoly. It is unlike 
anything that we have seen to date. For that reason we believe that it 
should be protected from discriminatory taxation.
  Mr. President, there will be some who seek to defeat this amendment 
or will offer second degree amendments to it regarding remote sales, 
specifically mail order sales. We dealt with that subject specifically 
the other day. My good friend from Arkansas offered an amendment to 
overturn the Quill decision regarding mail order sales. Senator Graham 
of Florida spoke in favor of the amendment. And then the Senate voted 
on the matter. The amendment was defeated handily: 65-30. We don't need 
to revisit this issue again. If we do, I would hope the vote to table 
would be the same.
  We should let this commission do its work. We should not prejudge 
what they will decide or attempt to force them to examine certain 
subjects or come to certain conclusions. That would be wrong and would 
undermine the mission of the Commission. The bi-partisan amendment 
before the Senate gives the commission free reign to decide what it 
believes is best and report such findings to the Congress. I urge my 
colleagues to support the McCain/Gregg/Lieberman amendment and defeat 
any second degree amendments that may be offered.
  Mr. President, I yield the floor.
  Mr. HUTCHINSON addressed the Chair.

[[Page S11660]]

  The PRESIDING OFFICER. The Senator from Arkansas.


                Amendment No. 3760 to Amendment No. 3722

    (Purpose: Relating to the duties of the Advisory Commission on 
                          Electronic Commerce)

  Mr. HUTCHINSON. Mr. President, I call up second-degree amendment 
3760.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arkansas (Mr. Hutchinson), for himself, 
     Mr. Enzi, and Mr. Graham, proposes an amendment numbered 3760 
     to amendment No. 3722.

  Mr. HUTCHINSON. Mr. President, I ask unanimous consent that reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the McCain amendment, add the following:
       (F) an examination of the effects of taxation, including 
     the absence of taxation, on all interstate sales 
     transactions, including transactions using the Internet, on 
     local retail businesses and on State and local governments, 
     which examination may include a review of the efforts of 
     State and local governments to collect sales and use taxes 
     owed on in-State purchases from out-of-State sellers.

  Mr. HUTCHINSON. I ask unanimous consent that Senator Enzi be added as 
cosponsor to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HUTCHINSON. Mr. President, I ask unanimous consent that the 
amendment be modified by deleting the word ``local'' on line 6 of page 
1 of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The modification is accepted.
  Mr. HUTCHINSON. Mr. President, this amendment amends the McCain 
first-degree underlying amendment to allow the commission to establish 
by the Internet Tax Freedom Act a study of the effects of taxation on 
interstate sales, or the lack thereof on retail businesses and State 
and local governments.
  I can think of nothing more reasonable and nothing more common sense 
than saying that the commission that we are creating should conduct a 
study to look at and examine the implications upon retail businesses 
and the implications upon local and State governments that this 
moratorium and this bill would have.
  The Senate rejected an amendment last week which would have 
immediately authorized States to require out-of-State sellers to 
collect sales taxes and remit them to the State in which the purchase 
was made. My colleague from Arkansas, Senator Bumpers, offered that 
amendment. I think that many of my colleagues who joined me in voting 
against this amendment would agree that this issue warrants further 
study.
  Why not have the commission establish by this bill conduct a study 
and examine the issue that is so important to State and local 
governments and which is so important to local businesses that are 
trying to survive and who are remitting those sales taxes. This issue, 
which is so critical, ought to be, I believe, examined and studied. For 
the sake of small mom-and-pop businesses who find themselves in 
competition with Internet entities and other out-of-State sellers who 
do not have to collect State sales taxes from out-of-State buyers, we 
should allow the commission to study the impact that the lack of 
taxation on these transactions has on small businesses.
  For the sake of out-of-State sellers who do collect and remit sales 
taxes while their competitors do not, let's allow the commission to 
study this issue. This is, in fact, a commission study.
  It should be noted that Congress and Congress alone can either accept 
or eject the recommendations that the commission might make. The 
Supreme Court decided in the case of Quill v. North Dakota that States 
cannot require out-of-State sellers to collect and remit sales taxes on 
goods purchased for use in a particular State, unless Congress 
authorizes them to do so.
  My amendment does not overturn Quill. I want to emphasize that. This 
amendment does not overturn the Quill decision. It simply allows the 
commission to study the implications, to study the ramifications of 
Quill on small businesses and State and local governments.
  Electronic commerce is estimated to reach $8 billion in 1998. And by 
the year 2002, electronic commerce is expected to reach $300 billion.
  Let me say that the Internet is an incredible tool both for education 
purposes and business promotion. My amendment in no way is intended to 
thwart the growth of the Internet. Again, it merely says that in light 
of the incredible growth in electronic commerce that we have witnessed 
over the last 5 years and that we anticipate in the next 5 years that 
this commission that we are about to create should have the right to 
examine its impact on businesses serving local markets.
  We will have an argument that my good friend from Arizona has 
argued--that this Internet Tax Freedom Act should focus solely on the 
Internet. But I argue that the Internet is a form of interstate 
commerce just like mail order, just like catalog sales. And when we 
talk about the impact of such interstate sales on local businesses, 
there is no distinction between the three. We should not address this 
issue in a vacuum.
  So the commission that is created ought to have the right to examine 
all of the implications of what we are doing and its impact upon that 
small businessman, that small businesswoman, that city, that county, 
that State government, and the effect upon their revenue stream.
  So the amendment I propose is a compromise. It is, I believe, one 
that is worthy of support.
  I ask my colleagues to support this second-degree amendment.
  Mr. WYDEN. Mr. President, first, let me say that I strongly support 
the Gregg amendment. Let me say to the Senator from Arkansas, I think 
his amendment is in the wrong place. I think it is supposed to go at 
page 25. But if we could work with him, we want to make sure that there 
is fair consideration of his amendment.
  Mr. President, let me also say that the whole point of the Internet 
Tax Freedom Act is to focus on electronic commerce. We have had, since 
the beginning of this discussion, efforts to bring into this debate a 
variety of other kinds of subjects, but it seems to me at a time when 
we have 30,000 taxing jurisdictions, many of which have varied and 
sundry ideas with respect to electronic commerce and the Internet, what 
we ought to do is stick to the subject at hand, and that is calling a 
brief time-out to look at these issues, a time-out in which the 
Internet would be treated like everything else, by the way.
  At various points in this debate we have heard about how we are 
establishing a tax haven for the Internet. That is simply wrong. During 
the moratorium, sales on the Internet would get treated just like other 
sales. It is very important now, with the extraordinary growth of the 
Internet, as our colleagues have noted, that we do this job right, 
which requires that we go forward with language such as that offered by 
the Senator from New Hampshire to ensure that we focus on electronic 
commerce.
  By doing that, we also increase the prospects for making sure that at 
the end of our work we have a policy that guarantees technological 
neutrality. We don't have that today in America. We have parts of the 
country, for example, where you get the newspaper through traditional 
mail, and you pay no tax on it. But if you read that very same 
newspaper on line, you pay a tax. That is not technologically neutral. 
That is what our legislation is all about. The Internet should not get 
a preference, nor should the Internet be discriminated against. It 
seems to me that by adopting the Gregg amendment we will ensure that 
the focus is on electronic commerce, No. 1; No. 2, we will have a 
chance to look at the very complicated and technical questions dealing 
with what is close to 30,000 taxing jurisdictions, and I urge my 
colleagues to support the original Gregg amendment.
  I yield the floor.
  Mr. GREGG addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. GREGG. Mr. President, I rise in opposition to the amendment 
offered by the Senator from Arkansas as a second degree to the 
amendment offered by myself, Senator McCain, and Senator Lieberman, 
which is the underlying amendment here. I think the Senator from 
Oregon, who has certainly

[[Page S11661]]

been a core player in bringing this matter to the Senate, outlined the 
issue rather well by pointing out that the purpose of this moratorium 
and the commission that is created under the moratorium should be to 
review the electronic commerce under the Internet and to pursue a path 
which will make that commerce more efficient.
  This bill, this attempt to protect the Internet from arbitrary 
taxation across the country with the 30,000 potential municipalities 
that could assess against the Internet and thus create chaos in what is 
truly one of the great engines of prosperity and economic 
entrepreneurship which has occurred within this century, and may be the 
economic engine for the next century--this bill, which is an attempt to 
put a hold on that sort of tax policy which might undermine, 
fundamentally harm, the expansion of the Internet during this formative 
period is a good bill, but it should not be used to bootstrap other 
issues onto the question.
  What is being attempted here is a backdoor bootstrapping of the whole 
issue of tax policy as it relates to the question of sales at distant 
points, whether it happens to be under the Internet, cable, catalogs or 
by telephone. And another study in this area, which is the proposal 
that is put forward by the Senator from Arkansas, is simply an attempt 
to broaden the scope of the underlying effort, which is to protect and 
address the issues that evolve around the Internet. It is totally 
inappropriate. There is no reason we should go down that road.
  There have been enumerable studies of this issue already. In fact, I 
have two right here, one done by the League of Cities and the other 
done by the Center for Budget and Policy Priorities. I also understand 
there has been one done by the Governors' Association, I believe. The 
fact is, the issues which are being raised by the Senator from Arkansas 
have been studied and studied extensively. Putting another study into 
this bill is not going to in any way change the tenor of the debate. It 
is simply going to attempt to expand the debate into a whole separate 
arena, which is inappropriate to this moratorium.
  The bottom line of this moratorium--and I will come to that after we 
have disposed of the amendment of the Senator from Arkansas, but the 
bottom line issue here is whether or not by voting to expand the 
moratorium and to get into areas such as the Senator from Arkansas has 
proposed we wish to dramatically expand the taxing authority of States 
and local jurisdictions and basically use this bill to become a huge 
vehicle for expansion in tax policy and expansion of taxes.
  I do not think that most Members of this body want to do that, and we 
already voted on this issue once with the Bumpers amendment. The vote 
was overwhelming. This body said no, it did not want to use this 
vehicle for the purposes of creating an explosion in new taxes. And yet 
there is another attempt being made now to do that, this time through a 
study. We will hear another attempt, I suspect, from the Senator from 
Florida who will do that with his amendment to this bill and this 
underlying amendment.
  So I guess what it comes down to is that this body has to make a 
policy decision: Does it want to use the Internet bill and the 
protection of the Internet, which has been proposed through the 
moratorium, which has been energized in large part by the Senator from 
Oregon, and obviously the Senator from Arizona, and which I have 
strongly supported, does it want to use that effort to try to protect 
the Internet to also be an effort to grossly expand the tax laws of 
this country and the tax policy of this country and the tax activity of 
municipalities and States, or do we want to stay focused on the subject 
at hand, which is how to make the Internet an efficient and effective 
place to do business, how to keep it as a dynamic engine for 
entrepreneurship and prosperity that it has become through a moratorium 
on taxes which might be assessed at the local community level?
  Although this amendment is couched in the terms of a study, it really 
gets back to that core issue of whether or not we want to have a 
moratorium which addresses the Internet or whether we want to use this 
moratorium as a bootstrapping event for purposes of dramatically 
increasing taxes and the tax collection capacity of local communities 
and States across the country.
  I oppose this study. I think it is misdirected to be attached to this 
bill, and I would say that if you really are interested in such a 
study, here is one you can read. Here is another one you can read. And 
the Governors' Association has one you can read. You don't have to pay 
for a new one.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Florida.
  Mr. GRAHAM. Mr. President, parliamentary inquiry. Is there a time 
limit on this amendment?
  The PRESIDING OFFICER. No time limit has been agreed to.
  Mr. GRAHAM. Mr. President, first let us come back to what we are 
fundamentally about. What the Internet Tax Freedom Act says is that 
there shall be a moratorium, a pause, in the State and local 
governments' exercise of their otherwise legal authority to impose a 
tax on access to or transactions consummated over the Internet.
  That is an unusual action. For the Congress of the United States to 
preempt State and local governments from their otherwise lawful 
responsibilities to establish what they feel to be appropriate policy 
for their citizens is an unusual act for the Congress and one which we 
should only take after careful consideration.
  Why should we exercise such care? Because the consequences of this 
action, of establishing a moratorium on the taxation of one form of 
commerce as opposed to all forms of commerce, is to create or to 
continue a competitive disparity. In this case, it is the comparative 
disparity between the Main Street retailer, the person who is selling 
hardware on Main Street and is legally responsible for collecting a 
sales tax from those who purchase hammers and saws, and those who buy 
the same hammers and saws over the Internet where they are not subject 
to the requirement to pay, and the seller to collect, that same sales 
tax. That is a level of obvious inequity that we would, only under 
exception circumstances, impose.
  Second, at a time when we are underscoring our commitment to 
fundamental activities such as law enforcement and education, we are 
about to drive a major hole in the ability to do so of those levels of 
government which have the primary responsibility for law enforcement 
and education, which are our colleagues at the State and local level. I 
will be giving some current examples, as recently as today's newspaper, 
of the potential that we are about to open up.
  So it would only take an extremely persuasive argument to convince 
the Congress of the United States that it ought to inflict that 
inequality in the marketplace and the threat to the ability to deliver 
fundamental police, fire, and educational services at the local level 
as this legislation does.
  What is that rationale? The rationale: This is a new, rapidly 
evolving technology and we need to have this pause so we can assure 
that whatever tax policies are developed are developed with uniformity, 
with nondiscrimination, with predictability, so as not to interfere 
with the natural growth and evolution of this very important part of 
our commerce at the end of the 20th century that no doubt will play 
even a larger role as we go into the 21st. That is the argument for the 
discrimination and threat to State and local governments for which we 
are about to be asked to vote.
  I will personally support the basic proposition of a pause. But I 
will only do so if that pause is for a reasonable period of time, that 
period of time that we would consider necessary to carry out this 
review and recommendation as to uniform, nondiscriminatory, predictable 
tax policy, and, second, that we have a commission, which is going to 
be making this study, which will represent all of the diversity of 
interests on this matter and will have a charter broad enough to look 
at all the questions that are relevant to establishing proper policy 
for the Internet.
  The argument here is a direct clash between what the Senate Finance 
Committee found and what the authors of this amendment support. The 
language which I support is the language which is in the bill that was 
reported by the Senate Finance Committee with 19 favorable votes.

[[Page S11662]]

  If you will look in the bill that appears on our desk, starting on 
page 22, which is the beginning of the issues to be studied, as stated 
by the Senate Finance Committee, on page 23, under paragraph (d), the 
Finance Committee, under the leadership of Senator Roth, who advocated 
this language, states that:

       . . . there will be an examination of the efforts of State 
     and local governments to collect sales and use taxes owed on 
     purchases from interstate sellers, the advantages and 
     disadvantages of authorizing State and local governments to 
     require such sellers to collect and remit such taxes, 
     particularly with respect to electronic commerce, and the 
     level of contact sufficient to permit a State or local 
     government to impose such taxes on such interstate commerce.

  That is the essence of the language that the McCain-Gregg-Lieberman 
amendment is going to strike.
  Mr. President, I ask my fellow colleagues, is that unreasonable for a 
commission we are going to set up to study the effects of Internet 
taxation on State and local governments and on fairness in the 
marketplace? Is that language unfair? I do not believe it is. The 
McCain amendment would strike that language.
  Senator Hutchinson of Arkansas, who has worked very diligently on 
this issue--and I commend him for his leadership on this matter and his 
deep understanding of the implications of this issue--has offered a 
second-degree amendment to the McCain amendment which essentially 
inserts the same concept of Senator Roth's language that was in the 
Finance Committee. His amendment would provide for ``an examination of 
the effects of taxation, including the absence of taxation on all 
interstate sales transactions, including transactions using the 
Internet, on local retail businesses and on State and local 
governments, which examination may include a review of the efforts of 
State and local governments to collect sales and use taxes owed on in-
State purchases from out-of-State sellers.''
  That is the amendment that Senator Hutchinson has offered which I 
think is as eminently reasonable as the language which was offered by 
Senator Roth in the Finance Committee. So I strongly support Senator 
Hutchinson's very thoughtful and significant amendment and would go on 
to say that current events are underscoring the urgency of this look at 
all forms of remote sales.
  One of the purposes of the underlying bill is to eliminate 
discrimination. That raises the question, Discrimination in 
relationship to what? If we end up with a bill that says that the 
commission cannot even look at the taxation and the effect of that 
taxation on fairness in the marketplace and on the ability of State and 
local governments to support their police and fire and schools, we are 
already guaranteeing that the commission will give us a report that, in 
order to be nondiscriminatory, the Internet should not be subject to 
taxation. That would make it the same as catalog sales. That would be a 
result with very serious long-term implications.
  If, on the other hand, we are able to adopt the language that either 
was in the underlying bill or the language that Senator Hutchinson has 
offered, then the commission is going to look at the taxation of all 
forms of remote sales and will be able to come back with a set of 
policy regulations that will in fact meet the test of uniformity, 
nondiscrimination, and predictability, which is the whole purpose of 
this exercise.
  I said the issue is one that is as topical as today's paper. I refer 
you to the Washington Post of October 7, on page C-10, which carries a 
story, ``Publisher, Bookseller Join Forces.''
  I will not read the whole article but let me just give you a flavor 
of what it says:

       Taking direct aim at Amazon.com, publishing conglomerate 
     Bertelsmann AG said [yesterday] it will spend $200 million to 
     buy half of the online book service of Barnes & Noble.

  So, what we have is a major bookseller which already has an on-line 
service, where they are selling through the Internet as well as through 
their Barnes & Noble megabookstores; now they have sold half of their 
on-line service to yet another publisher, the publisher who has well 
known book houses such as Random House, Doubleday, and Bantam 
Publishing. They now together own an on-line bookselling firm which is 
going to try to compete with Amazon.com.
  Why are they doing this? While still a tiny segment of the book 
retailing marketplace, on-line sales are exploding in popularity. I 
underscore ``exploding in popularity.''

       Seattle-based Amazon.com, founded three years ago, had 
     revenues of $204 million in the first six months of 1998.
  The implications of this to the independent bookstores in Helena, MT, 
or in Concord, NH, are obvious. In addition to the other benefits of 
convenience of the Internet, we are now going to have a situation 
where, if you buy a copy of your book at the Main Street independent 
bookstore, you are going to be paying the State and local sales tax, 
but if you buy it over the Internet, you will not be paying the sales 
tax, and, thus, we are institutionalizing a significant competitive 
disadvantage.
  Why we would want to adopt the policy that puts the Main Street 
seller at a disadvantage to cyberspace is beyond me. It also happens to 
be beyond a number of important organizations, whose letters I will ask 
unanimous consent be printed in the Record immediately after my 
remarks, beginning with the National Home Furnishings Association, 
which states:

       The home furnishing industry has struggled with the issue 
     of whether there is an obligation for remote sellers to 
     collect and remit sales/use taxes to the state in which the 
     purchaser resides on sales of furniture, long before the 
     first sale was made on the Internet.

  It goes on to say:

       In addition to the lost revenue to the state, the in-state 
     retailer is placed at a distinct disadvantage. There is, of 
     course, the differential in the customer's total cost 
     reflecting the sales/use tax. . . . Indeed, many times they 
     serve as the unwilling ``showroom'' and sales adviser for the 
     remote seller, as customers visit their store, discuss a 
     purchase with the sales staff, scribble down model numbers 
     and then call the remote seller.

  That is an example of the kind of institutionalization of competitive 
disadvantage we are about to enact.
  I also ask to have printed immediately after my remarks a letter from 
the Newspaper Association of America representing 1,700 newspaper 
members. This organization has supported the Internet Tax Freedom Act, 
but they state:

       . . . I am writing to express support for your efforts to 
     amend the Internet Tax Freedom Act to ensure that the 
     advisory commission examines the tax treatment of all remote 
     sales. . . . The major thrust behind the Internet Tax Freedom 
     Act is to ensure that the Internet is not subjected to 
     unfair, discriminatory and inconsistent taxes at the state 
     and local level. Proponents of the legislation--including 
     NAA--have argued that business transactions and services 
     should be treated similarly regardless of whether they are 
     offered through electronic means or through existing channels 
     of commerce. However, if the commission is not directed in 
     the legislation to examine all remote sales, a discriminatory 
     tax structure could be established that treats one form of 
     remote sales--the Internet--differently from other forms of 
     remote sales. Therefore, we believe a comprehensive approach 
     works best.

  Mr. President, I ask unanimous consent that the letter from the 
National Home Furnishings Association and the Newspaper Association of 
America be printed in the Record immediately after my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. GRAHAM. Mr. President, the second issue which is directly related 
to the first, the first being the discrimination against the local Main 
Street sale, is the impact on the ability of local governments and 
State governments to carry out their fundamental educational, health, 
and other responsibilities. I will be a Floridian for a moment and cite 
some of the statistics about the potential impact that an out-of-
control moratorium leading to permanent exemption from taxation of the 
Internet could have on a State such as mine.
  In 1996, the State of Florida collected a total of $11.4 billion in 
general sales tax revenue. This represented 77.3 percent of Florida's 
tax revenue generated from sales and excise taxes, excise taxes 
representing $3.8 billion of that total.
  Florida is not unique in having a high percentage of its tax revenue 
generated by sales and excise taxes. For instance, Nevada gets 84.3 
percent of its total revenue from these two

[[Page S11663]]

sources; Texas, 81 percent; South Dakota, 78.4 percent; Tennessee, 76.7 
percent; Washington, 74.3 percent; Mississippi, 67.3 percent; Hawaii, 
61.7 percent; Arizona, 57 percent; North Dakota, 56.8 percent; and New 
Mexico, 56.7 percent. They are examples of States which are heavily 
dependent on sales and excise taxes, the kind of taxes that are 
generated by Main Street activity.
  Currently, mail order nationwide has sales of $100 billion to $120 
billion a year. That is the catalog of remote selling. This results in 
an estimated $3.5 billion to $4 billion in lost sales tax. It is 
estimated, for instance, in the State of Florida that that would 
represent something in excess of $200 million a year in lost sales. 
That is, if the same sale had taken place at the local shopping mall 
that took place over the remote sales catalog process, it would have 
been an additional $200 million of sales tax collected.
  Internet sales are expected to grow by the year 2004, not to the $100 
billion to $120 billion of current catalog sales, but rather to $400 
billion to $500 billion. So Internet sales, by the year 2004, are 
expected to be four to five times what current catalog sales are. If 
$100 billion in sales loses $3.5 billion, then the $500 billion would 
represent a loss of $17.5 billion. For Florida, this means there could 
be an estimated loss of $875 million in sales tax per year as a result 
of this removing of the responsibility of the Internet seller to 
collect the taxes on those transactions.
  Florida's Department of Revenue states that the cost of exempted 
Internet taxation costs the State $60 million in sales tax revenue and 
$18 million for the gross receipts tax. This gross receipts tax is what 
is used to fund our school construction costs.
  Mr. President, the impact of this on State and local governments in 
their ability to put an adequate number of police on the streets and an 
adequate fire defense, and particularly an adequate number of schools 
and teachers and the other support personnel necessary for their 
educational system, will be extremely vulnerable if this legislation 
gets out of control.
  This is the amendment which I believe begins to break the dam of 
reasonability. It is reasonable to have a brief pause to look at all of 
the implications of Internet taxation. I support that brief pause. It 
is also reasonable to look at one that is conducted by people who 
represent all the interests that will be affected by these decisions 
and that those persons have a charter broad enough to give us wise, 
comprehensive policy.
  To adopt the McCain-Gregg-Lieberman amendment, which would 
essentially say we are going to put a blindfold over our eyes and we 
will not be able to look at those remote sales activities which are the 
most analogous to what the potential for Internet sales would be, is, 
in my opinion, to render this legislation ineffective in terms of its 
purpose and to strengthen the doubts that some of us have that its real 
purpose is, not to have a thoughtful examination, but rather to have 
this as the beginning of what will be a permanent bar to State and 
local governments' ability to manage their fiscal affairs and that the 
principal loser of this will be the shuttered stores along Main Street 
of the traditional seller, like the bookstore unable to compete when he 
or she has to collect the local sales tax but its competitor thousands 
of miles away does not, and will also be seen in the diminishment of 
vital public services, especially the education of our children.

  So, Mr. President, for those reasons, I strongly support the 
amendment offered by the Senator from Arkansas as eminently reasonable 
and consistent with the stated purpose of this legislation, and I urge 
its adoption.

                               Exhibit 1

                                                     National Home


                                      Furnishings Association,

                                                   Washington, DC.

NHFA Concerns With Proposed Manager's Amendment to S. 442, the Internet 
                            Tax Freedom Act

       The home furnishings industry has struggled with the issue 
     of whether there is an obligation for remote sellers to 
     collect and remit sales/use taxes to the state in which the 
     purchaser resides on sales of furniture, long before the 
     first sale was made on the Internet. Sales are frequently 
     made over the telephone or through the mails.
       In addition to the lost revenue to the state, the in-state 
     retailer is placed at a distinct disadvantage. There is, of 
     course, the differential in the customer's total cost 
     reflecting the sales/use tax. However, the in-state retailer 
     also makes a significant investment in the community. Indeed, 
     many times they serve as the unwilling ``showroom'' and sales 
     adviser for the remote seller, as customers visit their 
     store, discuss a purchase with the sales staff, scribble down 
     model numbers and then call a remote seller.
       NHFA has long sought a consistent, realistic definition of 
     what constitutes nexus for the purpose of determining the 
     sales/use tax obligation of a remote seller.
       S. 442 imposes a moratorium on so-called telecommunication 
     taxes, and establishes a commission to examine a variety of 
     issues. Both the Senate Finance and Commerce Committees' 
     versions of the bill, as does the House bill, include 
     language authorizing the commission to examine the issue of 
     the obligation of remote sellers to collect and remit a 
     variety of taxes includes sales and use taxes. For example, 
     the Senate Finance Committee bill states: ``an examination of 
     the efforts of State and local governments to collect sales 
     and use taxes owed on purchases from interstate sellers, the 
     advantages and disadvantages of authorizing State and local 
     governments to require such sellers to collect and remit such 
     taxes, particularly with respect to electronic commerce, and 
     the level of contracts sufficient to permit a State or local 
     government to impose such taxes on such interstate 
     commerce.''
       We have learned that a proposed manager's amendment would 
     severely limit the scope of the commission's mission and 
     strike the language allowing an examination of the broader 
     sales/use tax issue.
       If a moratorium on telecommunication taxes is enacted, even 
     though it does not technically apply to sales/use taxes on 
     the purchase of the goods themselves, the moratorium will 
     still have a chilling impact on the collection of those 
     taxes. We thought we could live with that moratorium, in the 
     belief we would gain more in the long run, if the commission 
     could resolve once and for all, the broader issue of 
     jurisdiction over remote sellers for all tax purposes 
     including sales and use taxes. It would seem to us, if the 
     manager's amendment strips the commission of the authority to 
     examine the nexus issue, we get the worst of both worlds.
                                  ____

                                             Newspaper Association


                                                   of America,

                                      Vienna, VA, October 6, 1998.
     Hon. Robert Graham,
     U.S. Senate,
     Washington, DC.
       Dear Senator Graham: On behalf of the more than 1,700 
     newspaper members of the Newspaper Association of America 
     (NAA), I am writing to express support for your efforts to 
     amend the Internet Tax Freedom Act to ensure that the 
     advisory commission examines the tax treatment of all remote 
     sales. As you are aware, we have supported and continue to 
     support enactment of the Internet Tax Freedom Act.
       The major thrust behind the Internet Tax Freedom Act is to 
     ensure that the Internet is not subjected to unfair, 
     discriminatory and inconsistent taxes at the state and local 
     level. Proponents of the legislation--including NAA--have 
     argued that business transactions and services should be 
     treated similarly regardless of whether they are offered 
     through electronic means or through existing channels of 
     commerce. However, if the commission is not directed in the 
     legislation to examine all remote sales, a discriminatory tax 
     structure could be established that treats one form of remote 
     sales--the Internet--differently from other forms of remote 
     sales. Therefore, we believe a comprehensive approach works 
     best.
       We believe the Internet Tax Freedom Act provides a unique 
     opportunity for a thoughtful and deliberative examination of 
     a uniform tax structure for goods and services. By including 
     all remote sales in the scope of the advisory commission's 
     work, the Congress is encouraging the development of tax 
     policies that present one set of rules that will be applied 
     to all businesses. A uniform approach not only promotes 
     fairness and consistency--it's sound public policy.
           Sincerely,
                                                    John F. Sturm,
                                                President and CEO.

  Mr. WYDEN addressed the Chair.
  The PRESIDING OFFICER (Mr. SANTORUM). The Senator from Oregon.
  Mr. WYDEN. Thank you, Mr. President.
  Mr. President, I urge adoption of the Gregg amendment and the 
rejection of the Hutchinson amendment. First, it is quite clear that 
this legislation is going to, in fact, study all of the questions 
related to the subject this bill deals with thoroughly. Let me just 
read into the Record exactly what it says with respect to what will be 
studied. It says:

       The Commission shall conduct a thorough study of Federal, 
     State and local, and international taxation and tariff 
     treatment of transactions using the Internet and Internet 
     access and other comparable interstate or international sales 
     activities.

  So it is right there at pages 21 and 22.
  Mr. HUTCHINSON. Will the Senator yield?
  Mr. WYDEN. In just 1 minute I will be happy to yield.

[[Page S11664]]

  It is quite clear, at page 21 and page 22, that there will be ``a 
thorough study'' of the issues and that the commission will look at 
``comparable interstate or international sales activities.''
  The question, Mr. President, and colleagues, is whether or not we are 
going to focus on yesterday's concerns, which are the mail-order or 
catalog issues--and they are important ones--or are we going to look at 
trying to come up with some sensible policies with respect to 
tomorrow's issues which essentially involve the ground rules for the 
digital economy.
  Somehow, those that want to look at mail-order and catalog sales feel 
that they can resolve all of their concerns on this legislation. We 
feel otherwise. The reason that it is so important to have the Gregg 
language is that it does put the focus on electronic commerce. I and 
others believe that if we do look at electronic commerce, and look at 
it thoughtfully, that it may, in fact, come up with some answers to 
these other issues--mail-order and catalog questions, which are 
important--but if we change the focus of this bill, which is 
essentially what the Senator from Arkansas wants to do, I believe what 
is going to happen is, A, we will not get any sensible ground rules for 
electronic commerce, nor will we deal with the issues with respect to 
mail orders.
  The fact of the matter is that Main Street America overwhelmingly has 
endorsed this bill. We have entered into the Record the list of the 
groups that are for it. And the reason that Main Street has endorsed 
this legislation is that if you are a small business on a main street 
in rural Arkansas or rural Oregon, or any other part of the country 
that is essentially rural, right now you are having a lot of difficulty 
competing against the Wal-Marts and the economic giants in our country.
  The Internet is a great equalizer. By having a web page, by having 
the ability to do business on line, that Main Street business in rural 
Oregon or rural America, for the first time, has the ability, in an 
inexpensive way, to market and look at lucrative markets around the 
world.
  Picture, if we will, what will happen to a home-based business in 
Wyoming or Arkansas or Oregon if we do nothing. There are 100,000 of 
these home-based businesses in my State alone. They are the fastest 
growing part of our economy, and if we do not come up with some uniform 
tax treatment for these home-based businesses, what is going to happen 
is they will be subject to scores of different taxes all over America.
  How is a home-based business in the State of Oregon or the State of 
Arkansas going to go out and hire a battery of accountants and lawyers 
and experts to help them sort this out? They are not going to be able 
to do it. And that is why, when we had the hearings on this legislation 
in the Senate Commerce Committee, we heard from a small Tennessee 
business that tried to operate through this thicket of different kinds 
of State and local rules and ended up going out of business.
  These home-based businesses are simply not going to be able to hire 
the battery of experts and accountants and lawyers that some of those 
who have opposed this legislation are going to mandate on these small 
businesses. So I hope that we can stick to the issue in front of us. 
That would mean going forward with the Gregg amendment and rejecting 
the amendment of the Senator from Arkansas.
  The Senator from Arkansas did ask me to yield, and I am happy to do 
so.
  Mr. HUTCHINSON. I thank the Senator for yielding.
  In the early part of your remarks, you emphasized and read from the 
bill that the commission would be authorized to conduct a thorough 
study. You emphasized the word ``thorough.'' I think you found a couple 
places where the term is used. It seems you are implying they will look 
at all issues affected by this legislation and by Internet sales.
  My question is, why, if in fact it is to be a thorough study looking 
at all issues and all the implications and ramifications of Internet 
sales on retailers and on government, why then would the Gregg 
amendment exclude, in effect, say this is off the table, this is one 
area of issues you cannot look at? When the Finance Committee, by a 
vote of 19-1, said this should be included, this should be an area that 
should be examined, this should be the purview of the commission, why 
then, if it is to be a thorough study, would this amendment, the Gregg 
amendment, exclude this particular area from study?
  Mr. WYDEN. Reclaiming my time, as I said, the debate here is over, Do 
you want to focus on the subject of this bill, which is electronic 
commerce--that is what the legislation does; that is what the Gregg 
amendment seeks to do--or are we going to go back and study in this 
legislation essentially yesterday's economy?
  We believe that if you put the focus on electronic commerce--that is 
what the Gregg amendment does--we are going to be able to deal with the 
digital economic issues; and we may well, in fact, come up with some 
ideas and some innovative approaches that may well resolve the mail-
order and catalog question as well.
  My concern, and the concern of the Senator from New Hampshire, is 
that essentially this is going to change the focus of this legislation 
to put it on the mail-order and catalog issues. There are Members of 
the U.S. Senate who feel that mail-order and catalog sales are 
insufficiently taxed. I am not one of them. I am one who believes that 
we all ought to work together, on a bipartisan basis, to deal with 
tomorrow's set of economic concerns, which involves the digital 
economy.
  I tell the Senator from Arkansas that as the original sponsor of this 
legislation, I have made more than 30 separate changes to this 
legislation in an effort to accommodate what I think are valid concerns 
which come from States and municipalities and others who are advocating 
the viewpoint of the Senator from Arkansas.
  But what I am not willing to support is essentially changing the 
focus of this legislation. If we do that, I believe that the 100,000 
home-based businesses in my State, and the hundreds of thousands across 
this country, are not going to see their concerns addressed; I think we 
will not be taking advantage of the opportunity to look at the Internet 
issues objectively, and we will lose that focus and take it off into 
another area which is, in my view, likely to not produce consensus with 
respect to the mail-order or catalog issue, nor make the progress we 
need to with respect to the Internet.
  Mr. President, I yield back the time.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I rise in strong support of the amendment 
offered by my friend from Arkansas. This amendment addresses the issue 
that is being changed by the Senator from New Hampshire. The second-
degree amendment would change things back to the way that they were.
  We have to take a look at the Internet sales tax issue for people who 
might be using this piece of legislation to develop huge loopholes in 
our current system. I am not talking about changing the system. I am 
talking about preserving for those cities, towns, counties, and States 
that rely on sales tax the ability to collect the tax they are 
currently getting.
  We are talking about a 2-year moratorium. Do you know how much the 
Internet will change in a 2-year period? Right now, with the current 
technology in the Internet, there are ways I could eliminate every 
single bit of retail sales tax in the United States, every day, if this 
bill passes. And I don't think that is our intent.
  I don't care if we have 30 amendments; if it needs 40 amendments, we 
will have to have 40 amendments. The number of amendments has nothing 
to do with the issue that we are addressing. There are some critical 
issues here that have to be solved to keep the stability of State and 
local government--just the stability of it--not increase sales tax, 
just protect what is there right now.
  We introduce these amendments because we don't think there is 
adequate protection now. An increase in catalog sales, I agree, is a 
topic for another time. It is very important we don't build electronic 
loopholes on the Internet, an ever-changing Internet, one that is 
growing by leaps and bounds, one that is finding new technology 
virtually every day. What we know as the Internet today is not what we 
will be using by the time this report comes

[[Page S11665]]

out. More people are using it every day.
  It is fascinating to me that one of the biggest areas of increased 
use of the Internet is by senior citizens. It probably has something to 
do with the quality of entertainment. If they do use computers, they 
are spending an average of 6 hours a day on the Internet. Part of that 
is purchasing; part of that is learning.
  The stated purpose of this bill is:

       To establish a national policy against state and local 
     government interference with interstate commerce on the 
     Internet or interactive computer services, and for other 
     purposes.

  Let me repeat that:

       To establish a national policy against State and local 
     government interference. . . .

  Mr. President, I recognize this body has a constitutional 
responsibility to regulate interstate commerce. Furthermore, I 
understand the desire of the bill's sponsors to protect and promote the 
growth of Internet commerce. Internet commerce is an exciting field. It 
has a lot of growth potential. The new business will create millions of 
new jobs in the coming years.
  The exciting thing about that for Wyomingites is that our merchants 
don't have to go where the people are. For people in my State, that 
means their products are no longer confined to a local market. They 
don't have to rely on expensive catalogs to sell merchandise to the big 
city folks. They don't have to travel all the way to Asia to display 
their goods. The customer can come to us on the Internet. It is a 
remarkable development, and it will push more growth for small 
manufacturers in rural America, especially in my State. We are just 
beginning to see some of the economic potential in the Internet. It is 
a valuable resource because it provides access on demand. It brings 
information to your fingertips when you want it and how you want it.
  We should probably take another look at using it on the Senate floor, 
but we need laptops for that; I will save that issue for another day.
  Having said that, I do have concerns about the bill before the Senate 
today. I come to this debate having been the mayor of a small town, 
Gillette, WY, for 8 years. I later served in the State house for 5 
years and the State senate for 5 years. Throughout my public life I 
have always worked to reduce taxes, to return more of people's hard-
earned wages to them.
  I am not here to argue in favor of taxes. There were times in 
Gillette when we had to make tough decisions. I was mayor during the 
boom time when the size of our town doubled in just a few years. We had 
to be very creative to be sure that our revenue sources would cover the 
necessary public services--important services like sewer, water, curb 
and gutter, filling in potholes, shoveling snow, collecting garbage, 
mostly water. It is a tough job because the impact of your decision is 
felt by all of your neighbors. They can look you in the eye. One of the 
biggest problems with local government is the ``Oh, by the ways.'' You 
go to dinner and somebody says, ``By the way, I have a little problem. 
Don't get up and solve it. Tomorrow morning will be fine.'' And 
tomorrow morning they know if you solved that problem.
  Hardly any of those problems is solved without money. When you are 
the mayor of a small town, you are on call 24 hours a day. You are in 
the phone book. People can call you at night and tell you that the city 
sewer is backing up into their house. I was fascinated how they were 
always sure that it was the city's sewer that was doing it. When they 
call to say that the power is out, they don't want a delay before it is 
fixed. When they call to tell you a neighbor has stolen a D-8 Cat and 
is tearing up the street and driving over sports cars and mailboxes and 
ripping up sprinkler systems, you have to go to work. Those are 
exciting things that happen from time to time in cities.

  The point is that the government that is closest to the people is 
also on the shortest time line to get results. I think it is the 
hardest work. I am very concerned with any piece of legislation that 
mandates or restricts local government's ability to meet the needs of 
its citizens. This has the potential to provide electronic loopholes 
that will take away all of their revenue. It may not seem like a big 
restriction, it may not exceed the $50 million limit that Congress set 
in the Unfunded Mandates Reform Act, but it does establish a national 
policy against State and local government. It does take an affirmative 
step to tie the hands of local government.
  Congress has to be very careful when we pass a law like this. We have 
to realize the effect of all of those people living at the local 
level--not the Federal level. I have not met anybody who lives on the 
Federal level; they all live at the local level.
  I am also concerned about the bill's impact on small businesses. My 
wife Diana and I owned a shoestore on Main Street, Gillette, for 28 
years. My wife did most of the managing on that. She greeted the 
people, she sold the shoes, ran the cash register, swept the floor, all 
the things that have to be done by a small business.
  We recognize the advantage of the Internet for these small 
businesses, these home-based businesses that were mentioned earlier. 
Yes, we understand the complications of trying to keep track of every 
kind of sales tax that is levied across the whole United States 
regardless of what kind of jurisdiction it is in. That is current law. 
That is current collection, to some degree, particularly if you have a 
presence in the State where the product is being sold.
  What is a ``presence'' in the State? Internet goes into absolutely 
every State. There is now the easy capability to set up another 
corporation in another State that does not have sales tax and still 
make the sale local, with immediate delivery, and avoid all sales tax 
through the Internet. That is going to be a problem.
  The problem with small business is, we talk about whether a business 
is 500 employees or just 150 employees. That is not the kind of small 
business I am talking about. I am talking about sweeping the sidewalk, 
carrying out the trash, filling out the myriad reams of required 
Federal paperwork. It really doesn't have much application to your 
business--probably five employees or less. These are the people who 
sponsor Little League, the basketball camps, the yearbooks, and all of 
the other things that happen in municipalities. They donate the raffle 
prizes and uniforms and they support all kinds of community activity. 
Every kid in town comes to the local small business and asks for help. 
Fortunately for America, they donate, and they donate gladly. They 
serve on the parade committees. They serve on the fair committees. They 
are the volunteers in the church and in the school and in local 
government. They are not only the neighbors, they are the customers for 
a small town for any retailer.
  We buy mail-order goods often because they are cheaper; there is no 
sales tax. That is a part of the pitch that is used. That is like a 5- 
to 7- to 9-percent reduction.
  Congress is now going to decide to prohibit local governments from 
taxing certain businesses--easy businesses to set up, easy businesses 
to locate in a State that has no sales tax whatever. We haven't seen 
anything like this before in the history of the United States, but we 
are about to see the biggest boom in the Internet that we have ever 
seen. We need a few amendments to this bill to provide some protection 
for the current system. I am not talking about expanding, I am talking 
about the current system.
  Are we going to be in the business of picking the tax winners and the 
tax losers? I am talking about the towns where the people of America 
live. We know who the losers will be. It will be the small retailer in 
your town, the one that you rely on to run down and pick up the 
emergency item.
  I do support this amendment. The commission should be allowed to 
study all of the issues with the Internet, all of the issues related to 
taxation. They definitely ought to be able to look at those that change 
with the technology so that the current system of collecting revenues 
for those towns and States can be preserved. I don't think we have all 
the answers, or we wouldn't be asking for this bill.
  I don't think we are going to have all the answers on the technology 
that is going to transpire in the next 2 years. So whatever we do, we 
have to have some amendments that will preserve the way that small 
business and small towns function at the present time. This amendment 
will help Congress to

[[Page S11666]]

make a decision in the future. It restores language that would be taken 
out with the Gregg amendment. It is critical for towns, small 
businesses, and you and me. I urge my colleagues to support it.
  I yield the floor.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.
  Mr. DORGAN. Mr. President, I rise in support of the second-degree 
amendment for all of the reasons previously stated by the Senator from 
Wyoming, the Senator from Arkansas and the Senator from Florida. I 
have, beginning with the origin of this bill in the Senate Commerce 
Committee, been very concerned about exactly what the language in this 
legislation will mean to this country, to our Main Streets, to our 
States and local governments.
  The issue here is a relatively simple one, and I don't need to 
restate all of the reasons that were offered by the Senator from 
Wyoming for being concerned about it. But the genesis of this bill was 
to be concerned about State and local governments applying ``punitive'' 
tax programs against Internet commerce. They were worried that this 
growth of the Internet and the expansion of commerce on the Internet 
would be retarded by local governments or State governments, seeing 
that as a big, juicy target, and apply some kind of new discriminatory 
or punitive tax regime upon it. Therefore, they said, let us at least 
have a time-out until we understand how to impose some sort of tax 
system that is fair to the Internet sellers and that does not 
discriminate against the Internet sellers.
  Well, the question here, then, is, if in this legislation where you 
have a time-out, or a moratorium, and you create a commission during 
that moratorium to investigate or evaluate all of these issues, why 
then would you say to that commission that you can take a look at all 
of this, you can take a look at what this means with respect to 
Internet commerce, but you cannot look at the other issues; you cannot 
look at how it relates, Internet commerce versus mail-order firms; you 
cannot look at how it relates to Internet commerce versus Main Street 
sellers? What kind of logic is that? If you are going to have a 
commission to try to figure out how this piece fits in the puzzle, then 
make sure all the pieces are there. That is all this second degree 
says--make sure all the pieces are there.
  The people who are here saying we don't want to solve this puzzle are 
people who have a vested interest. They are here, frankly, because of 
mail-order firms and the Internet. They are saying we don't want 
anybody to look at all of this. We want a moratorium for the Internet 
over here, and over here we don't want anybody discussing mail-order 
issues.
  The Senator from Wyoming said he and his wife had a shoestore. I 
didn't know that. I have never been to their shoestore. I have never 
shopped in Gillette, WY, and I probably never will shop there. But the 
issue he raises is essential to this point. When he and his wife opened 
the door in the morning and displayed shoes for sale in that store, 
they knew a couple of things: They rented the building, they hired the 
employees, and they bought an inventory. They opened their door and 
said: We are in business on Main Street in Gillette, WY. They knew that 
when somebody came through the door and took their shoes off and got 
fitted up and bought a brand new shiny pair of shoes, when they paid 
for it, they had to apply the local sales tax. That is what you have to 
do on Main Street. You are a tax collector for the local consumption 
tax in the State of Wyoming. I didn't hear him complain about that. 
That is what they do on Main Streets all across this country. I believe 
45 States have a sales tax.
  Another thing he and his wife knew, I am sure, and he is not here to 
answer the question, but I am sure they knew that if someone three 
blocks away decided they were not going to go to Main Street to buy 
shoes today, they were going to buy them through a mail-order catalog, 
in most cases they will buy those through the catalog without paying a 
local sales tax or a State sales tax, which means that his local 
business ended up being undersold by someone, perhaps by 4 percent, 
maybe 6, or maybe even 7 or 8 percent, because the catalog seller, in 
most cases, didn't charge the State sales tax.
  Is that discriminatory vis-a-vis the Main Street businessperson? I 
think it is. Of course, it is. Does it mean there is not a tax on the 
transaction? No, there is a tax. When they mail that pair of shoes from 
the mail-order catalog house to the person in Gillette, WY, or Fargo, 
or Bismarck, ND, the person who receives that pair of shoes has a 
responsibility in most every State to pay a use tax. Of course, they 
don't know that and they won't ever pay that, but that is the 
responsibility.
  The net result of all of this is that the Main Street folks will end 
up always being at a disadvantage with respect to taxation versus those 
who are doing business elsewhere, those who have constructed a catalog 
and haven't hired the employees, haven't rented a place to do business, 
and they haven't hired local folks; they have just operated through a 
catalog.

  I happen to think catalog sellers are very important to this country. 
Frankly, they are wonderful marketers. I think it is wonderful for a 
lot of people in this country to be able to shop that way. There is no 
question about that. I think when you look at the tax issue here--
whether it is buying it through a catalog or going through a computer 
and getting on the Internet and buying it through a seller on the 
Internet or buying it on Main Street--there ought to be some symmetry 
here in the tax treatment to make sure the tax treatment is not going 
to retard the growth of the business on Main Street, it is not going to 
retard the business growth of people who have catalogs and the business 
opportunities of the people on the Internet.
  But what is being said in the underlying amendment is, let's take a 
look at this only with respect to how it relates to the Internet, and 
you must ignore everything else. My friend, the Senator from Oregon, 
says, well, we want to explore everything. But, of course, this says 
you cannot, you must not; in fact, we are going to fight to the end 
here to see that you are unable to explore everything. That doesn't 
make any sense to me. That is what the second-degree amendment is 
about.
  The Senate Finance Committee got this right. It passed a bill, came 
to the floor, created a commission and said, take a look at all of 
this. We will have a commission that evaluates and studies all of this 
with respect to the tax neutrality, with respect to the opportunities 
in growth, and the impact of these taxes on a wide range of commerce--
not just Internet commerce, but a wide range of commerce.
  The Senate Finance Committee got it right. The underlying amendment 
now offered by a couple of good legislators, I think for understandable 
reasons, would say that the Finance Committee is wrong; this commission 
must not, cannot, and will not be able to study the whole range of 
circumstances. The second degree says, no, we don't accept that; we 
want to insert language that is effectively the language coming out of 
the Senate Finance Committee.
  I say again, as I did yesterday when the Senator from Florida was on 
the floor, and I say it now to the Senator from Arkansas, who along 
with the Senator from Florida and the Senator from Wyoming were primary 
sponsors of the second degree, in my judgment, they are dead right. 
They are absolutely right on target. I hope that the Senate, 
notwithstanding whatever curves and straightaways we find with this 
legislation--I assume this legislation will be worked out in the coming 
hours and days and, perhaps, be passed tomorrow, and I hope it will be 
passed in a satisfactory form.
  But one of the ways that this legislation will be made a better piece 
of legislation is to pass this second-degree amendment and restore it 
to the condition it was in when it came out of the Senate Finance 
Committee. These folks spent a lot of time on tax issues in the Finance 
Committee. I used to be on the House Ways and Means Committee in the 
other body for 10 years, and I spent a lot of time on tax issues. I 
think the Senate Finance Committee got it right. They said, study these 
issues, evaluate them all, understand the consequences of them all, and 
then, with that knowledge, let's make some judgments. That is the 
purpose of the time-out; that is the purpose of the moratorium.
  I have, as the Senator from Oregon stated, spent a fair amount of 
time

[[Page S11667]]

with him, and I think we have made a lot of progress on these issues.
  My expectation is we will pass a piece of legislation that is an 
acceptable piece of legislation that has a timeout moratorium. But it 
must, in my judgment, include this in order to really give us the 
assurance that that moratorium is used effectively by a commission that 
has divisions to look at all of these issues.
  I yield the floor.
  Mr. LIEBERMAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. LIEBERMAN. I thank the Chair.
  Mr. President, I rise to oppose the amendment offered by the Senator 
from Arkansas and others and to express my support of the underlying 
amendment offered in the first instance by the Senator from Arizona, 
the chairman of the committee. I am proud to be a cosponsor of that 
one.
  I was a cosponsor of the initial legislation, one of the pieces of 
legislation earlier in the session, along with my colleague from New 
Hampshire, Senator Gregg, which had the intention of trying to create 
some order and predictability and a little space for this extraordinary 
new area of economic activity, activity which has benefited so many 
people around our country, which is to say, e-commerce over the 
Internet.
  The aim was to say to the taxing jurisdictions, of which there are 
thousands and thousands and thousands--30,000, as a matter of fact--
potential taxing jurisdictions which exist in the United States, catch 
your breath, sit back, and let this new sector of our economy--Internet 
commerce, e-commerce, which the United States is heading and which has 
benefited so many people, which has created so many jobs--let it grow 
out of its infancy before we begin to put the teeth of the taxman into 
various parts of its anatomy; and let's let this commission begin to 
grow some ground rules for the consistent and fair handling of this new 
area of economic activity.
  The fact is today that an Internet service provider, or a merchant 
selling goods or services over the Internet, has no way of knowing in 
advance whether a State decides to tax them. As an example, in New 
Mexico, Internet access charges are subject to New Mexico gross 
receipts taxes. In Ohio, their sales are taxed as an electronic 
information service; in Tennessee, it is a telecommunications service; 
in my own State of Connecticut, as a computer and data processing 
services. Texas officials, I gather, have threatened to tax 
transactions that go through Internet servers in its State, even if the 
buyer and seller, in conventional terms, are not located in the State 
of Texas.
  The uncertainty of this tax liability is real and is having what you 
would expect--a negative, destabilizing effect on this business. Peat 
Marwick, a respected, recognized firm, just released a survey of 
industry executives of companies that sell over the Internet. Fifty 
percent of the executives said that the current State tax ambiguities 
and conflicting tax treatment of electronic commerce among the States 
are inhibiting their companies' involvement in electronic commerce. 
Ninety percent describe the current State sales tax procedures with 
regard to electronic commerce as ``overly burdensome,'' and 75 percent 
expressed their concern that State and local tax laws will place their 
companies at a disadvantage. It is because the industry is in its 
infancy.
  A predictable legal environment is exactly what the President's 
Report on Electronic Commerce recommended that we promote 
internationally. In fact, the administration has been sending out 
emissaries over the last year to persuade international organizations 
and individual countries to agree to create a predictable legal 
environment for the spread of electronic commerce. That is not only 
fair, it is good for American business, which happens to have a lead 
over business in any other countries in the effective use of the 
Internet.
  What the underlying bill, the underlying amendment, is saying is that 
it is time that we create the same sense of predictability here in the 
United States that our Government is urging on countries around the 
world. That is what this commission would do.
  The commission is asked to draft model State legislation that creates 
uniform definitions and categories of commercial transactions on the 
Internet so that States will be using the same vocabulary when it comes 
to categorizing the tax liabilities of an Internet company, or 
transaction--not unifying a tax rate among States, but creating a legal 
environment in which companies can do business.
  The National Commission on Uniform State Legislation has been working 
for the past 2 years on updating the treatment of Internet transactions 
according to various State laws. But it has not looked directly at 
taxes. This commission that would be created by this legislation would 
work with the national commission and other groups that have already 
been active in trying to update laws to be certain that Internet 
commerce is treated fairly. We would extend their work through this 
commission in the tax arena.
  I want to stress that the measure introduced by the distinguished 
chairman of committee, the Senator from Arizona--Senator Gregg, I, and 
others are proud to be cosponsors--does not preclude the commission 
created by this legislation from considering the question of nexus or 
taxation of remote sales. The danger in this amendment before us, the 
second-degree amendment, is that it singles these particular questions 
out as a requirement and thereby, I think, puts the commission in 
danger of falling into a very dense thicket.
  A battle has been waging for more than three decades, and taken right 
to the Supreme Court at one point, as to how remote sales by catalog-
telephone sales would be taxed by the 30,000 taxing jurisdictions in 
the States in the country. In so doing, I think the amendment threatens 
what is and should be the focus of the commission, which is to direct 
its attention on this extraordinary new sector of commerce, Internet 
commerce, and it runs the risk really of getting the commission so tied 
up in the thicket of remote sales that it will never really contribute 
what we hope it will to creating some order and predictability in e-
commerce.
  Mr. President, the fact is that this commission that is created by 
the underlying legislation may well--I think we who are its sponsors 
hope it will--create some language to reach some judgments that may in 
fact offer some counsel and help in this ongoing debate about taxation 
of remote sales, but let that happen naturally--that is my hope and 
prayer--as opposed to forcing it into the second-degree amendment in a 
way that would run the risk of destroying the underlying purpose of the 
proposal, and in that sense doing damage to Internet commerce and all 
who both benefit from it as consumers and benefit from it because they 
work in companies that are using it.
  I want to mention one other matter before closing. That is this: 
There are times when we talk about Main Street and the effect of 
Internet commerce on Main Street as if it were, one wins and one loses.
  The reality is that e-commerce has the potential to expand the 
winner's circle, to make more winners. I want to cite real cases from 
Connecticut which I learned about in the last 6 months to a year, and I 
think are typical of what is happening all over the country.
  First, let me say that a recent survey in Connecticut found that 38 
percent of small- and medium-sized companies have a web page--almost 
two out of five. A little over half of those are using their web page 
to sell goods and services--right now. And 21 percent are planning to 
add a web page next year. I am sure those numbers are going to grow 
dramatically in coming years.
  The fact is, insofar as some folks who are in taxing jurisdictions 
and the concern of this amendment has to do with treatment of direct 
mail-order sales or phone sales, if the mail-order catalogs that I get 
at my house are any indication of what the future is, I am being truly 
encouraged, aggressively encouraged by those catalogs instead of 
calling up, to use the Internet. So I think more and more of that kind 
of commerce will be done by e-commerce.
  But let me give you two great examples from home about the effect 
that the Internet is having on Main Street. A small company in old 
Broad Brook, CT, beautiful town by the water on Long Island Sound, 
called Stencil Ease, family-owned, 18 employees, sells stencils for 
home decorating and crafts. It

[[Page S11668]]

started a web page in 1996. They have been averaging 100 to 200 hits a 
day. Their sales increased 10 percent the first year due to the web 
site and 20 percent the next year.
  Here is a startling story in the second one--Coastal Tool & Supply. I 
have been there. It is a small, family-run hardware store in Hartford, 
CT, capital city. It was threatened, interestingly, by a location 
nearby of one of the large chain hardware stores. It was having a hard 
time. They decided to go on the Internet, in a sense to leap over the 
big competitor down the street. I think it was Home Depot, but it 
doesn't matter--a big competitor down the street and in a sense enter 
the global main street and hired a very able young man, skilled in 
computer matters, who put their catalog essentially on the Internet. 
Sales have grown almost 500 percent. They are doing more business over 
the Internet than they are from people coming into the store.
  So this is what the future holds, and it is a situation, if we do it 
right, where not only the big companies, but a lot of mom-and-pop 
stores and businesses are going to be able to benefit from Internet 
sales.
  Now, as it grows, it will actually have an effect on taxing 
jurisdictions, and we will naturally, in the normal order of business, 
want to create an opportunity for equity and to protect State and local 
jurisdictions that we represent. But this is not the time to do it, and 
this amendment is not the place to do it. Let's let this commission 
deal with the unique problems of e-commerce.
  Mr. WYDEN. Will the Senator yield?
  Mr. LIEBERMAN. I will be glad to yield to my friend from Oregon.
  Mr. WYDEN. I want to say that I think the Senator has made an 
especially effective approach and tell him that hardware account he 
gave is essentially what this legislation is all about. There has been 
discussion about who benefits here, huge corporations and the like. The 
people who benefit here are the 100,000 home-based businesses in my 
State, the hardware store that the Senator from Connecticut is talking 
about.
  The reason why that is the case is that the Internet is a great 
equalizer for those small businesses. The small businesses now that we 
are seeing in the State of the Senator from Connecticut and rural 
Oregon are having great difficulty today competing against the Wal-
Marts of the world. They do not have huge advertising budgets like Wal-
Mart. They don't have batteries of lawyers and accountants. These are 
small, entrepreneurial operations that now look at the Internet as a 
tool that can trampoline them into extraordinary economic opportunities 
they have never had.
  Without this legislation and the good work that has been done by the 
Senator from Connecticut and the Senator from New Hampshire, if you are 
a small, home-based business in Oregon or Connecticut, you may well 
face a good chunk of the thousands of taxing jurisdictions in our 
country looking at your business as a cash cow.
  One of our colleagues said the threat here is the World Wide Web 
would become the ``World Wide Wallet'' if that kind of approach went 
forward.
  So what the Senator was talking about with respect to that hardware 
store account is why I introduced this legislation early in 1997. That 
is the very kind of operation that I think we ought to be looking to 
grow in the 21st century.
  I thank the Senator for yielding me this time. I heard his account of 
the hardware store from the Cloakroom, and I think some have said--in 
fact, I heard it again today--that this was about Amazon.com or someone 
like that. Those people are not going to be in need of this kind of 
approach. This is going to benefit the small entrepreneurs, the home-
based business, the kind of person the Senator from Connecticut is 
talking about. I thank him for yielding me this time.
  Mr. LIEBERMAN. I thank the Senator from Oregon for his comments. I 
thank him for his leadership. Senator Gregg and I were happy to merge 
together with the work the Senator from Oregon and the Senator from 
Arizona have done.
  I want to end with one story the Senator from Oregon has stimulated 
in my memory when I visited that hardware store. It shows how you not 
only jump over the big store down the block but into the global 
shopping mall.
  One of their favorite stories--and this is not a pure market example 
because the particular customer I am about to refer to is from a Middle 
Eastern country--is about a man who happened to work for his country's 
national airlines, so his trip here was paid for, but he needed some 
large, heavy tools. He went on the Internet, found his way to the 
Coastal Tool & Supply web site, competitively priced, figured out the 
advantage, was on a flight to New York as part of his normal work, got 
off the plane, rented a truck, drove up to Hartford, bought the tools 
that he needed, drove back, put them on the plane, and went back to the 
Middle East, all smart shopping and good for business.
  So I hope that our colleagues will resist the allures of this second-
degree amendment and will not disrupt the noble and, I think, very 
necessary intention of the underlying bill. We can come back some other 
day, hopefully, informed by the work of the commission created herein 
to deal with the border problems that I know concern the Senator from 
Arkansas and the other cosponsors of the amendment.
  I yield the floor.
  Mr. HUTCHINSON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. HUTCHINSON. I thank the Chair. I just want to make a few closing 
observations of my perspective on this second-degree amendment and 
clarify a few things that I think are not representative at all of what 
this second-degree amendment does.
  May I just say also, being the Senator from the State of Arkansas and 
being from the hometown in which Wal-Mart stores are nationally 
headquartered, world wide headquartered, and Wal-Mart has been 
disparagingly mentioned several times----
  Mr. WYDEN. Will the Senator yield?
  Mr. HUTCHINSON. Not at this time. In my office in the Dirksen 
Building I have a hanging portrait of the 5-&-10-cent store where Sam 
Walton started the Wal-Mart stores. There is nothing in this amendment 
that is antientrepreneur. The fact is that Wal-Mart, with their huge 
advertising budget, as it was alluded to, started as a little 5-&-10-
cent store, as a mom-and-pop store in Arkansas. That is an American 
success story which ought to be applauded, not disparaged. Every 
American ought to have that opportunity, to have that dream. We ought 
not with legislation undercut that little Main Street store that cannot 
be replicated, cannot be replaced. No matter how great the Internet is, 
no matter how great catalogs are, they cannot replace that store on 
Main Street giving to the little league and supporting the local 
efforts and local initiatives.
  A couple other things. It has been implied that somehow this 
amendment, this second-degree amendment would mandate that they focus 
the study, the commission focus their study on interstate sales. 
Nothing could be further from the truth. If you look at the bill, it 
says, and I quote, ``may include in the study *under subsection,'' may 
include a study of. It is, in fact, the Gregg amendment, the McCain-
Gregg amendment that excludes even their authorization to study the 
impact, the obvious impact of remote sales including catalog, including 
Internet, all of the Internet remote sales, its impact upon small 
businesses and upon local and State government. It simply says ``may.'' 
It is simply authorizing, permissive language. It is, in fact, the 
House bill that mandated that they study this area and its impact, 
because it is so obvious the impact that it could potentially have, and 
that any study that should be done, if it is in fact to be a thorough 
study, must include this area.

  It is the proponents of the Gregg amendment who would say what the 
Finance Committee did by a vote of 19 to 1 should be overturned. The 
Finance Committee, led by Senator Roth, included a study of these 
issues--and they should be included. They should be studied. The 
language in the bill says ``thorough study.'' How can you have a 
thorough study and then delete the area of interstate sales? It puzzles 
me. How can anyone object to having a broader study that would include 
all of the various issues involved in a very complex subject?

[[Page S11669]]

  It has been implied that somehow this second-degree amendment, which 
would say this issue ought to be studied, is protax. My goodness, 
anybody who has ever looked at Tim Hutchinson's record in the 
statehouse in Arkansas, the U.S. House of Representatives, and the U.S. 
Senate, would have a hard time believing this amendment I am offering 
is protax or somehow a roadmap to higher taxes. Nothing could be 
further from the truth. We are not prejudging any kind of conclusions 
or any kind of recommendations that this commission might make. And, I 
remind my colleagues, it requires a two-thirds vote of the members of 
the commission to make any recommendation, and that is all they can 
make, is a recommendation. The final say remains with the Congress.
  How in the world can you say this somehow is going to lead to higher 
taxes or somehow thwart the growth of the Internet? And that, may I 
say, has been another mischaracterization of this amendment--that it is 
somehow not only protax but anti-Internet.
  We have applauded, and I applaud, the growth of the Internet. I 
quoted the statistics, from $8 billion in 1998 to the estimated $300 
billion in sales in the year 2002; that is a good thing. But while it 
is a good thing, we should not be so blind as to think it is not going 
to have serious consequences, serious impacts, that ought to be 
examined in advance.
  I support the bill. I support the timeout. I support the pause. I 
support the moratorium. But I also believe, if we are going to have a 
study, it ought to truly be a thorough study. It ought not say look at 
everything but don't look at the impact upon business, don't look at 
the impact upon the city government or the State government. It ought 
to truly be a thorough study. You cannot deal with these issues in a 
vacuum. They are interrelated, all of these, and they need to be, in 
fact, thoroughly studied.
  Let me just conclude by saying I thought Senator Enzi's comments were 
moving. I, like Senator Dorgan, did not realize that he and his wife 
operated a little Main Street shoestore for over 20 years in Gillette, 
WY. I did not know that. I had a great appreciation for Senator Enzi. I 
have a greater appreciation now. But I think also that, as he paid 
those sales taxes day in and day out, as he made the struggles that any 
small business person makes in order to stay in existence, as he 
contributed to the Little League, as he contributed to the United Way, 
as he did everything that only a physical entity actually being right 
there in the community can do--irreplaceable--that we need to consider 
them, we need to think about them, as we pass this needed legislation.
  I believe if they will simply look at the language of the second-
degree amendment restoring what the Finance Committee did by a 19-to-1 
vote and saying this is an area that ought to be examined, ought to be 
looked at, then I think my colleagues will realize that in fact it does 
make good sense and they will support it. I ask for their support.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Sessions). The Senator from Arizona.
  Mr. McCAIN. Mr. President, the amendment does not say anything about 
what to do or not to do. What we are talking about here is whether the 
commission should say we should overturn the Quill decision. That is 
what we get down to, if we want to get through all the rhetoric and 
language about this. We don't think the Quill decision should be 
overturned. Obviously, the proponents of the amendment do, and that 
really is, to a significant degree, what this amendment is all about.
  Mr. President, I move to table the amendment and ask for the yeas and 
nays.
  Mr. BUMPERS. Mr. President, will the Senator withhold for about 2 
minutes?
  Mr. McCAIN. I will be glad to withhold for 2 minutes before I make 
the motion to table.
  Mr. BUMPERS. I thank the distinguished manager very much.
  Mr. President, this is really a strange scenario for me. I have 
fought for years to allow States to do exactly what the Supreme Court, 
in the Quill decision, said we had the right to do, and that was to 
allow States to make mail order houses collect sales taxes on 
merchandise being shipped into our respective States. That is what the 
Supreme Court said. We would not be overturning the Quill decision. We 
would simply be taking advantage of what the Supreme Court said we had 
a right to do: Remove the interstate commerce clause as a burden and 
allow the States, 45 of whom have sales taxes on merchandise from out 
of State--allow those States who have passed those laws to implement 
them. They cannot be implemented. We are saying we do not care what 
kind of laws you pass at the State level, we are not going to allow you 
to implement them.
  Last week we once again killed my amendment to allow states to 
mandate that remote sellers collect the taxes they ought to. Yesterday, 
the Senate decided that we cannot even make Internet sellers alert 
consumers to the fact that there is a sales tax in the State. We cannot 
even tell them to alert people to the fact that somebody may knock on 
their door from their state revenue department and try to collect the 
unpaid use tax. Think about that. Mr. President, 45 States have a sales 
tax and we voted yesterday not to even require Internet sellers to tell 
consumers there may be a tax on their purchases.
  Now we come here today saying we cannot even study it. My God, how 
far are we going to go?
  The PRESIDING OFFICER. The 2 minutes has expired.
  Mr. McCAIN. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion of 
the Senator from Arizona. The yeas and nays have been ordered.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) and the 
Senator from South Carolina (Mr. Hollings) are necessarily absent.
  The PRESIDING OFFICER (Mr. Grams). Are there any other Senators in 
the Chamber who desire to vote?
  The result was announced--yeas 30, nays 68, as follows:

                      [Rollcall Vote No. 304 Leg.]

                                YEAS--30

     Boxer
     Burns
     Campbell
     Coats
     Collins
     Craig
     Dodd
     Faircloth
     Frist
     Grams
     Gregg
     Hagel
     Kempthorne
     Kerry
     Kohl
     Kyl
     Lautenberg
     Lieberman
     McCain
     McConnell
     Moseley-Braun
     Murray
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Stevens
     Thompson
     Torricelli
     Wyden

                                NAYS--68

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bryan
     Bumpers
     Byrd
     Chafee
     Cleland
     Cochran
     Conrad
     Coverdell
     D'Amato
     Daschle
     DeWine
     Domenici
     Dorgan
     Durbin
     Enzi
     Feingold
     Feinstein
     Ford
     Gorton
     Graham
     Gramm
     Grassley
     Harkin
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerrey
     Landrieu
     Leahy
     Levin
     Lott
     Lugar
     Mack
     Mikulski
     Moynihan
     Murkowski
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Sessions
     Specter
     Thomas
     Thurmond
     Warner
     Wellstone

                             NOT VOTING--2

     Glenn
     Hollings
       
  The motion to lay on the table the amendment (No. 3760), as modified, 
was rejected.
  Mr. McCAIN. Mr. President, the Senate has spoken. I move that we 
adopt the underlying amendment and the pending amendment.
  The PRESIDING OFFICER. The question is on the second-degree 
amendment.
  Without objection, the amendment is agreed to.
  The amendment (No. 3760), as modified, was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mr. DORGAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                     Amendment No. 3722, as amended

  The PRESIDING OFFICER. The question is on the first-degree amendment.

[[Page S11670]]

  The amendment (No. 3722), as amended, was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mr. DORGAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                 Amendments Nos. 3732 And 3733, En Bloc

  Mr. McCAIN. Mr. President, I send two amendments to the desk, en 
bloc, and ask for their immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain] proposes amendments 
     numbered 3732 and 3733, en bloc.

  Mr. McCAIN. Mr. President, I ask unanimous consent that reading of 
the amendments be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments are as follows:


                           amendment no. 3732

           (Purpose: To modify the duties of the Commission)

       On page 22, line 2, strike ``interstate'' and insert 
     ``instrastate, interstate''.


                           amendment no. 3733

           (Purpose: To modify the report of the Commission)

       On page 25, line 12, insert ``Any recommendation agreed to 
     by the Commission shall be tax and technologically neutral 
     and apply to all forms of remote commerce.'' after ``this 
     title.''.

  Mr. McCAIN. These have been accepted by both sides. I know of no 
further debate.
  The PRESIDING OFFICER. If there is no further debate, without 
objection, the amendments are agreed to.
  The amendments (No. 3732 and No. 3733), en bloc, were agreed to.
  Mr. McCAIN. Mr. President, we are now down to basically two issues 
about which the Senator from Wyoming, the Senator from North Dakota, 
and the Senator from Oregon are deeply concerned. We are negotiating 
those. We hope we can get an agreement on those so that we can finish 
up on this legislation. If not, we will probably have votes on those 
two issues. But we have resolved the remaining amendments, except for 
those two. There is more than one amendment associated with those two 
issues. But if we can get that agreement within the next half hour or 
so, I think we can move to final passage. I thank the Senator from 
North Dakota for his cooperation with this difficult issue.
  I yield the floor.
  Mr. DORGAN. Mr. President, it is also my hope that in a relatively 
short period of time we will be able to resolve the remaining issues. 
We have made a lot of progress on the bill. I will say again that the 
Senator from Arizona has done an excellent job, and the Senator from 
Oregon and others have pushed very hard to get us to this point. There 
are other significant issues, but I expect to get them resolved in 
relatively short order. I hope we will make the final progress 
necessary on this piece of legislation.
  I yield the floor.
  Mr. LOTT addressed the Chair.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. LOTT. Mr. President, we are working on a unanimous consent 
agreement now that we hope we can get approved, which would allow us to 
get to a conclusion and a final vote on the Internet tax freedom bill. 
I commend all who have been involved, including Senators McCain, Dorgan 
and Wyden. I believe we can actually get to a conclusion. There has 
been the possibility that it would be tangled up in other matters, but 
I think maybe we have an agreement that will allow us to complete that.

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