[Congressional Record Volume 147, Number 158 (Thursday, November 15, 2001)]
[Senate]
[Pages S11902-S11915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   INTERNET TAX NONDISCRIMINATION ACT

  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (H.R. 1552) to extend the moratorium enacted by the 
     Internet Tax Freedom Act through November 1, 2003, and for 
     other purposes.

  The PRESIDING OFFICER. The Senator from Arizona is recognized.
  Mr. McCAIN. Since I see the Senator from North Dakota here, I suggest 
that perhaps we could make our opening statements as part of the 60 
minutes of debate on the Dorgan-Enzi amendment. If that is agreeable, I 
would be glad to do that. I move to modify the agreement that we move 
immediately to the Enzi-Dorgan amendment with the 60 minutes of debate 
equally divided.
  The PRESIDING OFFICER. Is there objection?
  Mr. BAUCUS. Madam President, reserving the right to object----
  Mr. McCAIN. I withdraw that. I will proceed with my statement. I was 
trying to save the Senate some time. Obviously, we will take more time 
in discussing whether I was saving the Senate time or not.
  First, I ask unanimous consent to have printed in the Record a 
Statement of Administration Policy concerning H.R. 1552, the Internet 
Tax Nondiscrimination Act, from the President of the United States.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             H.R. 1552--Internet Tax Nondiscrimination Act

       The Administration supports Senate passage of H.R. 1552. 
     The Administration believes that government should be 
     promoting Internet usage and availability, not discouraging 
     it with access taxes and discriminatory taxes.
       As passed by the House, H.R. 1552 extends the Internet tax 
     moratorium enacted by the Internet Tax Freedom Act for two 
     years. While a five-year extension would be preferable, a 
     two-year extension will provide additional time to analyze 
     the impact of e-commerce on local and State tax receipts 
     while ensuring that the growth of the Internet is not slowed 
     by new taxes.
       The moratorium expired on October 21, 2001. The 
     Administration supports rapidly reinstating the moratorium. 
     The Administration encourages the Senate to pass H.R. 1552, 
     without amendment, to enable its expeditious enactment into 
     law.

  It basically says that the administration supports Senate passage of 
H.R. 1552. He concludes by saying that the administration encourages 
the Senate to pass H.R. 1552, without amendment, to enable its 
expeditious enactment into law.
  On Sunday, October 21, the Federal moratorium on Internet taxes 
expired.

[[Page S11903]]

State and local taxing jurisdictions, reportedly over 7,000 of them, 
are now free to tax Internet access, and to impose multiple and 
discriminatory taxes on e-commerce.
  I strongly support H.R. 1552, which would extend the moratorium by 2 
years. This proposal for a simple, short-term extension of the 
moratorium is supported by diverse interests, including, among many 
others, the National Conference of State Legislatures, the United 
States Conference of Mayors the Information Technology Association of 
America, the American Electronics Association, and the National 
Association of Manufacturers.
  I urge my colleagues to support this measure that has already passed 
the House of Representatives, and to oppose the Enzi/Dorgan amendment. 
Let me explain why.
  There is broad consensus that the moratorium on the imposition of 
access taxes should be extended. This has not been done, however, 
because of the separate issue of the collection of sales taxes on 
remote transactions. A number of Senators believe that this separate 
issue must be addressed if the moratorium is extended for more than a 
few months.
  State and municipal governments are concerned that they will lose 
significant revenue as more and more consumers buy goods on-line. Most 
of these consumers are required by state laws to pay taxes on these 
transactions, but they seldom do. While the loss of tax revenue from 
remote catalog sales has been of concern to states for many years, the 
prospect of many more untaxed on-line transactions has worried main 
street merchants and state and local governments that rely on sales tax 
revenue to support critical functions including education and emergency 
response. Their concerns are legitimate.
  A group of Senators have tried, literally for years, to address these 
concerns. Senators Dorgan, Enzi, Kerry, Voinovich, Hutchison, Wyden, 
and Allen, among others, have held countless meetings to try to balance 
concerns about loss of State and local revenue with concerns about 
imposing unwarranted and perhaps unbearable burdens on remote 
transactions. I have participated in many of these meetings at which 
countless drafts of legislation have been circulated, and I have been 
continually impressed at how committed, creative, and open to 
compromise these Senators have been.
  Unfortunately, however, there is not yet a consensus on if or how 
Congress should permit states to require out-of-state retailers to 
collect sales taxes on remote transactions. After the events of 
September 11 refocused out efforts, it became clear that we would not 
resolve this issue before the moratorium on Internet taxes expired.
  While we are much closer to an agreement on legislation relating to 
the collection of sales taxes we are not yet there. In the past, 
Congress has held protracted debate on the question of Internet taxes. 
Although the issue is extraordinarily controversial, we don't have time 
to thoroughly consider the still-divergent proposals. This controversy, 
however, should not prevent us from proceeding on the separate, and 
non-controversial issue of extending the moratorium on Internet access 
taxes.
  Just as there is agreement that the moratorium on Internet access 
taxes should be extended, there is also agreement that state sales 
taxes must be radically reconciled and simplified to remove both 
practical and legal barriers to remote collection and remission.
  This simplification, however, has not yet occurred. And it is not the 
Federal Government's responsibility to see that it does.
  Recognizing the need for simplifications, thirty-two states last year 
joined the Steamlined Sales Tax Project to develop a plan for 
simplifying remote sales and use tax collection. The National 
Conference of State Legislatures has since undertaken to develop model 
legislation to create uniform definitions and remove the burden on 
retailers of collecting and remitting sales taxes. Next month, the 20 
states that have passed legislation this year indicating their intent 
to proceed on sales tax simplification will meet in Salt Lake City to 
do this.
  Although these efforts are underway, the simplification is complex 
and will not happen overnight. Reconciling definitions among states of 
what is or is not taxable, and resolving the allocation of tax revenues 
among localities within states will not happen in 8 months. Frankly, it 
probably will not happen in 2 years. Nevertheless, I think that 
substantial progress toward simplification can be made in 2 years, and 
Congress will be in a much better position then to determine whether to 
consent to allowing states to require out-of-state retailers to collect 
and remit sales taxes on remote transactions.
  In the meantime, I think it is imperative that we extend the 
moratorium on the separate issue of Internet access taxes.
  The recent economic success experienced by the United States, the 
longest economic expansion in U.S. history was due, in part, to the 
Internet. Now the sectors of the economy tied to this vehicle of growth 
are experiencing troubled times and the nation is spiraling into 
recession. During times of economic uncertainty, we must restrain 
ourselves from further burdening an already ailing sector, particularly 
one which provides the most promise for successful recovery and further 
growth.
  Prior to September 11, the high tech sector began to suffer dramatic 
losses. Since the beginning of this year alone, revenue for U.S. 
Technology sales, including computers, semiconductors, and 
communications equipment, had fallen by 35 percent. Mass layoffs 
plagued the sector with 479,199 high tech jobs eliminated since the 
beginning of the year, 47,250 of which were eliminated in September 
alone.
  Industry leaders such as AOL, Sun Microsystems, and Intel have seen 
both stock prices and profits plunge. According to the research firm of 
Thomson Financial/First Call the high technology companies on the 
Standard & Poor's 500 are expected to see fourth quarter profits fall 
to 58 percent of last year's levels.
  This grim picture is expected to decline further, with tech profits 
expected to fall sharply in the first quarter of 2002, before 
recovering by the end of next year. Allowing access and multiple and 
discriminatory taxes on electronic commerce will inevitably lead to 
harder times for an ailing industry.
  We are now faced with the choice, will we allow the Internet tax 
moratorium to remain expired, further hampering the recovery of the 
high tech sector and the entire economy, or will we act now to extend 
the moratorium and support the recovery of this economy.
  Again, I reiterate my appreciation to the Senator from North Dakota, 
Mr. Dorgan, who has, along with myself, the Senator from Oregon, the 
Senator from Virginia, and others, had countless meetings. We have 
tried to come to an agreement. I believe there will come a time when we 
reach agreement. There will come a time when there are enough States 
that have come together to come up with a simplified system of sales 
taxes that can be fair to everybody. But we are not there yet.
  Other colleagues of mine will make arguments on both sides of this 
issue. I wish we could reach that stage because I am fully aware that 
State and local revenues are being unfairly diverted, or not collected 
because of the failure to have any taxes imposed on Internet 
transactions. But we are not there yet. I believe, particularly at this 
time when we are in an economic situation that is clearly unpleasant, 
it would not be the time for us to impose taxes on the Internet which 
is already in a state of fragility.

  Madam President, I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator has used his time. Who yields 
time?
  Mr. BAUCUS. Madam President, who is controlling time?
  Mr. McCAIN. May I ask the parliamentary situation?
  The PRESIDING OFFICER. The Senator from Arizona has consumed his 5 
minutes. There is 5 minutes to the chairman of the Commerce Committee 
and 5 minutes each to the chairman and ranking member of the Finance 
Committee.
  Mr. McCAIN. In other words, there is no time available under the 
unanimous consent agreement, so we would have to move to the amendment 
in order for other Members to speak; is that correct?
  The PRESIDING OFFICER. There is 1 hour available on the first-degree 
amendment.

[[Page S11904]]

  Mr. McCAIN. On the amendment. Madam President, parliamentary inquiry. 
I suppose the next speaker will then be taking time on the amendment.
  The PRESIDING OFFICER. If the amendment is called up, time will be 
available on the amendment.
  The Senator from Montana.
  Mr. BAUCUS. Madam President, I understand I have 5 minutes.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. BAUCUS. Madam President, I will try to make the best use of those 
5 minutes.
  Madam President, I rise in support of a simple 2 year extension of 
the Internet Tax Freedom Act. In my judgment, a short-term extension 
represents a reasonable, bipartisan compromise.
  While I support a clean 2-year extension, we should be firm in our 
resolve that this will not be the first of an endless line of 
moratorium extensions.
  I make a strong plea that this be the last time we impose a 
moratorium without taking the meaningful steps needed to bring 
interstate tax rules into the 21st century.
  While progress has been made on the issue of sales tax 
simplification, State and local governments will certainly need more 
than 6, 12, or even 18 months to come up with a system that works.
  Moreover, we do not need a quick fix; we need a real solution. Let us 
continue to keep the parties at the table long enough to make a 
meaningful change that works.
  The debate and negotiations that occur from this point forward must 
be about resolving issues regarding taxation of the Internet and not 
about the length of any future extensions.
  More importantly, the focus must be on how the traditional tax rules 
should apply to ``new economy'' businesses. These are issues the 
Finance Committee has been and will continue to examine.
  The States have been working hard to create a model simplified sales 
and use tax system. A limited extension of the moratorium for 2 years 
is needed in order to provide an adequate time to assess their 
progress.
  More importantly, as chairman of the Finance Committee I represent 
the State of Montana, which does not have a sales tax.
  As a Senator from Montana, I will work to ensure that any 
simplification plan will not place a undue burden on Montana 
businesses. Sales tax simplification should also be truly simple, and 
easy for businesses to comply with.
  Hopefully, by making this a short 2-year extension, we can encourage 
the States and the business community to move expeditiously to resolve 
outstanding issues and design a truly simplified sales and use tax 
system.
  This debate is not only about the structure of State sales and use 
taxes. There is also concern with how States assert a direct tax 
liability on an out-of-State company.
  States impose business activity taxes--corporate income and/or 
franchise taxes--on corporations that have property or employees in the 
State. The businesses that pay these taxes receive some governmental 
benefits and protections afforded by that State.
  A similar situation exists internationally, where foreign 
jurisdictions impose a direct tax liability on businesses operating 
within in the country.
  Therefore, as the rules for sales and use taxes are simplified, it is 
also important that we pay special attention to the rules regarding 
business activity taxes.
  What we used to think of when we heard ``property,'' ``goods,'' or 
even ``employees,'' is now very different in a world of digital goods, 
bits of electrons, and telecommuters.
  I stress the need to sort through these issues because I am certain 
that the rules we establish for ``interstate'' commerce will be the 
model for ``international'' commerce.
  We need to be very careful we do not set up a system that makes U.S. 
companies a tax collector for every jurisdiction around the world.
  On Internet access taxes, I believe we should look for ways to reduce 
barriers to access, including taxes.
  If our intention is to make Internet access tax-free, we must be 
certain that an appropriate definition of access is developed. 
Moreover, it is important to ensure that otherwise taxable product 
provided over the Internet are not inappropriately shielded from tax.
  I appreciate the hard work of my friends, Senators Enzi, Graham, 
Dorgan. They have worked hard. They have a proposal which may have 
merit.
  But the devil is always in the details, and the details have not been 
examined by the Finance Committee, or any committee for that matter.
  In fact, there have been no hearings on the Dorgan-Enzi amendment to 
give interested parties, academics, and Members of the Senate the 
opportunity to discuss the consequences of this legislation and assess 
the workability of this bill.
  This amendment may be a reasonable starting point, but as with all 
legislation of this magnitude, the Senate, through its committees, 
should give it careful consideration.
  Some people may say that we have talked too much already. They say 
that the parties have already had three years to iron out their 
differences.
  That may be, but we must be very careful because this bill raises 
more questions than it answers.
  For example, how does this legislation make sure that the uniform 
rates among states stay uniform over time?
  Does the definition of ``Internet access'' allow nonincidental 
content, such as music and movies, to be provided tax free if bundled 
with Internet access?
  Are business activity taxes adequately addressed?
  These are difficult issues, and they deserve serious and deliberative 
consideration.
  It is for this reason, that I encourage my colleagues to support a 
short, 2-year clean extension of the Internet Tax Freedom Act.
  In my judgment, 2 years is adequate time to give the Finance 
Committee an opportunity to address these important, but difficult, tax 
issues.
  I emphasize that the work remaining involves tax issues that must be 
resolved by the Finance Committee. There is a long-term precedent of 
the Senate Finance Committee having jurisdiction over issues involving 
the taxation of the Internet.
  A 2-year extension of the Internet Tax Freedom Act is a reasonable 
compromise and deserves the support of the Senate.
  Mr. LEAHY. Mr. President, I want to add my support to promoting 
electronic commerce and keeping it free from discriminatory and 
multiple State and local taxes.
  I strongly support the Senate quickly passing H.R. 1552 to extend the 
Internet tax moratorium for 2 years.
  Last month, I was pleased to join the senior Senator from Oregon and 
the senior Senator from Arizona as an original cosponsor of the 
Internet Tax Moratorium Extension Act, the Senate counterpart to H.R. 
1552. I commend Senator Wyden and Senator McCain for their continued 
leadership on Internet tax policy.
  Although electronic commerce is beginning to blossom, it is still in 
its infancy. Stability is key to reaching its full potential, and 
creating new tax categories for the Internet is exactly the wrong thing 
to do.
  E-commerce should not be subject to new taxes that do not apply to 
other commerce.
  Indeed, without the current moratorium, there are 30,000 different 
jurisdictions around the country that could levy discriminatory or 
multiple Internet taxes on e-commerce.
  Let's not allow the future of electronic commerce, with its great 
potential to expand the markets of Main Street businesses, to be 
crushed by the weight of discriminatory taxation.
  Many Vermont companies have contacted me in the last month and weeks 
in support of extending the moratorium, including Green Mountain Coffee 
Roasters, the Army & Navy Store in Barre, and the Vermont Teddy Bear 
Company.
  Cyberselling is working for Vermonters.
  We also need a national policy to make sure that the traditional 
State and local sales taxes on Internet sales are applied and collected 
fairly and uniformly. This 2-year extension of the current moratorium 
gives our Governors and State legislatures time to simplify their sales 
tax rules and reach consensus on a workable national system for 
collecting sales taxes on e-commerce.
  Indeed, the National Conference of State Legislatures has endorsed 
our legislation to extend the Internet tax

[[Page S11905]]

moratorium for two more years to give States time to complete work on 
sales tax simplification.
  I must also raise some serious questions about the approach of some 
Senators to pass legislation to waive Congress's authority to carefully 
review and approve interstate compacts. As chairman of the Senate 
Judiciary Committee, which has jurisdiction over interstate compacts, I 
cannot understand why we should recede congressional authority to 
approve an interstate compact on sales tax issues if 20 States join any 
compact.
  Despite good intentions of its proponents, this approach is asking 
the Senate to buy a pig in a poke.
  I am a strong supporter of interstate compacts where appropriate, 
such as the Northeast Dairy Compact, but the Senate should not approve 
of any interstate compact without carefully reviewing its details 
first. When the Northeast Dairy Compact was approved by the Congress, 
every detail and every aspect of it was known far in advance.
  It also raises constitutional questions for legislation to mandate 
that Congress automatically approve an interstate compact on sales 
taxes without reviewing its text since the Constitution explicitly 
requires Congress to approve interstate compacts.
  The Enzi amendment allows 11 jurisdictions to continue to tax 
Internet access, but permanently bans Internet access taxes everywhere 
else in the country. By permanently prohibiting taxation of Internet 
access in some States, but approving of such taxation in other States, 
the Enzi amendment may violate the ``uniformity clause'' in Article I, 
8 of the United States Constitution.
  The uniformity clause states that ``all Duties, Imposts and Excises 
shall be uniform throughout the United States.''
  The uniformity clause requires that Federal legislation levying taxes 
follow a consistent plan and apply in all portions of the United States 
where the subject of the tax is found.
  In United States v. Ptasynski, the Supreme Court held that it will 
subject geographic distinctions in Federal taxation to heightened 
scrutiny. In a unanimous decision, the Court stated that ``Where 
Congress does choose to frame a tax in geographic terms, we will 
examine the classification closely to see if there is actual geographic 
discrimination.''
  The Enzi amendment proposal to lock in discrimination between States 
in taxation of Internet access raises questions under the uniformity 
clause that require careful consideration.
  In the case of a temporary moratorium, such as the one in the House 
bill, the grandfathering of Internet access taxes in a limited number 
of States may be explained as freezing the status quo while Congress 
comes up with a permanent solution to the Internet tax issue. Thus, it 
is unlikely to raise the geographic discrimination problem the Supreme 
Court discussed in Ptasynski, and would survive heightened scrutiny.
  In contrast, the Enzi amendment's permanent discrimination on the 
basis of where an Internet user lives is much harder to explain under 
the heightened scrutiny required by the Supreme Court. If courts treat 
the Federal Government's establishment of a discriminatory regime of 
taxation by the States as raising the same uniformity clause issues as 
the Federal Government's levying of discriminatory taxes, the Enzi 
amendment's Internet access tax moratorium will be ruled 
unconstitutional.
  As a result, this amendment appears to raise serious constitutional 
concerns.
  E-Commerce is growing, our moratorium law is working, and we should 
keep a good thing going. I am proud to cosponsor the Internet Tax 
Moratorium Extension Act to encourage online commerce to continue to 
grow with confidence and to continue to allow the States to move ahead 
with sales tax simplification efforts.
  I urge my colleagues to vote for a straight forward 2-year extension 
of the internet tax moratorium.
  Mr. BURNS. Madam President, multiple, confusing and inconsistent 
State tax rules impose an incredible burden on interstate commerce and 
the economy, and therefore it is imperative that the Senate move 
quickly to extend the moratorium on Internet access taxes and to 
continue protecting electronic commerce from multiple and 
discriminatory taxation.
  As a result of the U.S. Senate's failure to extend the moratorium 
before it lapsed on October 21, 2001, it is now possible for the more 
than 7,600 State and local taxing jurisdictions to impose multiple and 
discriminatory taxes on electronic commerce and taxes on internet 
access.
  On October 16, the House adopted H.R. 1552 under expedited floor 
procedures. This bipartisan legislation would extend the current 
moratorium created by the Internet Tax Freedom Act for 2 years. H.R. 
1552 is supported strongly by a wide range of groups, including the 
entire high-tech business community, the National Conference of State 
Legislatures, State and local municipal groups, the U.S. Chamber of 
Commerce, the National Association of Manufacturers, and many other 
business and retail groups that have put aside their differences in 
support of a clean, 2-year extension of the moratorium.
  Given recent events and the current economy, this is the wrong time 
to saddle consumers with Internet access taxes or with multiple and 
discriminatory State taxes on electronic commerce. Enacting H.R. 1552 
now would provide us with additional time to continue to work together 
to try to reach consensus on clear and simple tax rules for a 
borderless marketplace.
  We should not be focusing on how to make our tax codes less 
cumbersome for the purposes of Interstate sales tax collection, 
especially at this late hour. That is why I ask that my colleagues 
table this amendment.


                            section 5(a)(8)

  Mr. DURBIN. Madam President, I would like to have a discussion with 
the managers that I hope will clarify the meaning of an important 
element of this legislation. Section 5(a)(8) of the bill calls for 
``State administration of all State and local sales and use taxes'' to 
be part of the streamlining process that would allow States and 
localities to be able to collect taxes due on remote sales. I believe 
it is important to make clear--in the legislation itself--that the 
requirement for ``State administration'' applies only to those taxes on 
out-of-State remote sales. The fact that, in a particular State, a 
single locality might on its own continue to collect local taxes on 
other sales would not affect that State's eligibility to be part of the 
streamline compact.
  By way of example, the city of Chicago has a number of local use 
taxes that are imposed on different types of transactions. The city 
both imposes and collects those taxes from sellers wherever they are 
located in the State of Illinois. While the city and the State might 
agree to State administration of out of State remote sales, I would not 
want to see this legislation mandate that only the State of Illinois 
could collect these taxes on other sales.
  I believe that this interpretation is intended by the legislation. 
Section 5(a) call for States and localities to work together to develop 
a streamlined tax system ``in the context of remote sales.'' However, I 
am concerned that this intent is not clearly enough spelled out. When 
the legislation returns from conference, I hope that this intent would 
be made absolutely clear. This could be done by changing section 
5(a)(8) to read ``State administration of all State and local sales and 
use taxes on remote sales.'' It would also help to add a general use 
clause that would state that ``nothing in this Act shall be construed 
to divest the authority of local governments to collect taxes on sales 
other than remote sales as defined in this Act.''
  Would the managers agree to this interpretation and assure me that 
the final legislation will make this interpretation absolutely clear?
  Mr. DORGAN. I thank the Senator for his observations. I agree with 
his interpretation that the requirement of State administration of 
sales and use taxes applies only to remote sales. While I believe that 
this is the intent of the current wording, I will work in conference to 
assure that this point is absolutely clear.
  Mr. ENZI. I am in agreement with both the Senator from Illinois and 
the Senator from North Dakota. I also agree that the requirement for 
State administration of sales and use taxes applies only to remote 
sales, and that this is the intent of the current wording. However, I 
will join with the Senator from North Dakota in working to

[[Page S11906]]

further clarify this language in conference.
  The PRESIDING OFFICER. The Senator's time has expired. Who yields 
time? The Senator from Wyoming.


                           Amendment No. 2155

  (Purpose: 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)

  Mr. ENZI. Madam President, apparently under the unanimous consent 
agreement, that brings us to the amendment itself. As such, I yield 
myself 8 minutes, and I call up amendment No. 2155.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Wyoming [Mr. ENZI], for himself, Mr. 
     Dorgan, Mrs. Hutchison, Mr. Graham, Mr. Voinovich, Mr. 
     Breaux, Mr. Hutchinson, and Mr. Carper, proposes an amendment 
     numbered 2155.

  Mr. ENZI. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Madam President, 2 years ago we passed a simple extension 
of the moratorium. That is exactly what we did 2 years ago, and now we 
are saying there have been no hearings held on it and there has been no 
committee work on it.
  There have been individuals working on this because 2 years ago there 
were a number of us who were deeply concerned about what was going to 
happen to revenues for cities, towns, counties, and States. We have 
been working on it in the meantime. We have been working with people 
from the committees. We have been having groups come in.
  I particularly want to mention Senator Dorgan of North Dakota, 
Senator Graham of Florida, Senator Wyden of Oregon, Senator Voinovich 
of Ohio, Senator Allen of Virginia, and Senator Carper of Delaware. A 
lot of us have been working and meeting with any group that would meet 
with us to talk about how we could handle this sales tax loophole.
  There is pain out there, there is agony out there, and through a 
process--not a popular process because this amendment does not wind up 
with what any one group wants. Usually the process around here is to 
say: This group has enough votes to pass this, and I am going to join 
that group and we will build in what we can for other people and expand 
the vote. That is not what can happen because it does not put in any 
degree of fairness for anybody who is involved in the system.
  So what we tried to do with this bill was go into a leveling process, 
one that would provide for sales tax collections so sales tax revenues 
would not go down. It would take care of an extension of the access 
tax, and it would provide some encouragement for the States to do 
something to streamline and simplify their sales tax system.
  A very important procedure in this provision is one that protects 
start-up and small businesses, and that is an exclusion from having to 
collect any tax, even should the Congress at a future date say that 
needs to be done, on sales of less than $5 million. That is not a 
start-up business. That is not a small business. So what this amendment 
actually does is extend the access taxes, in a very conservative way, 
so we would not overreach on access taxes, but so we would put a 
prohibition on access taxes.
  Then it gives some encouragement to the States to simplify their tax 
systems. It does not agree it will be done. It does not put any tax 
into effect. It gives them encouragement, and that is something 
Congress has not been giving them for the last 2 years. We have not 
been giving them encouragement, other than a few meetings we have had 
with them to see what kind of work they can do, and they have been 
meeting. They have been streamlining. They have been working to come up 
with a system that will make it possible for people to collect the 
sales tax in a way that will benefit the States and the marketers.
  I hope my colleagues will take a look at the bill. I know this is 
something that has been talked about, reviewed by a lot of people, 
particularly since we turned in this last version of the bill, but 
through all of the versions that we have worked on. I know the 
guidelines have been seen that are outlined for the States. There is 
some flexibility for the States yet, and that is a necessity while they 
finish out their work, but this bill contains some guidelines for them. 
Then it provides for us to vote on their provision when they get 20 
States together, if they can get 20 States together. That is a pretty 
large group of people to be able to get into a compact. The 
encouragement for them to join the compact is, even if Congress 
approves the compact, they cannot have remote sales tax collections 
without joining the compact. So we have some requirements we have asked 
for them for the simplification, and then we have put a provision in if 
they can get 20 States together--and again, I want to mention how hard 
that is--the Congress will vote on whether they have simplified or not, 
whether they have met criteria that we have imposed either in the bill 
or in our minds since that time. It will require a vote of Congress, 
and that complies with Federal and Supreme Court direction we have had 
before.
  I have a bill. I am pleased with the support. I do want to mention it 
has been a difficult process. We have worked with the National 
Governors Association. We have worked with the National League of 
Cities. We have worked with the International City-County Management 
Association. We have worked with the National Association of Counties 
and the Council of State Governments. All of those folks have endorsed 
what we have done and asked for Congress to take this step of extending 
the moratorium with encouragement.
  In their letter they state, irrespective of previous letters on the 
Internet tax moratorium and contrary to some dear colleague letters 
circulating in the Senate, we do not support legislation to reinstate 
the Internet tax moratorium for 2 additional years. The letter is from 
those groups I mentioned.
  Besides those groups, we have been working with retailers from 
virtually every State. We have been working with direct marketers and 
the Direct Marketing Association. We have been working with realtors. 
They have a huge stake in this whole process as well.
  I have to say there are not provisions in this bill that satisfy any 
one of those groups, but they recognize the need to do this in order to 
get the States in a position where they can provide for the kinds of 
services they have to provide in their communities.
  I reserve the remainder of my time, and I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Madam President, as the original Senate sponsor of the 
Internet Tax Freedom Act, I have spent 18 months trying to find common 
ground on this issue. For hour after hour, we have gone at it, because 
obviously the technology sector is being pounded and local governments 
are understandably concerned about their revenues. Today, however, and 
I want to emphasize this to the Senate, many in both camps are in 
agreement on what the Senate should do. Groups as diverse as the 
American Electronics Association and the National Conference of State 
Legislatures are in agreement.
  There ought to be a simple 2-year extension of the current Internet 
Tax Freedom Act. It would be a mistake to support the substitute, 
although well-intentioned, by the Senator from Wyoming. The current 
Internet Tax Freedom Act makes it illegal to discriminate against 
electronic commerce, and no jurisdiction in the country has been able 
to show that they have been hurt by their inability to discriminate. I 
want to emphasize to our colleagues tonight, a vote for the Enzi 
substitute means millions of Americans could be hit with new taxes for 
clicking on a Web page.
  The substitute is bad news because it changes the definition of 
Internet access so if Internet access includes receipt of content or 
services then Internet access can be taxed. That would mean, for 
millions of Americans, the first thing they would get when they get on 
to the Web, news or weather or sports, that could be taxed. If this 
were

[[Page S11907]]

not damaging enough, the substitute actually makes it possible to 
inflict those taxes retroactively to 1998.
  I am of the view most Senators believe there ought to be a permanent 
ban on Internet access taxes, that Internet access taxes widen the 
digital divide, and yet the substitute goes in the opposite direction.
  Our first economic responsibility ought to be to do no harm, but the 
substitute creates new opportunities for economic mischief.
  For many Americans, basic Internet access is about plugging the 
computer into a plain old phone line, dialing an Internet Service 
Provider, such as Erol's or Earthlink, and logging on to the Internet. 
Obviously, the blank screen does no one any good; most people when they 
click on to the Net they get a Web page and start receiving information 
and content on that Web page. For that, the substitute opens those 
millions of people up to new taxes.
  The second flaw with the substitute is it would not prevent every tax 
jurisdiction from imposing new taxes on the Internet. Any of the 7,600 
taxing jurisdictions in America could go out and concoct new taxes. For 
the life of me, I cannot figure out why that would be good for the 
economy right now.
  The third flaw in the substitute is it allows discrimination against 
remote and on-line sellers, forcing them to pay different tax rates 
than in-State businesses. The substitute permits the remote seller to 
be taxed differently than an in-State business and, as a result, 
millions of small businesses will face significant large, new burdens 
trying to navigate a system of multiple and varying tax rates.
  For example, in one part of Colorado there are five distinct tax 
rates within a single zip code. No software exists today that can help 
the small businessperson navigate the sea of bureaucracy and redtape, 
and I hope the Senate won't force that daunting task on unsuspecting 
small businesses.

  I will conclude with this comment. Tonight, the Senate is being 
presented with two different views of Federal policy towards the 
Internet. The first, which is contained in the underlying bill, 
stipulates that there ought to be a short, clean extension of current 
law barring discriminatory taxes on electronic commerce and nothing 
else. The substitute--the Senate Finance chairman is absolutely right, 
and I am grateful for his support on this--hasn't had a hearing. It 
exposes millions of Americans to the prospects of new taxes, creates 
the possibility of a crazy quilt of Internet regulation throughout the 
country, and looks to the possibility that we would see scores of forms 
and paperwork that would chew up a vast amount of time in compliance.
  I hope my colleagues will support the underlying bill, will reject 
the substitute, and join a diverse coalition that includes the American 
Electronics Association and the National Conference of State 
Legislatures, two groups that, on this issue, have in the past 
disagreed again and again. Those two groups, the American Electronics 
Association and the National Conference of State Legislatures, are 
united saying the way for the Senate to proceed is to go for a clean 2-
year extension of this moratorium and reject the substitute.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Madam President, I request the Chair please notify me 
when I have used 4 minutes.
  Madam President, we need to decide what this debate is about and what 
it is not about. This is not a debate about a new tax. It is not a 
debate about a new tax. My colleague referred to that. That is not 
accurate, and I would be happy to have a long and extended debate about 
that. But let's understand what it is and is not.
  I support the Enzi-Dorgan substitute. I think it is an important 
piece of legislation. Let me describe what it does.
  We have two problems. One of the problems is that more and more sales 
in this country now are being conducted by remote sellers--Internet, 
catalog, and so on. On Main Streets of our communities we have sales 
being conducted by small business men and women. When they make those 
sales, they collect the tax. They compete against a remote seller who 
makes a sale but does not charge the tax, even though a tax is owed on 
the transaction. The tax is owed on a transaction with the remote 
seller, but it is never paid because it is a use tax and people don't 
file millions and millions of use tax returns. The result is State and 
local governments are losing a substantial amount of money--$13 billion 
it is estimated this year; by the year 2006, $45 billion, most of which 
goes to support local schools. So State and local governments are 
rightly concerned about funding for their schools.
  There is also the issue of fairness for Main Street. That is a 
problem: Lack of funding for schools, a tax that is owed but not paid, 
fairness for Main Street retailers.
  The second problem is a problem for remote sellers. A remote seller 
says: I don't want to have to collect a tax and submit it to 5,000 or 
7,000 jurisdictions. That is a fair point. They should not have to do 
that. That is burdensome and too complicated. So we say solve both 
problems.
  Require State and local governments to make dramatic simplifications 
in their tax systems. When they do, through a compact, submit that 
compact to the Congress for approval or disapproval. If the Congress 
approves that, then allow them to require remote sellers to collect the 
tax that is already owed on the transaction, solving both problems and 
dramatically simplifying compliance for the remote sellers. And we will 
not approve it if it does not do that.

  Second, at the same time, collect a tax that is already owed and make 
it much simpler for those who owe that tax to comply with current law.
  We can do both of those. We can solve both of those by beginning with 
this substitute. This substitute itself doesn't solve the problem, but 
we have two choices. We can decide to ignore this problem and do 
nothing. But you know and I know it will not go away. We will be back 
here next year or the year after or 5 years from now. This problem is 
going to grow, not recede. We can solve this problem now or we can just 
do the moratorium, which, incidentally, I have supported and do 
support, but I support it with a solution to the other problem.
  We can do these in tandem by providing support for the Enzi 
substitute, saying we want to do a number of things. We want to extend 
this moratorium. We don't believe in punitive taxation. We don't 
believe in taxing access. We want to do all the things Senator Wyden 
talked about with respect to the moratorium, but we want to do more 
than that. We want to solve another problem out, festering, and 
growing. It is not a problem that deals with a new tax. Anybody who 
talks about that is just dead wrong. It is a problem dealing with 
school finance, with fairness on Main Street, a problem with ballooning 
revenues that need to come to support our schools, revenues that are 
now being lost because they are not being paid.
  That is the choice, and I hope we make the right choice tonight.
  Let me make one final point. When we pass the Enzi substitute, we 
have not done anything except say to the States: You go ahead and 
develop this process and submit it to us later, and we will then make a 
judgment on whether we will allow you to impose this collection. But 
our judgment will be based on whether you substantially have simplified 
your tax laws.
  That is what the Enzi substitute does, and that is why I support it.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. ALLEN. Madam President, I yield myself 8 minutes off the time of 
the opponents of the amendment.
  The PRESIDING OFFICER. The Senator is recognized for 8 minutes.
  Mr. ALLEN. Madam President, the reality is, if we pass the Enzi-
Dorgan amendment, the substitute, what we are in effect doing is 
imposing Internet access taxes and allowing discriminatory taxes on the 
Internet. This is a measure on which I know Senator Enzi and Senator 
Dorgan have worked hard. Nevertheless, it has been changing almost by 
the day and certainly almost by the hour in recent weeks. There has not 
been any scrutiny to it.
  Let me associate myself, though, with the remarks and observations of 
Senator Wyden of Oregon. This does complicate the Tax Code. It is a 
very complex issue which actually makes it

[[Page S11908]]

worse. There are unfair taxes that could occur even within a State if 
this were adopted and, indeed, it has added taxes.

  If we allow this amendment to be put on, let's have no doubt about 
it; the House is not going to conference. We will have this expired 
moratorium continuing. There are already States that have access taxes 
that are grandfathered. These are taxes, such as the Spanish-American 
war tax that was put on for telephone service, a luxury. Once taxes are 
put on by a State or locality, it is very hard to get them off.
  There are two sides. There is a choice Senators are going to need to 
make. The opponents are for a tax-free Internet. The other side is on 
the pro-tax-collector side. The first decision we need to make is 
whether we extend the Internet access tax moratorium or do we vote for 
the Enzi-Dorgan amendment which would result in allowing Internet 
access taxes and discriminatory Internet taxes.
  The opponents of this amendment side with individuals. We side with 
entrepreneurs rather than siding with the tax collectors.
  We have heard that this is a loophole, the fact that someone who has 
no physical presence in a State, gets no benefits from fire or police 
services, that they do not have to collect and remit sales and use 
taxes to 7,600 jurisdictions--that that is not a level playing field, 
or it is a loophole.
  I look at the Internet as an individualized enterprise zone where the 
consumer, the individual, the human being is the one making the 
decisions, not tax-collecting bureaucracies.
  As far as this level playing field, let's assume you wanted to get 
your son or daughter a Harry Potter CD. If you ordered it on line, it 
would cost $16.26. That is including shipping and handling. That would 
be getting it in 3 to 5 days in shipment. It would be 5 times more in 
cost of shipping if you wanted it overnight. Off line, at a store, it 
would be $14.62.
  With the velour dress, here are cowboy boots and a computer. Let me 
go through the specification on each of these to show how this playing 
field is relatively level and, in fact, you actually save money by 
going to a store, as well as convenience. Amazon.com on line, total 
price, shipping and handling, is $16.26. If you go to Best Buy in 
Springfield, VA, paying a sales tax, it is $14.62. Savings by going to 
the store is $1.64. Again, we took the lowest shipping and handling.
  Again, this is where we take the lowest shipping and handling.
  Let's assume you wanted to buy yourself or your bride a dress. There 
is a velour dress from Spiegel.com, on line, at $89. The price at the 
store is actually a little more. At Tyson's Corner, at Macy's, it is 
$95. But when you put in the tax versus shipping and handling, you save 
money by going to the store.
  Say you wanted to buy yourself some boots. This is what it would cost 
on line--$120. It is $121 at the store in Springfield. But, again, the 
savings is $3.50 if you go to the store over shipping and handling.
  If you buy a Dell computer on line, the price is exactly the same 
price as it is at Circuit City in Charlottesville, VA. But you would 
save money in that the sales tax is $71. Shipping and handling is $95. 
You would save approximately $24.
  Put all of that into context. If you are buying a dress, or somebody 
is buying boots, you may like to try them on. You may want to put them 
on to see if they fit. That is the advantage those in the stores have 
over somebody buying on line. You can touch it. You can feel it. You 
can see how they fit. If there is a problem, you bring them right back 
to that store. You don't have to pay handling and shipping and go 
through all that annoyance and aggravation of handling and shipping.
  Say you wanted to buy your son or daughter the Harry Potter 
soundtrack but didn't want to wait 5 days. Maybe you wanted to get an 
Allen Jackson soundtrack and listen to it driving home. You would want 
to get it right away. Again, the convenience is there.
  The point is there is competition. The idea that this is not a level 
playing field is not just borne out by the facts. While this is all 
very well intentioned, the solution is not burdening the free 
enterprise system. The solution is not harming the Internet, and the 
capabilities and potential and possibilities of the Internet for 
education, communication, and commerce.
  Indeed, what is being tried here with the Enzi-Dorgan amendment is to 
abrogate and negate a settled constitutional law from Supreme Court 
decisions, whether it was the Quill decision or whether it was the 
Bella Hess decision, which say there cannot be taxation without 
representation.
  I would like to work with the proponents of this amendment to find a 
system where the folks who care about their local schools, as Senator 
Dorgan said, can pay those use taxes. But I am going to stand on the 
side of freedom--freedom of the Internet, trusting individuals and 
entrepreneurs--and not on the side of making this advancement in 
technology easier to tax for the tax collectors.
  I reserve whatever time I may have remaining.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. VOINOVICH. Madam President, I yield myself 4 minutes.
  Madam President, I rise in support of the amendment offered by my 
colleagues, Senators Enzi and Dorgan. Most experts agree that this 
explosion in electronic commerce, made possible through the Internet, 
helped fuel our most recent economic surge and contributed to the 
greatest sustained period of growth in our nation's history. However, 
most would agree that the current framework of thousands of state and 
local tax jurisdictions is now well-built for this ``new economy.'' 
Technology has made it possible for commerce to transcend traditional 
local, state and even national borders.
  The issue here is how can we continue to grow the Internet while at 
the same time preserving state's rights to collect revenues on sales 
that traditionally would be generate sales taxes. Frankly, I believe 
that no state is in favor of creating new taxes so as to cripple the 
growth of the Internet. But I do feel that states and localities should 
be able to collect taxes on legitimate transactions that have a 
substantial nexus with their state so that they would be able to 
collect sales taxes on those transactions if they were to physically 
take place in their state.
  And many other organizations agree.
  This legislation is supported by the National Governors Association, 
National Association of Counties, National League of Cities, Council of 
State Governments, International City and County Management 
Association, National Retail Federation, National Association of 
Retailers, E-Fairness Coalition and companies such as Gateway, Compaq, 
VerticalNet, Walmart, Target, HomeDepot, and Circuit City.
  This issue is truly about federalism--the delineation of the role the 
federal government plays relative to state and local governments and 
the people.
  With regard to sales taxes, there are currently 45 states that rely 
on some form of sales tax. These states receive, on average, almost 33 
percent of their annual operating budgets from sales taxes. In my state 
of Ohio, it's 31.4 percent.
  Our States are in a very serious situation. A recent study prepared 
by the University of Tennessee shows that states could lose nearly $440 
billion in sales tax revenue over the next decade in Internet tax 
revenues if Congress does not empower our states to collect revenues 
from remote sales.
  These are revenues that would not be available to build schools, pave 
roads, pay for emergency services or meet other fundamental 
responsibilities.
  In my home state of Ohio, our state government will lose more than 
$475 million in fiscal year 2002 and Ohio is projected to lose $596 
million in fiscal year 2003 in revenue forgone from their ability to 
raise funds from Internet sales.
  And as our economy moves more and more towards E-commerce, the fiscal 
impact on Ohio and other states will continue to damage the abilities 
of our states to fund their own services. This lost revenue merely 
exacerbates the difficult fiscal challenges Ohio and other states face 
as they suffer revenues losses from the current economic downturn.
  For the federal government to shield Internet sellers from state tax 
collection responsibilities would usurp the autonomy of the states and 
force them to cut services and/or raise revenue elsewhere through 
additional taxes or fees.

[[Page S11909]]

  In my view, preempting the states in such a critical area as e-
commerce without addressing the state and local revenue needs suggests 
that Congress is not as committed to the principles of federalism.
  And it could force the states to come to Washington in order to make 
up the funds we have taken away from them. For those concerned about 
the growth of the federal government, as I am, it will be very 
difficult to say ``no'' when states argue for more money if Congress by 
inaction has taken away a revenue source.
  That is why this amendment by Senators Enzi and Dorgan is so 
important.
  It provides a permanent extension of the moratorium on Internet 
access taxes, and extends the moratorium on multiple and discriminatory 
taxes for five years.
  In addition, this amendment encourages states to develop a 
streamlined system of sales and use taxes that provides: a centralized 
multi-state registration system for sellers; uniform rules for 
attributing transactions to particular taxing jurisdictions; uniform 
procedures for exempt purchases; uniform software certification 
procedures; uniform tax return and remittance forms; consistent 
electronic filing and remittance methods; and protections for consumer 
privacy.
  This amendment will also allow Congress to remain involved before any 
state moves to tax any Internet transactions. Once 20 states have 
developed and adopted an Interstate Simplified Sales and Use Tax 
Compact, the states will submit the Compact to Congress.
  Our State and local governments are not interested in putting a 
damper on the expansion of the Internet; they want it to prosper like 
all of us.
  The real question before us is: how can we ensure that our businesses 
and our nation are able to compete in this new, technology driven 
economy without sacrificing the principles of federalism which have 
served us well for over 200 years? State economies benefit from the 
healthy and unfettered growth of electronic sales. All they and 
traditional retailers ask is fair treatment.
  Federalism can adapt and even flourish when we remember to work as 
partners with our state and local governments. That is why I urge my 
colleagues to support the Enzi-Dorgan amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. BOXER. Madam President, I yield myself 5 minutes in opposition 
to the Enzi amendment.
  The PRESIDING OFFICER. The Senator may proceed.
  Mrs. BOXER. Thank you very much, Madam President.
  I rise in strong opposition to the Enzi amendment, and I hope we will 
defeat it by a very strong bipartisan vote.
  I have read this amendment over and over. It has changed mightily 
during the last month or so. But it is very clear to me that if this 
amendment were to become law--by the way, the House would never allow 
it to become law. But let's say it could become law. I think it would 
wreak havoc on Internet commerce. Let me tell you why.
  Look at page 3 of the amendment. Look at section 3, and look at 
paragraph A. There is a 1, which clearly states that Internet service 
providers could be forced to go back retroactively to 1998 and remit 
Internet access taxes to the States.
  Can you imagine the burden that would put on this country at a time 
in our history when we are in a major recession?
  Second, Senator Enzi's amendment would not prohibit new taxes on 
Internet access and, although it would keep the moratorium on 
``discriminatory and multiple'' taxes, it may not prevent ``new'' taxes 
on electronic commerce.
  Finally, I want to state that these are statements made by my friend 
and colleague from Oregon, Ron Wyden, in a far more articulate way than 
I. I am trying to underscore what he said.
  If you look at page 4, you see that the Enzi proposal would allow 
taxes on Internet content. It is very clear that the moratorium on 
Internet access taxes would no longer apply to Internet content.
  Can you imagine people connecting to the Internet and suddenly being 
charged every time perhaps they connected to the Web?
  In my view, this is a very dangerous kind of amendment because if it 
does become law it will wreak havoc on business on the Internet, and 
not only business, but just the right to get on the Web and read 
content and to be able to do that without extra charges. This is not 
the time for that.
  Madam President, this was updated as of October 5, 2001. The Wall 
Street Journal has printed 30 pages of companies that have gone out of 
business. I will give you some of them. AdMart: announced plans to shut 
down, lay off 334 employees. Advertising.com: announced plans to lay 
off 72 employees, or 25 percent of its staff. And it goes on and on and 
on.
  You will remember some of these companies. We remember the Webvan 
that went out of business. But it just goes on and on. You would 
recognize some of these companies.
  Is this a time, I would ask my colleagues, to go after this industry? 
It is the wrong time. It is the wrong time, and it is a dangerous time. 
I will give you some more examples.
  Barnes & Noble.com said in February 2001 it will cut 350 jobs, or 60 
percent of its workforce.
  Beautyjungle.com, a cosmetics seller, laid off 60 percent of their 
workforce and then shut down.
  I will go on. eToys: In January 2001, it said it would lay off 700 
people, or 70 percent of its workforce. In February 2001, it said it 
would let go the remaining 293 employees by April. Later in February, 
it said it would file for bankruptcy protection.
  Here is the Webvan Group story. Cut staff in April 2001 by 30 percent 
or 885 employees. They also closed operations in Sacramento, CA, and in 
Atlanta, the latest in a series of shutdowns. In July 2001, they 
announced plans to close all remaining operations and terminate 2,000 
employees.
  The general economy is in trouble. We have seen more layoffs in 1 
month than we have in 21 years.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mrs. BOXER. Madam President, I ask unanimous consent for 30 seconds 
to conclude my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. BOXER. So, in closing, this amendment is flawed. It will allow 
new Internet access taxes. It will force the collection of Internet 
access taxes going back to 1998. It will allow taxing on content. And 
it comes at a time when the economy is tanking.
  For goodness sakes, we cannot even get an economic stimulus package 
passed, and the first thing we do, late on a Thursday night, is look at 
ways to get more people laid off.
  I hope we will vote, in a bipartisan way, against the Enzi amendment.
  I yield back my time.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Florida.
  Mr. GRAHAM. I yield myself 5 minutes off the proponents' time.
  The PRESIDING OFFICER. The Senator may proceed.
  Mr. GRAHAM. Madam President, this is the most important vote that we 
are going to take in this Congress, first or second session, on 
education, on public services, and on fundamental fairness in America's 
marketplace.
  Why do I make that statement? I make that statement because, first, 
State and local governments are very dependent on the sales tax in 
order to fund their basic public service responsibilities, specifically 
education, police, and fire.
  Let me just give you some examples. The city of Boston: 10 percent of 
its revenue comes from its local sales tax. That represents 
approximately half of its annual cost of its police and fire services.
  The city of Detroit: 10 percent of its total revenue comes from its 
local sales tax. That represents two-thirds of the cost of its police 
and fire services.
  In Milwaukee, 23 percent of the local revenue comes from its sales 
tax which represents almost 100 percent of the cost of its police and 
fire.
  At a State level, to use my State of Florida as an example, 73 
percent of our general revenue comes from the sales tax, and 70 percent 
of that general revenue is used to finance education and the public 
emergency services, such as State police and our judicial system.

[[Page S11910]]

  If there were to be a significant erosion of our sales tax, in these 
cities in my State, and the other 45 States which are very dependent on 
the sales tax, there would be an immediate impact on their primary 
responsibilities of education and public services.
  Second, State governments and local governments are facing a 
hemorrhaging of the sales tax. To use my State again as an example, the 
State of Florida collects approximately $30 billion a year in sales 
tax. The General Accounting Office has estimated that by the year 2003, 
there will be a 4-percent erosion of that sales tax revenue by virtue 
of sales tax that will not be required to be collected because the sale 
will be made by a distant seller.
  Then, according to a study made by the University of Tennessee, 3 
years later, in the year 2006, that will go up from 4 percent to almost 
8 percent of our State's sales tax revenue.
  That is what I call a hemorrhaging of the ability of a major State--
illustrative of the other 45 sales tax States--to be able to finance 
basic public services.
  Third, there is no rationale for this discrimination in favor of one 
group of retailers over another group of retailers. This is not a new 
tax. This is a responsibility to collect a tax which is paid by the 
ultimate consumer and which has been in place in most States, including 
mine, for over a half a century. This is not a new tax. It is a 
responsibility for equality of treatment in the collection of an 
existing tax.
  This will do serious harm. It will do more harm to our traditional 
Main Street retailers. Why should we say to a local bookstore that they 
have to collect the sales tax on the Harry Potter book, but that if you 
buy it from a distant store, they do not have to collect the sales tax? 
There is no rationale to that policy.
  There have been, in the past, times in which there has been a public 
policy that said, we will provide a lessened sales tax or some other 
preferential benefit in order to stimulate the sale of a product that 
we consider to be in the public interest.

  In my State, we did it, for instance, for solar energy. But we are 
not talking about new products here; we are talking about books, we are 
talking about clothes, we are talking about electronic items. It is not 
the product; it is the method of sale of the product that is getting 
the discriminatory beneficial treatment.
  Finally, there have been statements made about all of the horrors 
that are going to happen if we pass this amendment. People forget, this 
amendment had no life, had no vitality until this Congress, by a 
separate independent affirmative act, at some point in the future, 
voted to institute this authority of the States to collect the sales 
tax through distant sellers.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. GRAHAM. Madam President, this is an extremely important issue for 
the most important services rendered by our State and local 
governments. I urge a vote against the motion to table.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. GREGG. Madam President, I rise in opposition to the amendment and 
yield myself 5 minutes.
  The PRESIDING OFFICER. The Senator may proceed.
  Mr. GREGG. Madam President, there are a number of issues that are 
raised by this amendment which are very significant. It comes to us 
tonight without having any hearings, without having any airing in the 
public sector of any significance. Yet it addresses some of the most 
fundamental issues of constitutional law, and the relationship between 
States and between the Federal Government and States, that we could 
confront as a Congress. It is simply precipitous to pass this amendment 
in this rushed format.
  The amendment would go right at the heart of what has been a long 
history of case law settled by the Supreme Court and reverse it. It 
would reverse the Bella Hess case and the Quill case which, 
essentially, are cases which said that there must be a nexus between 
the seller of the goods and the State in which the goods are sold 
before a tax can be assessed against the seller of the goods.
  This amendment would reverse that. That is the purpose of this 
amendment. It does not affect just Internet transactions.
  There is an equally large effort here to reverse the issue as it has 
been dealt with in catalog sales. Yet the proposal is going to be dealt 
with in 2 hours in the Senate Chamber. Clearly, it is precipitous 
because the implications are huge.
  The second major constitutional problem with the amendment is that it 
creates this brandnew regime where 20 States can bind the other 30 
States. This is truly an excess of the minority over the majority. It 
reverses the concept of federalism and turns it on its head and says if 
20 States reach agreement, then the rest of the 30 States have to 
follow that agreement. If you are going to change constitutional law, 
you have to have a three-fifths vote. There is no way you can do it 
with 20 States. And yet that is the attempt here.
  This is a roundabout way of trying to amend what is essentially a 
constitutional procedure without using the appropriate constitutional 
procedures. If it were passed, it would truly set up a precedent which 
would fundamentally harm the concept of federalism. If it is used here, 
I can see this concept of 20 States getting together and ganging up on 
the rest of the States being used fairly regularly.
  The amendment itself on the issue of substance is wrong and 
inappropriately presented. It certainly is wrong on the issue of the 
manner in which it has been brought forward in that it should have 
gotten more hearings. If this idea makes sense, it should go through a 
proper hearing process before it comes to the floor. It would create an 
atmosphere where 7,000 different jurisdictions across the States could 
end up taxing the Internet. That would be chaos and would fundamentally 
undermine this engine of prosperity and economic growth which we had 
and which we continue to have and which we continue to lead the world 
in, which is the Internet.
  Those are the substantive reasons why this is a bad idea at this 
time. There is probably an equally, if not more important procedural 
reason. If this amendment passes, it is a poison pill. It will kill the 
Internet tax moratorium. It will mean that there will be no moratorium 
for the next 2 years.
  The House has said it is not going to take this language. It is not 
going to conference this language. So as a practical matter, the 
Internet tax moratorium is dead. The underlying bill here would cause a 
2-year tax moratorium. And if the language of this amendment makes 
sense, that will give us more than ample time to proceed in the proper 
course through the proper hearing procedure to listen to the arguments 
for this proposal. It can be passed any time during this next 2 years.
  What can't be done during the next 2 years, if we don't have an 
Internet tax moratorium, is put back together Humpty Dumpty because we 
will literally have thousands of jurisdictions which will put in place 
taxes against the Internet as soon as they have that opportunity, as 
soon as it is clear that there is going to be no moratorium. We will 
have chaos which we will never be able to sort out.
  The amendment, although obviously sincerely principled and 
aggressively pursued, has serious substantive problems. I hope we will 
not pass this amendment because it will represent a poison pill and it 
will end up killing the Internet tax moratorium.
  The PRESIDING OFFICER (Mr. Miller). Who yields time?
  The Senator from Delaware.
  Mr. CARPER. Mr. President, I rise in support of the amendment and 
yield myself 4 minutes.
  The PRESIDING OFFICER. The Senator may speak.
  Mr. CARPER. Mr. President, Delaware is one of five States that has no 
sales tax. One might think as a result we have no dog in this fight. We 
do. I think we all do, whether we happen to be from a sales tax State 
or not.

  My colleague who spoke immediately before me said we haven't had 
hearings on this proposal. We have had discussion in this Chamber, in 
the House, in State houses across the country, certainly in Governors' 
meetings for the last 3 years. We don't need a hearing to know that 
States are under duress. Their economies are struggling. Their revenue 
growth is down and in some cases negative. Spending is up. Unemployment 
is up. Out-of-pocket costs for

[[Page S11911]]

health care for Medicaid are up, and they are in between a rock and a 
hard place.
  We have been debating this week how can we help those States in their 
time of need. Some have said: Let's increase the Federal share for 
Medicaid. Others have said: Let's provide an extension of unemployment 
insurance and pay for it with Federal dollars. Others have said: Let's 
pass a stimulus package. Maybe we should provide a sales tax holiday 
and let the Federal Government pay for that--something I don't think is 
a good idea, but that has been put forward.
  A much better idea is the Enzi-Dorgan amendment that lies before us 
today, the product of many years work between the States, between 
Governors, mayors, county executives, legislators here, and previous 
administrations as well as the current administration. What does it do? 
Anybody listening to this debate has to be confused.
  This amendment provides for extensions of bans on multiple and 
discriminatory taxes for 5 years, and it extends the ban on access 
taxes permanently. That is what it does. What it also does is it 
empowers the States to work among themselves to see if 20 of them can 
agree on a simplified approach toward collecting taxes from remote 
sellers. If they can come to an agreement and provide that kind of a 
simplified approach, then that plan would come to us and we would have 
the opportunity to vote yes or no as to whether or not States can 
actually proceed. If we vote no, they can't proceed.
  Our voting for this amendment today, even if it ended up in the final 
bill signed by the President, would not authorize the collection of a 
sales tax by remote vendors. It simply sets in motion a process which 
could lead to another vote by us somewhere down the line.
  My last point: If you happen to be a brick and mortar vendor in a 
State and you have a sales tax and you are required to collect a sales 
tax and are selling a piece of luggage or a shirt or wallet, a CD 
player, and you have to collect sales taxes on those items and charge 
more for those items and there is somebody who is buying it remotely 
from another State, where are people going to shop? More and more they 
are shopping on the Internet. They are not going to the local vendor. 
It is not fair to the local vendor who is collecting the taxes that pay 
for the schools and public safety and transportation and other things. 
It is just not fair.
  One aspect of this amendment I am not comfortable with deals with 
Amazon.com and the eBay issue which I have discussed with Senators Enzi 
and Dorgan. I hope when we get to conference, we will have an 
opportunity to address those issues.
  I yield to Mr. Enzi for whatever time he consumes.
  Mr. ENZI. I thank the Senator from Delaware, particularly since he is 
from a non-sales-tax State, for supporting this issue and realizing how 
important it is to other States. I will definitely work to get that 
done. What we are trying to do is have an even playing field here. I 
will work to get that as part of the definition and clarification.
  Mr. CARPER. I thank the Senator for his assurances.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. SMITH of New Hampshire. Mr. President, I rise as an opponent to 
the amendment and yield myself 3 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SMITH of New Hampshire. Mr. President, I rise in opposition to 
this amendment because e-commerce is at the very heart of our economy. 
It brings billions of dollars in revenues, provides huge surpluses to 
local, State, and Federal coffers throughout the country. Why, 
particularly in an economic slowdown, would we want to saddle an 
industry with huge new tax increases and heavy bureaucratic and 
regulatory burdens? It does not make sense.
  The National Bureau of Economic Research concludes that imposing 
these multibillion dollar tax increases and government burdens would 
result in a 30 percent reduction in purchases over the Internet. Think 
of what that would do to the economy. It would have a devastating 
effect.
  For the first time in history, government bureaucrats in one State 
will have the power to tax the people in another State. That is not 
right. The hours and capital required to comply with the Tax Code from 
the IRS and State and local taxing agencies are going to be 
overwhelming under this amendment. Not only would businessowners be 
under the glass with the usual suspects, but now they are going to be 
open to thousands of bureaucratic agencies looking into their business 
to get a cut.

  I can assure you if a State or local official spends money to come 
across the country to audit you, he is going back with some money. In 
New Hampshire, we don't have a sales tax, and I believe it is a 
regressive tax that disproportionately affects the poor and working 
class. It is a State's decision as to whether they want to impose the 
tax. Under this legislation, New Hampshire residents would be forced to 
pay these taxes to businesses all across the country. Due to the 
increased costs of paying these out-of-State taxes, and the flood of 
audits, our residents would pay substantially higher prices for goods 
and services.
  So allowing State and local governments the power to target taxpayers 
outside their own State, where those people have nothing to say at the 
ballot box, would set a horrible precedent. Frankly, I believe it is 
unconstitutional.
  States would then be able to use this new sword to target businesses 
and States that were competing with their own. Of course, with local 
businesses and consumers in an uproar, States would have to retaliate. 
Then we come to lawsuits. At some point, the Federal Government is 
going to step in and be called to set regulations and taxing levels, 
and here we go on down the road where the Government sets the sales tax 
rate. They would then have the venue they needed to have a national 
sales tax.
  Some have argued for a national sales tax, but this would be on top 
of the income tax. If you don't like the income tax, you are not going 
to be too happy about having a sales tax on top of it.
  This is a multibillion-dollar increase, a regulatory monster, and it 
must be stopped. I urge my colleagues to vote against the Enzi 
amendment and support Main Street and freedom.
  The PRESIDING OFFICER. Who yields time?
  Mr. WYDEN. Mr. President, we are moving to wrap this up. I want to 
come back to a couple points because I think there is confusion, for 
example, on the Internet access charge issue. There is a sense among 
some Senators that this is something that would have to be approved by 
this body. That is not correct. This amendment--the substitute--changes 
the definition of Internet access, and it can be applied to millions of 
Americans without any further action by the Senate.
  In particular, what the amendment says is that it would be possible 
to ``tax content or services.'' That is virtually everything. Nobody 
wants a blank screen on their computer. Of course, they are going to 
have a Web page with news, weather, and basic information. The fact is 
that the substitute means that millions of Americans could be hit with 
new taxes just for clicking on a Web page, and this could be done 
without any further action by the Senate.
  I think most Senators believe there ought to be a permanent ban on 
Internet access taxes, that Internet access taxes widen the digital 
divide. Yet the substitute on the Internet access tax issue goes in 
just the opposite direction. A lot of Americans think Internet access 
is plugging the computer into a phone line, dialing up the Internet 
provider, and logging onto the net. Then you would get a blank screen. 
Of course, you want information and content. People need to know, as 
they move to this vote, that they could be taxed for getting those 
kinds of services that many of them believe are essential, such as the 
weather.
  At the end of the day, I pledge to continue to work with the Senator 
from Wyoming. He has been extremely sincere and extremely dedicated. 
However this vote comes out, I want to make it clear that I will work 
closely with him, Senator Dorgan, and all the Senators who see this 
differently than I, Senator Baucus, Senator McCain, and others. We are 
going to have to stay at it.

[[Page S11912]]

  When you vote tonight, you are talking about two very differing 
approaches with respect to Internet policy. One approach that we 
advocate tonight is backed by the American Electronics Association and 
the National Conference of State Legislatures. The other is opposed by 
virtually all of the technology groups in the country.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I yield myself 3 minutes.
  I thank all of those people who have been dedicated in their work on 
this issue. There have been innumerable meetings, and Senator McCain, 
Senator Dorgan, Senator Kerry, Senator Wyden, and I have been the 
primary people. We have met with these different groups to see what 
parts of the Internet were their interests.
  This bill is as close as we can come to pulling everybody to the 
center. No, it doesn't please everybody. Does it please most of the 
people? I certainly hope so, and we will have a vote to determine 
whether it does or not. But this does make permanent the Internet 
access tax prohibition. Now that is something that Gateway, 
VerticalNet, Compaq, and other high-tech folks have wanted and do want.
  This bill does not have new taxes in it. This bill has a provision so 
that States will be encouraged to simplify their taxes and, at some 
future time, in order to comply with the Supreme Court decisions 
mentioned here, there will be a vote to see if Congress approves of 
their simplification. Unless the vast majority of the States are 
involved in that, I am sure they won't get approval.
  We passed a moratorium 2 years ago, and we promised all of these 
governmental agencies and all of the other people with an interest in 
sales tax that we would put a bill together, solve their problem, bring 
them a solution. Have there been hearings? Everybody says there have 
not been hearings. There have been a lot of meetings. There has not 
been a bill produced other than what we have here.
  This is a promise we made to local and State governments 2 years ago. 
This is some action we can take on it. It doesn't make anything final, 
but it provides incentive to get people together to work on a problem 
that is necessary. Cities, towns, and counties, not to mention States, 
have been put under some unusual circumstances just since September 11. 
We need to have a mechanism for them to be able to fund them. We have 
not promised funding for everything. We have made them do a lot. This 
gives them an opportunity to work out a system whereby they can 
continue to operate, continue to have revenues that are on a declining 
basis at the moment, and this is something so that we can have a vote. 
This just provides for a vote of Congress at a future date when there 
has been streamlining.
  The extension of the current moratorium of the Internet Tax Freedom 
Act of 1998 expired this past Sunday on October 21, 2001. I believe 
this amendment would thoroughly address this issue as well as the 
simplification of State and local use tax systems.
  We 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 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 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.
  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. 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. 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 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, this 
amendment has been filed. I would like to commend several of my 
colleagues for their commitment to finding a solution. I know this 
amendment is the solution. The amendment 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 
thousands 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 
amendment 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 amendment 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 amendment also authorizes states to 
require all other sellers to collect and remit sales and use taxes on 
remote sales once Congress has acted to approve the compact by law 
within a period of 120 days after the Congress receives it.
  The amendment 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.

[[Page S11913]]

  I strongly support this amendment because I do not think there is 
adequate protection now. It is very important we do not build 
electronic loopholes on the Internet, an every-changing Internet, one 
that is growing by leaps and bounds, one that is finding new technology 
virtually every day.
  Mr. President, 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.
  I am very concerned, however, with any piece of legislation that 
mandates or restrict 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. This amendment 
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 vote for this 
amendment.
  In the current definition in Sec. 1104(5) of the ITFA:

       The term ``Internet access'' means a service that enables 
     users to access content, information, electronic mail, or 
     other services offered over the Internet, and may also 
     include access to proprietary content, information, and other 
     services as part of a package of services offered to users. 
     Such term does not include telecommunications services.

  I do want to address one very important issue that has not been 
addressed in this amendment. One of the most important aspects of this 
legislation deals with State and local taxation of Internet access 
services. There is general agreement in this body that there should be 
no new State and local taxes on basic Internet access as a way to 
assist every American to be able to take advantage of the Internet and 
its resources. That is a goal I obviously support, and my amendment 
will do that.
  As you know, however, I have serious concerns with the current 
definition of Internet access. I am concerned that without further 
work, it will subvert our intent, discriminate against some Internet 
Service providers, and impact state and local governments. Thus, I want 
to continue to work with my colleagues at a later date to refine that 
definition so that we accomplish our aim without doing harm.
  The problem is that the current definition is so broad, and 
technology is changing so fast that the current definition could 
unfairly discriminate against many businesses that provide similar 
content or services over the counter, over a cable wire, or via any 
other means. The discrimination could affect a variety of products and 
services that I don't think any of us envisioned as part of access to 
the Internet. In a nutshell, the current definition essentially 
includes anything and everything, except telecommunications that could 
be offered as a part of a package of Internet access services, 
including television programs, radio broadcasts, games, books, music, 
motion pictures and other such products and services.
  Following mergers of Internet service providers and media and 
entertainment companies, it is not hard to envision an ISP that 
provides these services and includes all of the items in one bill to a 
customer. For example, an ISP could provide downloadable movies to 
customers--allowing a customer to download a set number of movies each 
month includable in their monthly fee for Internet access, while paying 
extra for any movies beyond the included amount. This sets up some 
perverse and discriminatory situations. First, for example, someone who 
pays $9.95 for basic Internet service that doesn't include movies would 
have to rent movies separately and pay tax on those rentals, while 
customers of an ISP that include movies in its $21.95 service would not 
pay tax on those movies. Second, the tax-exempt benefit of purchasing 
more expensive Internet access services doesn't stop at just movies. 
Providers could also include music, publications--and someday soon, 
downloadable nightly cable broadcasts--and under the current definition 
these would also be exempt from tax. I don't think any of us ever 
envisioned when we first debated and enacted a temporary moratorium 
that the scope of services provided over the Internet was intended to 
cover anything beyond basic access.

  I believe that the current definition of Internet access needs to be 
examined closely by the Congress so that we don't do damage where we 
intend to do good. I have tried a number of different approaches to 
defining it, and each of them has issues and problems. I am not ready 
to give up, however.
  Furthermore, there are also some that believe the current definition 
of Internet access needs to be changed because it unfairly 
discriminates among providers of Internet access and gives some 
providers advantages over others. The current definition favors large 
companies over small. It also excludes telecommunications services from 
the definition of access. In doing so, the language could be 
interpreted to exclude Wireless Web Access because all services 
provided by wireless companies are considered ``telecommunications.'' 
Thus, Internet access purchased from one company might be exempt, but 
it could be taxable if purchased from a wireless provider. I know our 
intent is not to discriminate among Internet access providers, but that 
is the effect of current law.
  If we don't continue to work on this definition, we will go contrary 
to the findings in the legislation we are considering. If we allow the 
current definition of Internet access to remain unchanged, we will be 
authorizing the disparate treatment of the sales of identical products 
depending on whether the sale occurs online or not. In simplest terms, 
the current definition of Internet access would exempt the sales of 
many products and services that would be taxed if sold in any other 
way. Besides the fiscal problem this would cause for states, this is 
also fundamentally unfair, and should be prevented. I think formulating 
a good definition of Internet access presents a host of opportunities 
that we should not let pass by. It gives us an opportunity to define a 
critical component of the infrastructure of our new economy--and, in 
doing so, provide a definition that allows all new economy companies, 
both large and small, to operate on a level playing field. It provides 
us with an opportunity to provide a clear definition that reduces the 
probability of litigation over the exact meaning of the statute. And, 
it provides us with an opportunity to insure that we do no harm to the 
fiscal stability of many levels of government--while providing a 
positive environment in which business can survive.
  I hope to continue to work with my colleagues at a later date to 
develop a definition of Internet access that preserves the tax-
exemption for access to the basic services and resources of the 
Internet.
  The Internet is such a powerful tool of education and commerce that 
we should do everything we can to make sure that each American can take 
advantage of it. At the same time, we need to insure that our goal 
assisting in the provision of basic access is not subverted by an 
overly broad definition of access that allows a host of digital goods 
and services to be bundled together and sold tax exempt. Such 
subversion would only serve to weaken state and local governments at 
this important time in our nation's history.
  I ask unanimous consent that a letter from the National Governors 
Association, National League of Cities, International City/County 
Management Association, National Association of Counties, and Council 
of State Governments be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
         National Governors Association, National League of 
           Cities, International City/County Management 
           Association, National Association of Counties, Council 
           of State Governments,
                                                 November 6, 2001.
     Hon. Thomas A. Daschle,
     Majority Leader, U.S. Senate, The Capitol,
     Washington, DC.
     Hon. Trent Lott,
     Minority Leader, U.S. Senate, The Capitol,
     Washington, DC.
       Dear Senator Daschle and Senator Lott: Irrespective of 
     previous letters on the

[[Page S11914]]

     Internet tax moratorium and contrary to some ``Dear 
     Colleague'' letters circulating in the Senate, we do not 
     support legislation to reinstate the Internet tax moratorium 
     for two additional years. Four organizations listed below 
     support legislation by Senator Enzi (S. 1567) that would 
     create a level playing field so that remote and Main Street 
     sellers receive equal treatment. The National League of 
     Cities is working closely with Senator Enzi and believes that 
     S. 1567 represents a promising opportunity to resolve this 
     critical issue.
           Sincerely,
     Raymong C. Scheppach,
                                               Executive Director,
                                   National Governors Association.
     Donald J. Bount,
                                               Executive Director,
                                        National League of Cities.
     William H. Hansell,
                                 Executive Director, International
                               City/County Management Association.
     Larry Maake,
                                               Executive Director,
                                 National Association of Counties.
     Daniel My. Sprague,
                                                Executive Director
                                     Council of State Governments.

  The PRESIDING OFFICER. The Senator has consumed his 3 minutes. Does 
the Senator yield back his time?
  Mr. ENZI. I reserve the remainder of my time. The other side has used 
their time?
  The PRESIDING OFFICER. The opponents have used all of their time. The 
proponents have 2 minutes.
  Mr. ENZI. I yield back the remainder of my time.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, on behalf of myself and Senator Wyden, I 
move to table the Dorgan-Enzi amendment and I ask for the yeas and 
nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the motion.
  The clerk will call the roll.
  The legislative clerk called the roll.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 57, nays 43, as follows:

                      [Rollcall Vote No. 341 Leg.]

                                YEAS--57

     Allard
     Allen
     Baucus
     Bennett
     Biden
     Bond
     Boxer
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Cochran
     Corzine
     Craig
     Crapo
     Dodd
     Domenici
     Edwards
     Ensign
     Feinstein
     Frist
     Gramm
     Gregg
     Hagel
     Hatch
     Inhofe
     Inouye
     Kennedy
     Kohl
     Kyl
     Landrieu
     Leahy
     Lieberman
     Lott
     Lugar
     McCain
     McConnell
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nickles
     Reid
     Roberts
     Schumer
     Sessions
     Smith (NH)
     Smith (OR)
     Snowe
     Stevens
     Thompson
     Thurmond
     Torricelli
     Warner
     Wyden

                                NAYS--43

     Akaka
     Bayh
     Bingaman
     Breaux
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Collins
     Conrad
     Daschle
     Dayton
     DeWine
     Dorgan
     Durbin
     Enzi
     Feingold
     Fitzgerald
     Graham
     Grassley
     Harkin
     Helms
     Hollings
     Hutchinson
     Hutchison
     Jeffords
     Johnson
     Kerry
     Levin
     Lincoln
     Mikulski
     Nelson (NE)
     Reed
     Rockefeller
     Santorum
     Sarbanes
     Shelby
     Specter
     Stabenow
     Thomas
     Voinovich
     Wellstone
  The motion was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mrs. BOXER. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. McCAIN. Mr. President, I think we are in agreement the major 
aspects of this legislation have been decided. So I do not think, 
unless someone desires it, that we need another recorded vote.
  The PRESIDING OFFICER. If there be no amendment to be offered, the 
question is on the third reading of the bill.
  The bill (H.R. 1552) was ordered to a third reading and was read the 
third time.
  The PRESIDING OFFICER. The bill having been read the third time, the 
question is on the passage of the bill.
  The bill (H.R. 1552) was passed.
  Mr. McCAIN. Mr. President, I move to reconsider the vote, and I move 
to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, I appreciate the debate. I appreciate the 
efforts made on both sides of this very difficult issue. The closeness 
of it really dictates that we do sit down and work something out on 
this issue with Senator Dorgan, Senator Kerry, Senator Allen--all of 
those with whom we have met in numerous, countless hours on this issue. 
It is very clear we need to come to some kind of agreement rather than 
go through moratorium after moratorium.
  Mrs. BOXER. Mr. President, the Senate is not in order.
  The PRESIDING OFFICER. The Senate will come to order.
  The Senator from Arizona.
  Mr. McCAIN. Mr. President, I conclude by saying I think we should 
begin meetings as soon as possible so we can resolve this issue so 
there is a reasonable resolution. I know the proponents of this 
amendment which was just defeated spent great labor and effort on it. I 
congratulate them for their arguments. I look forward to working with 
them. This is an issue that needs to be resolved.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KERRY. Mr. President, I say to the distinguished Senator from 
Arizona, we spent a lot of hours working through this with Senator 
Enzi, Senator Dorgan, Senator McCain, myself, and many others. This was 
a very difficult vote for many of us. We do not support any tax on the 
Internet itself. We don't support access taxes. We don't support 
content taxes. We don't support discriminatory taxes. Many of us would 
like to see a permanent moratorium on all of those kinds of taxes.
  At the same time, a lot of us were caught in a place where we thought 
it important to send the message that we have to get back to the table 
in order to come to a consensus as to how we equalize the economic 
playing field in the United States in a way that is fair.
  I hope the Senator from Arizona will follow up with us, so we can 
come back to that table to do what is sensible and fair. I look forward 
to the chance to do that.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, before the Senator from Massachusetts 
leaves, I want him to know, as the original Senate sponsor, I want to 
redouble my efforts to work with him and Senator Enzi and all of our 
colleagues. We may be able to see that there is a technological fix 
here that is going to make it possible to collect taxes owed.
  There is a lot of good will on both sides. This is by no means the 
end of the issue. I am very pleased the Senator from Massachusetts is 
ending this discussion in a conciliatory way because we are going to 
have to stay at it. He has my pledge as the original sponsor of this 
effort to do it.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KERRY. Mr. President, as an original author and cosponsor of the 
moratorium, which I believe in, I appreciate the comments. I had hoped, 
and in many ways thought this was not ripe for this vote, but I think 
it was important for us to have gone through the process. I look 
forward to seeing if we can come up with a sensible resolution.
  I thank the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. I thank my colleagues, who have just spoken, for their 
comments, for the effort they put forth. I thank all the people for 
allowing the debate that happened. That had to be done by unanimous 
consent.
  Now we know our work is cut out for us. Two years ago we passed a 
moratorium. Tonight we passed a moratorium. Hopefully before 2 years is 
up we will have done something that will solve the problem. I 
appreciate the commitment of the chairman of the Commerce Committee to 
make that happen. I am sure all the people who are involved in this 
issue will be extremely happy that some work will be done on it. The 
hearings will be held. The consensus will be arrived at because it is 
necessary for our cities, towns, counties, and States.

  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, I have been involved in a number of issues 
in

[[Page S11915]]

my time here. I know of no two people who have worked harder on an 
issue than the Senator from Wyoming and the Senator from North Dakota.
  That renews my commitment to try as hard as I can to come to an 
agreement because they deserve an all-out effort on an issue on which 
we are fundamentally in agreement.
  I thank the Chair. I thank my colleagues.
  I yield the floor.
  Mr. STEVENS. 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. DASCHLE. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, I thank all of those Senators who were 
involved in the array of legislative items that we have taken up today. 
This has been quite a busy day, with a lot of coordination and a 
tremendous amount of work. I think we have accomplished a good deal 
today.
  I also report that the Commerce Committee has completed its work. I 
compliment the chair and ranking member of the Commerce Committee for 
their work on the aviation security bill. We will be addressing that 
bill a little later.

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