[Congressional Record Volume 144, Number 139 (Wednesday, October 7, 1998)]
[Senate]
[Pages S11675-S11680]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

  The Senate continued with consideration of the bill.


                    Amendment No. 3719, As Modified

         Amendment No. 3779, As Modified to Amendment No. 3719

  Mr. McCAIN. I ask unanimous consent that amendment No. 3719, as 
modified, be the pending business; that Senator Dorgan be recognized to 
offer a second-degree amendment, as modified, that will be adopted; and 
it be in order for me to offer a nonfiled second-degree amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. Madam President, let me comment on what is going on here 
for the benefit of my colleagues. We have agreed on the language 
concerning the grandfathering of this legislation, which was important.
  Now we have resolved all matters with the exception of whether the 
moratorium should last for 3 or 4 years. My amendment, after we accept 
the grandfather language from the Senator from North Dakota, will be to 
have the moratorium expire at the end of 4 years, for which there will 
probably be a recorded vote, after which it is most likely--although we 
have to check with both sides about further debate--we will have 
completed the amending process of the germane amendments that were on 
the bill and we will be very close to final passage of the legislation.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain], for himself and Mr. 
     Wyden, proposes an amendment numbered 3719, as modified.
       The Senator from North Dakota [Mr. Dorgan] proposes an 
     amendment numbered 3779, as modified, to amendment No. 3719.

  The amendments (No. 3719, as modified, and No. 3779, as modified) are 
as follows:


                    Amendment No. 3719, as modified

    (Purpose: To make minor and technical changes in the moratorium 
                               provision)

       On page 16, beginning with line 23, strike through line 15 
     on page 17, and insert the following:
       (a) Moratorium.--No State or political subdivision thereof 
     shall impose any of the following taxes during the period 
     beginning on October 1, 1998, and ending 3 years after the 
     date of the enactment of this Act:

[[Page S11676]]

       (1) Taxes on Internet access, unless such tax was generally 
     imposed and actually enforced prior to October 1, 1998; and
       (2) Multiple or discriminatory taxes on electronic 
     commerce.
       (b) Preservation of State and Local Taxing Authority.--
     Except as provided in this section, nothing in this Act shall 
     be construed to modify, impair, or supersede, or authorize 
     the modification, impairment, or superseding of, any State or 
     local law pertaining to taxation that is otherwise 
     permissible by or under the Constitution of the United States 
     or other Federal law and in effect on the date of enactment 
     of this Act.
       (c) Liabilities and Pending Cases.--Nothing in this Act 
     affects liability for taxes accrued and enforced before the 
     date of enactment of this Act, nor does this Act affect 
     ongoing litigation relating to such taxes.


                    Amendment No. 3779, as modified

       On page 2, after line 14, add the following:
       (d) Definition of Generally Imposed and Actually 
     Enforced.--For purposes of this section, a tax has been 
     generally imposed and actually enforced prior to October 1, 
     1998, if, before that date, the tax was authorized by statute 
     and either--
       (1) a provider of Internet access services had a reasonable 
     opportunity to know by virtue of a rule or other public 
     proclamation made by the appropriate administrative agency of 
     the State or political subdivision thereof, that such agency 
     has interpreted and applied such tax to Internet access 
     services; or
       (2) a State or political subdivision thereof generally 
     collected such tax on charges for Internet access.

  Mr. McCAIN. Madam President, I don't know if there is any debate on 
the Dorgan second-degree amendment.
  Mr. DORGAN. Madam President, the second-degree amendment to the 
first-degree amendment that was offered by the Senator from Arizona is 
an amendment that has been worked out over a period of several days 
dealing with the grandfather clause. It is something that I think 
represents a workable solution which improves the legislation. It would 
be my hope that the Senate would approve it.
  I do want to point out that the amendment that was referred to by 
Senator McCain would be an amendment dealing with the length of the 
moratorium. My understanding is that the passage of the first-degree 
and second-degree amendments would leave in place a 3-year moratorium 
with respect to this legislation. The Senator from Arizona would then 
offer an amendment, and I believe there would be a recorded vote after 
some debate on that amendment, that would propose that the 3-year 
moratorium be extended to 4 years, and the Senate then would make a 
judgment on that question.
  I offer that by way of explanation of what is happening here. I hope 
the Senate will approve by voice vote the first- and second-degree 
amendments.
  The PRESIDING OFFICER. The question is on agreeing to the amendments.
  The amendments (No. 3779, as modified, and No. 3719, as modified, as 
amended) were agreed to.
  Mr. McCAIN. 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. 3783 To Amendment No. 3719, As Modified, as Amended

  Mr. McCAIN. Madam President, I have a second-degree amendment at the 
desk, and I ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arizona [Mr. McCAIN] proposes an amendment 
     numbered 3783 to amendment No. 3719, as modified and amended.

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

       On line 5, strike ``3'' and insert ``4''.

  Mr. McCAIN. As I explained earlier, this will be a simple vote on 
whether the moratorium should last for 3 years or 4 years. I am sorry 
we have to have a recorded vote on it since we were able to reach 
agreement on far more contentious issues surrounding this legislation. 
There will be some debate and discussion on this amendment.
  In the meantime, 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. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 3678, as Modified

  Mr. McCAIN. Madam President, the other day the Senate adopted 
amendment No. 3678, which had technical and drafting errors. I ask 
unanimous consent that the modification of the amendment be adopted.
  The PRESIDING OFFICER. The amendment will be so modified.
  The amendment (No. 3678), as modified, is as follows:

       At the end of the bill add the following new title:

     SEC. ____01. SHORT TITLE.

       This title may be cited as the ``Government Paperwork 
     Elimination Act''.

     SEC. ____02. AUTHORITY OF OMB TO PROVIDE FOR ACQUISITION AND 
                   USE OF ALTERNATIVE INFORMATION TECHNOLOGIES BY 
                   EXECUTIVE AGENCIES.

       Section 3504(a)(1)(B)(vi) of title 44, United States Code, 
     is amended to read as follows:
       ``(vi) the acquisition and use of information technology, 
     including alternative information technologies that provide 
     for electronic submission, maintenance, or disclosure of 
     information as a substitute for paper and for the use and 
     acceptance of electronic signatures.''.

     SEC. ____03. PROCEDURES FOR USE AND ACCEPTANCE OF ELECTRONIC 
                   SIGNATURES BY EXECUTIVE AGENCIES.

       (a) In General.--In order to fulfill the responsibility to 
     administer the functions assigned under chapter 35 of title 
     44, United States Code, the provisions of the Clinger-Cohen 
     Act of 1996 (divisions D and E of Public Law 104-106) and the 
     amendments made by that Act, and the provisions of this 
     title, the Director of the Office of Management and Budget 
     shall, not later than 18 months after the date of enactment 
     of this Act, develop procedures for the use and acceptance of 
     electronic signatures by Executive agencies.
       (b) Requirements for Procedures.--(1) The procedures 
     developed under subsection (a)--
       (A) shall be compatible with standards and technology for 
     electronic signatures that are generally used in commerce and 
     industry and by State governments;
       (B) may not inappropriately favor one industry or 
     technology;
       (C) shall ensure that electronic signatures are as reliable 
     as is appropriate for the purpose in question and keep intact 
     the information submitted;
       (D) shall provide for the electronic acknowledgment of 
     electronic forms that are successfully submitted; and
       (E) shall, to the extent feasible and appropriate, require 
     an Executive agency that anticipates receipt by electronic 
     means of 50,000 or more submittals of a particular form to 
     take all steps necessary to ensure that multiple methods of 
     electronic signatures are available for the submittal of such 
     form.
       (2) The Director shall ensure the compatibility of the 
     procedures under paragraph (1)(A) in consultation with 
     appropriate private bodies and State government entities that 
     set standards for the use and acceptance of electronic 
     signatures.

     SEC. ____04. DEADLINE FOR IMPLEMENTATION BY EXECUTIVE 
                   AGENCIES OF PROCEDURES FOR USE AND ACCEPTANCE 
                   OF ELECTRONIC SIGNATURES.

       In order to fulfill the responsibility to administer the 
     functions assigned under chapter 35 of title 44, United 
     States Code, the provisions of the Clinger-Cohen Act of 1996 
     (divisions D and E of Public Law 104-106) and the amendments 
     made by that Act, and the provisions of this title, the 
     Director of the Office of Management and Budget shall ensure 
     that, commencing not later than five years after the date of 
     enactment of this Act, Executive agencies provide--
       (1) for the option of the electronic maintenance, 
     submission, or disclosure of information, when practicable as 
     a substitute for paper; and
       (2) for the use and acceptance of electronic signatures, 
     when practicable.

     SEC. ____05. ELECTRONIC STORAGE AND FILING OF EMPLOYMENT 
                   FORMS.

       In order to fulfill the responsibility to administer the 
     functions assigned under chapter 35 of title 44, United 
     States Code, the provisions of the Clinger-Cohen Act of 1996 
     (divisions D and E of Public Law 104-106) and the amendments 
     made by that Act, and the provisions of this title, the 
     Director of the Office of Management and Budget shall, not 
     later than 18 months after the date of enactment of this Act, 
     develop procedures to permit private employers to store and 
     file electronically with Executive agencies forms containing 
     information pertaining to the employees of such employers.

     SEC. ____06. STUDY ON USE OF ELECTRONIC SIGNATURES.

       (a) Ongoing Study Required.--In order to fulfill the 
     responsibility to administer the functions assigned under 
     chapter 35 of title 44, United States Code, the provisions of 
     the Clinger-Cohen Act of 1996 (divisions D and E of Public 
     Law 104-106) and the amendments made by that Act, and the 
     provisions of this title, the Director of the Office of 
     Management and Budget shall conduct an ongoing study of the 
     use of electronic signatures under this title on--

[[Page S11677]]

       (1) paperwork reduction and electronic commerce;
       (2) individual privacy; and
       (3) the security and authenticity of transactions.
       (b) Reports.--The Director shall submit to Congress on a 
     periodic basis a report describing the results of the study 
     carried out under subsection (a).

     SEC. ____07. ENFORCEABILITY AND LEGAL EFFECT OF ELECTRONIC 
                   RECORDS.

       Electronic records submitted or maintained in accordance 
     with procedures developed under this title, or electronic 
     signatures or other forms of electronic authentication used 
     in accordance with such procedures, shall not be denied legal 
     effect, validity, or enforceability because such records are 
     in electronic form.

     SEC. ____08. DISCLOSURE OF INFORMATION.

       Except as provided by law, information collected in the 
     provision of electronic signature services for communications 
     with an executive agency, as provided by this title, shall 
     only be used or disclosed by persons who obtain, collect, or 
     maintain such information as a business or government 
     practice, for the purpose of facilitating such 
     communications, or with the prior affirmative consent of the 
     person about whom the information pertains.

     SEC. ____09. APPLICATION WITH INTERNAL REVENUE LAWS.

       No provision of this title shall apply to the Department of 
     the Treasury or the Internal Revenue Service to the extent 
     that such provision--
       (1) involves the administration of the internal revenue 
     laws; or
       (2) conflicts with any provision of the Internal Revenue 
     Service Restructuring and Reform Act of 1998 or the Internal 
     Revenue Code of 1986.

     SEC. ____10. DEFINITIONS.

       For purposes of this title:
       (1) Electronic signature.--The term ``electronic 
     signature'' means a method of signing an electronic message 
     that--
       (A) identifies and authenticates a particular person as the 
     source of the electronic message; and
       (B) indicates such person's approval of the information 
     contained in the electronic message.
       (2) Executive agency.--The term ``Executive agency'' has 
     the meaning given that term in section 105 of title 5, United 
     States Code.


                    Amendment No. 3721, As Modified

  Mr. McCAIN. There was a technical error in amendment No. 3721. 
Therefore, I send a modification to the desk and ask it be accepted on 
the proviso we will try to hire more efficient staff so these kinds of 
things are not required in the future.
  The PRESIDING OFFICER. The amendment will be so modified.
  The amendment (No. 3721), as modified, is as follows:

       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).
       (C) 8 representatives of the electronic commerce industry 
     (including small business), 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.

  Mr. McCAIN. 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. WYDEN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3783

  Mr. WYDEN. Madam President, let me try to describe briefly for the 
Senate where we are with respect to the important issue coming up now 
on the length of the moratorium. As Chairman McCain and my colleague, 
Senator Dorgan, noted, the two issues we have been trying to deal with, 
the question of grandfathering in existing States and localities and 
the length of the moratorium are linked, and we think we have a fair 
process in place now for resolving the two important issues.
  I would like to tell my colleagues why I think it is important that 
we go with the McCain amendment on the length of the moratorium. The 
legislation, when I introduced it in March of 1997, did not specify how 
long the moratorium should last. When we considered it in the Senate 
Commerce Committee, after a very lengthy debate and, in effect, taking 
a break for 5 or 6 months after the hearings were held to try to work 
with Senators on both sides of the aisle, the Senate Commerce Committee 
voted out legislation that set in place a 6-year moratorium.
  As Senators know, the Finance Committee then went forward with its 
legislation and imposed a 2-year moratorium. In a sense, this 
moratorium isn't even the most accurate way to describe it because even 
during this period Internet transactions were treated exactly like any 
other transaction. We have heard discussion of how, in some way, the 
legislation would create some sort of special tax haven for the 
Internet, and that is simply not the case. Internet transactions would 
be treated just like any other.
  The reason the McCain amendment with respect to the length of the 
moratorium is important is not just because it is a compromise--4 
years--between the Commerce Committee bill and the Finance Committee 
bill, but I think it is going to take that long in order to deal with 
these issues in a thoughtful way. They are complicated questions. It is 
very clear that if, for example, someone orders fruit from Harry and 
David's in Medford, OR, uses America Online in Virginia to make the 
order, pays for it with a bank card in California, and ships it to a 
cousin in Boston, this transaction could affect scores and scores of 
local jurisdictions, as well as a number of States. So we do want 
sufficient time to sort out these issues.
  Under the amendment that will be first offered by Senator McCain and 
myself, there would be a two-step process. First, the commission 
studies the issues and makes its recommendations to the Congress. 
Second, the recommendation must be implemented. Our concern is that a 
number of State legislatures do not meet every year; mine is one. You 
are going to need the McCain-Wyden amendment with respect to the 
moratorium in order to make sure that you have sufficient time for both 
the study of these issues and recommendations to the Congress, as well 
as an adequate amount of time for legislative bodies to consider them.
  So we felt that the amendment we were offering not only was a fair 
compromise between what was passed in the Senate Commerce Committee 
overwhelmingly and what was passed in the Senate Finance Committee, but 
in terms of the actual logistics of State legislative sessions, we 
believe the amendment that we will be offering with respect to the 
length of the moratorium is a critical one.
  The fact of the matter is, when you have in the vicinity of 30,000 
taxing jurisdictions--and that is the number in our country--you have 
the prospect of different taxing jurisdictions in States and localities 
that all see the Internet as the golden goose; you have the real 
prospect that policies could be adopted that would cause great damage 
to the Internet's development and cause that golden goose to lay far 
fewer eggs.
  What we are trying to do in this legislation is to restore a balance 
with respect to the moratorium. We think it is a fair compromise 
between what the two committees dealt with here in the U.S. Senate, and 
at the same time we think it is an approach that will give adequate 
time for the States and localities to deal with the recommendations 
that are made while making sure that businesses aren't confused and, in 
a number of instances, paralyzed by discriminatory and multiple 
taxation about which they are already expressing concerns.
  I think we have made a considerable amount of headway. As I have said 
in a couple of instances when I came to the floor, if you look at the 
legislation that the Presiding Officer heard discussed in the Commerce 
Committee

[[Page S11678]]

early in 1997 and the legislation that is before the Senate now, it is 
clear that there have been many, many changes, over 30. Those are 
changes that were made specifically to try to deal with the legitimate 
concerns of States and localities that are concerned about their 
revenue prospects with respect to the digital economy.
  We have tried to be fair. We had a number of votes on the floor of 
the Senate. There were several which I thought would have done great 
damage to the philosophy of what we are trying to do in this 
legislation. There were others raised with respect to ensuring the fair 
analysis of a variety of issues and participation on the commission 
where, clearly, Senators have tried very hard to work together.
  The issue that is coming up now with respect to the length of the 
moratorium is critical. When I introduced this legislation last year, 
there was no end date on the moratorium. The reason there was not is 
that it was our view that if ever there was something that ought to be 
treated as interstate commerce, it was the Internet. The Internet is 
global; it knows no boundaries. It is not something that ought to be 
balkanized in the 21st century into kind of a toll-riddled freeway 
where it will be very hard to tap the potential of the Internet.
  We should make no mistake about it. The great potential for the 
Internet is for those individuals, such as those in rural America and 
inner cities, senior citizens, handicapped individuals, many of them 
operating home-based businesses, who with sensible governmental 
policies will be able to, in my view, make a very decent living in the 
global economy. But the prerequisite of having those kinds of 
opportunities will be policies that allow the Internet to flourish. 
Those policies should neither be discriminatory against the Internet 
nor should they be preferential.
  I have heard various Senators say over the last few days that in some 
way this legislation would ensure preferential treatment for the 
Internet. It would do nothing of the sort. It would say very 
specifically that Internet sales ought to be treated just like 
everything else. If you pay a specific tax by buying the goods in a 
jurisdiction in the traditional way, by walking into a retail store, 
under this legislation, even with the moratorium, you pay exactly the 
same tax if you order those goods over the Internet--exactly the same 
tax. There is nothing preferential, nothing discriminatory.
  In a little bit we will have that first vote on the amendment that 
Chairman McCain and I offered together with respect to the length of 
the moratorium. It will ensure that we have enough time to study the 
various issues with respect to electronic commerce and make 
recommendations, and it will give adequate time to have those 
recommendations implemented by the localities and the States. There are 
a number of States that do not meet every year, for example, with their 
legislatures. They would not have adequate time under the shorter 
version of the moratorium.
  Madam President, and colleagues, we will have those votes before too 
long. I thank the various Senators who have weighed in with myself and 
Chairman McCain, both today and over the last few days. This has been a 
good debate. And it is only the beginning of our discussions on the 
ground rules for the digital economy.
  This presents a whole new set of questions for the U.S. Senate. When 
we look at traditional commerce, even with the Senate Commerce 
Committee of 40 or 50 years ago, we were talking about moving goods 
from point A to point B. There was a role for traditional business. 
There was a role for labor unions and various other key economic 
sectors such as the transportation sector. That has changed now in many 
respects, because information--in effect, goods and services--can move 
on the Internet in a flash of light. So we need sensible policies.
  I urge my colleagues to support that first amendment that Chairman 
McCain and I are offering with respect to the length of the moratorium. 
It will ensure that States and localities have an adequate amount of 
time to act after the recommendations of the commission to go forward. 
It is a true compromise. The Senate Commerce Committee passed 
legislation that called for a moratorium of 6 years after my original 
bill with Chairman McCain, which had no end date at all. The Senate 
Finance Committee bill was 2 years. We are going forward with 4. That 
would give the States an opportunity to act in a thoughtful way.
  I hope on that first vote the Senate will support the McCain-Wyden 
amendment with respect to the length of the moratorium.
  Madam President, I yield the floor.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER (Mr. Gorton). The Senator from Arizona.
  Mr. McCAIN. Mr. President, I urge the advocates of the 3-year 
moratorium to come to the floor and help us explore this very complex 
issue as to whether we are going to have a 3-year or a 4-year 
moratorium. I know it is a subject that is complex in detail. However, 
we would like to complete the debate on this very complicated issue 
that we were unable to resolve with our friends on the other side of 
this issue.
  Again, I find it remarkable that we were able to work out grandfather 
language, and about 15 other amendments. But somehow this one is worthy 
of a vote as to whether a moratorium is 3 or 4 years.
  I can't add a lot to what the distinguished Senator from Oregon just 
said, except to say that I hope we can minimize the debate. But I say 
to those who are the 3-year advocates to come over and make their case, 
because as soon as Senator Dorgan comes back we would like to move on 
that amendment, because I believe that, following Senator Murkowski's 
motion on the underlying amendment, we can move to final passage on 
this bill.
  I know the Senator from Oregon would like to dispense of this 
legislation but not nearly so much as I would.
  Mr. WYDEN. Will the chairman yield?
  Mr. McCAIN. I am glad to yield to my friend from Oregon.
  Mr. WYDEN. I thank the chairman for all of his patience.
  I think it would be helpful, and perhaps the chairman would lay it 
out, to know that through this discussion there has been an effort to 
link the grandfather provision effort to make sure that States and 
localities that already have laws on the books are protected and to 
link that to the moratorium so that there would be an effort to be fair 
to both sides. I think the Senator has been very fair, and perhaps the 
Senator could elaborate a little bit on some of the challenges with 
respect to that grandfather debate.
  Mr. McCAIN. Will the Senator repeat his question?
  Mr. WYDEN. I am sorry. The fact is the grandfathering provision and 
the moratorium really are linked, and I think that the Senator has been 
very fair to both sides with respect to this discussion, and to the 
extent that there are greater protections for grandfathering and more 
jurisdiction protected that obviously affects the discussion about the 
length of the moratorium. I think the Senator struck a fair balance, 
and I think it would be helpful if the Senator could take the Senate 
through those discussions a bit.
  I thank the Senator for yielding me some time.
  Mr. McCAIN. I thank the Senator from Oregon.
  The reality is that the original legislation as proposed by the 
Senator from Oregon had no grandfathering. It had no time limit. This 
legislation received overwhelming support both in the committee and, 
very frankly, throughout the country, and gradually, interestingly 
enough, many Governors who would experience, in the view of some, a 
loss of revenue came on board this legislation--the Governor of 
California, the Governor of Texas, the Governor of New York, and many 
other Governors, but practically every Governor of every major State.
  Along those lines, Mr. President, I ask unanimous consent that a 
letter from the distinguished Governor of Virginia, Mr. Gilmore, be 
printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:


[[Page S11679]]




                                      Commonwealth of Virginia

                                 Richmond, VA, September 25, 1998.
     Hon. John McCain,
     Chairman, Committee on Commerce, Science, and Transportation, 
         U.S. Senate, Washington, DC.
       Dear Senator McCain: I am very pleased the Senate will soon 
     vote on the Internet Tax Freedom Act (S. 442).
       Since its introduction last year, I have been--and continue 
     to be--in strong support of the Internet Tax Freedom Act. 
     Your work on this important legislation goes hand in hand 
     with the compromise agreement reached by the Commerce and 
     Judiciary Committees in the House of Representatives. Both 
     Committees as well as the full House passed the bill 
     unanimously after well reasoned compromise from all those 
     concerned.
       As you know, the Internet is one of our most valuable and 
     fastest-growing resources, presenting enormous potential to 
     revolutionize both global and domestic commerce. But this 
     incredible tool currently faces some significant obstacles 
     with respect to state and local taxation. With more than 
     30,000 state and local taxing jurisdictions in the United 
     States, Internet development is in danger of being stifled by 
     a maze of inconsistent, unfair, and burdensome taxing 
     regimes.
       There are currently thousands of Internet companies, which 
     can be found in every state in the nation. They are small but 
     important vehicles of economic development and are unfairly 
     assessed taxes based on interpretations of existing tax law 
     written well before the establishment of the Internet. 
     Because of the importance of these businesses, the substance 
     of the act should do what its title suggests.
       The Internet Tax Freedom Act is important to our state 
     economies, to online consumers, and to the future success of 
     electronic commerce. This legislation places a temporary 
     moratorium on certain taxes so that an appropriate, non-
     discriminatory Internet tax policy can be developed and 
     implemented by policymakers at all levels.
       For these reasons, I urge the enactment of the Internet Tax 
     Freedom Act this year and look forward to working with you 
     and the Congress to ensure our nation remains the undisputed 
     leader in cutting edge technology industries.
           Very truly yours,
                                             James S. Gilmore III,
                                             Governor of Virginia.

  Mr. McCAIN. Mr. Gilmore says:

       I am very pleased the Senate will soon vote on the Internet 
     Tax Reform Act, S. 442.

  Not as pleased as I am. He says in his concluding paragraph:

       For these reasons, I urge the enactment of the Internet Tax 
     Freedom Act this year and look forward to working with you 
     and the Congress to ensure our Nation remains the undisputed 
     leader in cutting edge technology industries.

  So another Governor and a very important one, the Governor of 
Virginia, has weighed in in favor of this legislation.
  I believe the fact that we were willing to agree to certain 
grandfathering provisions was very helpful in moving this process 
forward, but I also think that it made an argument for a 4-year 
moratorium. Again, when it came out of the committee, it was 6 years 
originally and now the Finance Committee reduced it to 2. We think that 
4 years is obviously a reasonable compromise.
  So again I urge the 3-year moratorium advocates to come to the floor 
so we could have vigorous debate on that issue and a vote sometime 
around 4:45, with the agreement of the majority leader.


                           Amendment No. 3727

 (Purpose: To include legislative recommendations in the commission's 
                                report.)

  Mr. McCAIN. Mr. President, I know of no opposition to the amendment 
3727 by Senator Enzi, and I therefore call up the amendment and ask 
that it be adopted.
  The PRESIDING OFFICER. Is the Senator asking that the pending 
amendment be laid aside?
  Mr. McCAIN. I ask unanimous consent that the pending amendment be 
laid aside for the Enzi amendment 3727.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the Enzi amendment.
  The assistant legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain], for Mr. Enzi, 
     proposes an amendment numbered 3727.

  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 25, beginning on line 10, strike ``a report 
     reflecting the results'' and insert the following: ``for its 
     consideration a report reflecting the results, including such 
     legislative recommendations as required to address the 
     findings''.

  Mr. McCAIN. Mr. President, I urge adoption of the amendment.
  The PRESIDING OFFICER. Is there further debate on the amendment? If 
not, the question is on agreeing to the amendment.
  The amendment (No. 3727) was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mr. ENZI. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. McCAIN. I congratulate the Senator from Wyoming for his 
amendment.


                    Amendment No. 3718, as modified

       (Purpose: To revise the definitions of the terms ``tax,'' 
``telecommunications service,'' and ``tax on internet access,'' as used 
                              in the bill)

  Mr. McCAIN. Mr. President, on behalf of myself, I send an amendment 
to the desk, No. 3718, as modified, and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The pending amendment is set aside and the 
clerk will report the amendment of the Senator from Arizona.
  The legislative clerk read as follows:

       The Senator from Arizona, [Mr. McCain], for himself and Mr. 
     Wyden proposes an amendment numbered 3718, as modified.

  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 29, beginning with line 20, strike through line 19 
     on page 30 and insert the following:
       (8) Tax.--
       (A) In general.--The term ``tax'' means--
       (i) any charge imposed by any governmental entity for the 
     purpose of generating revenues for governmental purposes, and 
     is not a fee imposed for a specific privilege, service, or 
     benefit conferred; or
       (ii) the imposition on a seller of an obligation to collect 
     and to remit to a governmental entity any sales or use tax 
     imposed on a buyer by a governmental entity.
       (B) Exception.--Such term does not include any franchise 
     fee or similar fee imposed by a State or local franchising 
     authority, pursuant to section 622 or 653 of the 
     Communications Act of 1934 (47 U.S.C. 542, 573), or any other 
     fee related to obligations or telecommunications carriers 
     under the Communications Act of 1934 (47 U.S.C. 151 et seq.).
       (9) Telecommunications service.--The term 
     ``telecommunications service'' has the meaning given such 
     term in section 3(46) of the Communications Act of 1934 (47 
     U.S.C. 153(56)) and includes communications services (as 
     defined in section 4251 of the Internal Revenue Code of 
     1986).
       (10) Tax on internet access.--The term ``tax on Internet 
     access'' means a tax on Internet access, including the 
     enforcement or application of any new or preexisting tax on 
     the sale or use of Internet services.

  Mr. McCAIN. Mr. President, I urge adoption of the amendment.
  The PRESIDING OFFICER. The Senator has sent up a different version. 
Did the Senator want to modify it?
  Mr. McCAIN. As modified, 3718 as modified. I sent up a modified 
version.
  The PRESIDING OFFICER. Without objection, the amendment is modified.
  Is there further debate on the amendment? If not, the amendment is 
agreed to.
  The amendment (No. 3718), as modified, was agreed to.
  Mr. McCAIN. Mr. President, while he is on the floor, I thank the 
Senator from Wyoming for his involvement in this issue. He won a 
significant victory. I believe that his knowledge of this issue and 
this technology is very helpful not only on this issue, but we will be 
addressing numerous other issues regarding these emerging technologies 
in the future and I appreciate his participation. We look forward to 
working with him.
  Mr. President, I yield the floor.
  Mr. ENZI. Mr. President, I also thank the Senator from Arizona and 
the Senator from Oregon for their cooperation and the careful work they 
have done on the bill with the acceptance of the amendments that I and 
a number of other people worked on. I appreciate that. I yield the 
floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BIDEN. 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. BIDEN. Mr. President, I ask unanimous consent that I be able to

[[Page S11680]]

proceed for 7 minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________