[Congressional Record Volume 147, Number 136 (Thursday, October 11, 2001)]
[Senate]
[Pages S10652-S10653]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ENZI:
  S. 1542. A bill to foster innovation and technological advancement in 
the development of the Internet and electronic commerce, and to assist 
the States in simplifying their sales and use taxes; to the Committee 
on Health, Education, Labor, and Pensions.
  Mr. ENZI. Mr. President, I rise to introduce the Internet Tax 
Moratorium and Equity Act. I encourage each of my colleagues to join me 
as a cosponsor of this bill. With the extension of the current 
moratorium of the Internet Tax Freedom Act of 1998 expiring soon on 
October 21, 2001, there are several bills that are currently being 
discussed in the Senate in order to address this issue. I had to take a 
look at the Internet sales tax issue for people who might be using 
legislative vehicles to develop huge loopholes in our current system. 
We are federally mandating States into a sales tax exemption. We need 
to preserve the system for those cities, towns, counties, and States 
that rely on the ability to collect the sales tax they are currently 
getting. I believe that the current moratorium on Internet access taxes 
and multiple and discriminatory taxes on the Internet should not be 
extended without addressing the larger issue of sales and use tax 
collection on electronic commerce.
  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 to increase sales tax, just protect what is there right now. I 
believe the Internet Tax Moratorium and Equity Act is a monumental step 
forward in protecting, yet enhancing, the current system.
  Certainly, no Senator wants to take steps that will unreasonably 
burden the development and growth of the Internet. At the same time, we 
must also be sensitive to issues of basic competitive fairness and the 
negative effect our action or inaction can have on brick-and-mortar 
retailers, a critical economic sector and employment force in all 
American society, especially in rural States like Wyoming. In addition, 
we must consider the legitimate need of State and local governments to 
have the flexibility they need to generate resources to adequately fund 
their programs and operations.
  As the only accountant in the Senate, I have a unique perspective on 
the dozens of tax proposals that are introduced in Congress each year. 
In addition, my service on the State and local levels and my 
experiences as a small business owner enable me to consider these bills 
from more than one viewpoint.
  I understand the importance of protecting and promoting the growth of 
Internet commerce because of its potential economic benefits. It is a 
valuable resource because it provides access on demand. In addition, it 
is estimated that the growth of online businesses will create millions 
of new jobs nationwide in the coming years. Therefore, I do not support 
a tax on the use of Internet itself.
  I do, however, have concerns about using the Internet as a sales tax 
loophole. Sales taxes go directly to State and local governments and I 
am very leery of any Federal legislation that bypasses their 
traditional ability to raise revenue to perform needed services such as 
school funding, road repair and law enforcement. I will not force 
States into a huge new exemption. While those who advocate a permanent 
loophole on the collection of a sales tax over the Internet claim to 
represent the principles of tax reduction, they are actually advocating 
a tax increase. Simply put, if Congress continues to allow sales over 
the Internet to go untaxed and electronic commerce continues to grow as 
predicted, revenues to State and local governments will fall and 
property taxes will have to be increased to offset lost revenue or 
States who do not have or believe in State income taxes will be forced 
to start one.
  Furthermore, State and local revenues and budgets are especially 
critical now as these governments are responding to protect the 
security of all of our citizens and businesses. Any action to

[[Page S10653]]

extend the current moratorium without creating a level playing field 
would perpetuate a fundamental inequity and ignore a growing problem 
that will gravely affect the readiness of the nation.
  After months of hard work, negotiations, and compromise, the Internet 
Tax Moratorium and Equity Act has been introduced. I would like to 
commend several of my colleagues for their commitment to finding a 
solution and working with all parties to find that solution. I know 
this bill is the solution. The bill makes permanent the existing 
moratorium on Internet access taxes, but extends the current moratorium 
on multiple and discriminatory taxes for an additional four years 
through December 31, 2005.
  Throughout the past several years, we have heard that catalog and 
Internet companies say they are willing to allow and collect sales tax 
on interstate sales, regardless of traditional or Internet sales, if 
States will simplify collections to one rate per State sent to one 
location in that State. I think that is a reasonable request. I have 
heard the argument that computers make it possible to handle several 
thousand tax entities, but from an auditing standpoint as well 
as simplicity for small business, I support one rate per State. I think 
the States should have some responsibility for redistribution not a 
business forced to do work for government. Therefore, the bill would 
put Congress on record as urging States and localities to develop a 
streamlined sales and use tax system, which would include a single, 
blended tax rate with which all remote sellers can comply. You need to 
be aware that States are prohibited from gaining benefit from the 
authority extended in the bill to require sellers to collect and remit 
sales and use taxes on remote sales if the States have not adopted the 
simplified sales and use tax system.

  Further, the bill would authorize States to enter into an Interstate 
Sales and Use Tax Compact through which members would adopt the 
streamlined sales and use tax system. Congressional authority and 
consent to enter into such a compact would expire if it has not 
occurred by January 1, 2006. The bill also authorizes States to require 
all other sellers to collect and remit sales and use taxes on remote 
sales unless Congress has acted to disapprove the compact by law within 
a period of 120 days after the Congress receives it.
  The bill also calls for a sense of the Congress that before the end 
of the 107th Congress, legislation should be enacted to determine the 
appropriate factors to be considered in establishing whether nexus 
exists for State business activity tax purposes.
  I am introducing this bill today because I do not think there is 
adequate protection now. It is very important we do not 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.
  I recognize this body has a constitutional responsibility to regulate 
interstate commerce. Furthermore, I understand the desire of several 
senators 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 continue to create millions of new 
jobs in the coming years.
  The exciting thing about that for Wyomingites is that our merchants 
do not 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 do 
not have to rely on expensive catalogs to sell merchandise to the big 
city folks. They do not 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 have seen 
some of the economic potential in the Internet and will continue this 
progress. 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.
  I am very concerned, however, with any piece of legislation that 
mandates or restricts State and local governments' ability to meet the 
needs of its citizens. This has the potential to provide electronic 
loopholes that will take away all of their revenue. The Internet Tax 
Moratorium and Equity Act would designate a level playing field for all 
involved--business, government, and the consumer.
  The States, and not the Federal Government, should have the right to 
impose, or not to impose, consumption taxes as they see fit. The 
reality is that emergency response personnel, law enforcement 
officials, and other essential services are funded largely by States 
and local governments, especially through sales taxes. Passing an 
extension of the current moratorium without taking steps toward a 
comprehensive solution would leave many States and local communities 
unable to fund their services. I urge my colleagues to support it.
                                 ______