[Congressional Record Volume 149, Number 128 (Wednesday, September 17, 2003)]
[House]
[Pages H8295-H8301]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNET TAX NONDISCRIMINATION ACT
Mr. SENSENBRENNER. Mr. Speaker, I move to suspend the rules and pass
the bill (H.R. 49) to permanently extend the moratorium enacted by the
Internet Tax Freedom Act, and for other purposes, as amended.
The Clerk read as follows:
H.R. 49
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Internet Tax
Nondiscrimination Act''.
SEC. 2. PERMANENT EXTENSION OF INTERNET TAX FREEDOM ACT
MORATORIUM.
(a) In General.--Subsection (a) of section 1101 of the
Internet Tax Freedom Act (47 U.S.C. 151 note) is amended to
read as follows:
``(a) Moratorium.--No State or political subdivision
thereof may impose any of the following taxes:
``(1) Taxes on Internet access.
``(2) Multiple or discriminatory taxes on electronic
commerce.''.
(b) Conforming Amendments.--(1) Section 1101 of the
Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by
striking subsection (d).
(2) Section 1104(10) of the Internet Tax Freedom Act (47
U.S.C. 151 note) is amended by striking ``unless'' and all
that follows through ``1998''.
(3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act
(47 U.S.C. 151 note) is amended by striking ``except with
respect to a tax (on Internet access) that was generally
imposed and actually enforced prior to October 1, 1998,''.
(c) Clarification.--The second sentence of section 1104(5),
and the second sentence of section 1101(e)(3)(D), of the
Internet Tax Freedom Act (47 U.S.C. 151 note) are each
amended by inserting ``, except to the extent such services
are used to provide Internet access'' before the period.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Wisconsin (Mr. Sensenbrenner) and the gentleman from North Carolina
(Mr. Watt) each will control 20 minutes.
The Chair recognizes the gentleman from Wisconsin (Mr.
Sensenbrenner).
General Leave
Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous material on H.R. 49, the bill
currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Wisconsin?
There was no objection.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of H.R. 49, the Internet Tax
Nondiscrimination Act. Over the last several years, the Internet has
revolutionized commerce, become an economic engine and is a major
source of information for Americans in virtually every segment of the
population. It has expanded consumer choices, enhanced competition and
enabled individuals as well as brick and mortar retailers to
participate in a national marketplace once reserved to a privileged
few.
In 1998, Congress passed the Internet Tax Freedom Act to facilitate
the commercial development of the Internet, and in 2001 this body voted
to extend the moratorium through this year. This act prohibits States
from imposing multiple and discriminatory taxes on electronic commerce
and shields consumers from new Internet access taxes. However, it does
not exempt Internet retailers from collecting and remitting sales taxes
to the States.
Introduced by the gentleman from California (Mr. Cox), H.R. 49 makes
permanent the ban on taxes that target the Internet for discriminatory
treatment as well as all taxes on Internet access by States and
localities. This sound policy reflects the experience and insights
gained over the last 5 years and represents the position of a wide
bipartisan cosponsorship.
The Subcommittee on Commercial and Administrative Law conducted a
hearing on this bill in April. On July 16, the full Judiciary Committee
reported the bill favorably by voice vote with one bipartisan amendment
in the nature of a substitute offered by the subcommittee's ranking
member, the gentleman from North Carolina, and
[[Page H8296]]
its chairman, the gentleman from Utah. This amendment ensures that the
original intent of the law, to provide tax freedom for all forms of
Internet access, is preserved. I commend the gentleman from Utah and
the gentleman from North Carolina for their work to clarify in this
amendment that tax freedom must be tech neutral.
If H.R. 49 is not passed, Internet commerce will be subject to State
and local taxes in thousands of jurisdictions. Failure to make the
moratorium permanent could result in the imposition of a complex web of
taxes that would create uncertainty for the information technology
industry, a sector of the economy which can ill afford further
setbacks.
Further, we must encourage equal participation in the digital age by
keeping Internet access as affordable as possible. A recent survey
confirmed that poorer Americans and those in rural or urban areas are
most likely to cite cost pressures as a major reason why they would not
avail themselves of the resources found online. Taxes on Internet
access would only deepen the digital divide between those who have
access to the Internet and those who do not. This bill has had
virtually unanimous support in the Committee on the Judiciary and it
has more than 130 bipartisan cosponsors. It is supported by the
administration and has garnered the endorsement of numerous IT
businesses and organizations.
Last Congress, the House and Senate passed a temporary extension of
the moratorium by voice vote. These limited protections expire November
1 of this year. It is now time to make the benefits created by the
moratorium permanent. Doing so will vitalize the IT economy, assist
consumers and stimulate equal access to the invaluable resource that is
the Internet.
I urge my colleagues to support this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. WATT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of H.R. 49, the Internet Tax
Nondiscrimination Act. H.R. 49 would permanently extend the existing
moratorium against taxes on Internet access by all State and local
governments, including those that were previously grandfathered by the
Internet Tax Freedom Act. Although this bill will necessarily result in
the loss or potential loss of revenue to some States, it will promote
the continued development, emergence and widespread access to the
Internet and it will do so in a fair and technologically neutral
manner.
During the full committee markup of H.R. 49, I, together with the
chairman of the Subcommittee on Commercial and Administrative Law, the
gentleman from Utah, offered an amendment to help clarify the meaning
of Internet access and to put an end to the current confusion that has
led to discriminatory and inconsistent State taxation on Internet
access. The bill before us today incorporates that amendment and is the
product of industry-wide and bipartisan negotiations. The principle I
pursued in offering the amendment was simple. If we are to prohibit
taxes on Internet access, we must do so regardless of how that access
is provided. Otherwise, we would give a competitive advantage to those
providers covered by the moratorium over those providers that remained
subject to taxation. This would limit the choices of consumers and
raise the costs of alternative means of accessing the Internet, such as
DSL. By making the moratorium applicable to all Internet service
providers, we have created a level playing field for the consumer. In
the process, we have had no intention to otherwise undermine State and
local telecommunications tax bases.
Indeed, I, along with the gentleman from Massachusetts (Mr. Delahunt)
and other colleagues on the subcommittee, have insisted throughout that
we remain mindful of the fiscal crisis currently confronting many of
our States. Toward that end, Chairman Cannon has agreed to conduct
hearings this month on the States' attempt to establish a unified tax
system that would enable them to impose and collect sales taxes on
transactions over the Internet in a manner that is fair and manageable.
I commend Chairman Cannon for his commitment to those hearings and look
forward to working toward a solution to the streamlining issue.
In closing, I believe that H.R. 49 ensures that the ban on Internet
access taxes is neutral as to technology, speed and provider.
{time} 1100
I believe that the bill will lower costs to the consumer, enhance
competition, clarify for State and local governments the type of
services subject to tax, and facilitate narrowing the digital divide
that presently impedes access to the Internet in disadvantaged
communities. I urge my colleagues to support H.R. 49.
Mr. Speaker, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield 4 minutes to the gentleman
from Utah (Mr. Cannon), the chairman of the subcommittee.
Mr. CANNON. Mr. Speaker, I thank the gentleman for yielding me this
time. I would also like to thank the gentleman from North Carolina (Mr.
Watt), the distinguished ranking member of the subcommittee, for his
long hours and hard work on this issue. We appreciate that very much.
Also, the gentleman from Massachusetts (Mr. Delahunt), who has been
very clear and very helpful in setting up the issue of the Streamlined
Sales Tax Project, and others who have worked on this bill who I will
mention during my speech; but I also want to mention the gentleman from
Virginia (Mr. Goodlatte), chairman of the Committee on Agriculture, who
for years has worked on this issue.
Mr. Speaker, I rise in support of H.R. 49. I would like to thank the
gentleman from Wisconsin (Mr. Sensenbrenner), chairman of this
committee, the Committee on the Judiciary, and the gentleman from
Michigan (Mr. Conyers) for their constant support of preventing
taxation on Internet access. I also want to thank the gentleman from
California (Mr. Cox) for championing this issue since he, together with
Senator Wyden, first introduced this legislation.
I also wish to recognize the efforts of my friend from Virginia,
Senator Allen, on companion legislation in the other body. I look
forward to working with him and others to guide our product to the
President's desk for signature.
This body has debated Internet tax moratorium bills several times
since 1998. In the past, efforts were made to link these moratoria to
consideration of whether Congress should adopt legislation authorizing
States to compel the collection of sales taxes from remote vendors.
This effort, known as the ``Streamlined Sales Tax Project,'' or SSTP,
has made progress without Federal intervention. But as we know, before
interstate compacts can become effective, the Constitution requires
congressional approval.
I thank the gentleman from Massachusetts (Mr. Delahunt) for his
attention to the SSTP and assure him of my cooperation in considering
all facets of this effort. My subcommittee has scheduled a hearing on
the project for October 1 in order to give Members an opportunity to
examine this issue fully.
Mr. Speaker, I support H.R. 49. This bill would broaden access to the
Internet, expand consumer choice, promote certainty in growth in the IT
sector of our economy, and encourage deployment of broadband services
at lower prices.
The bill puts to rest the ``grandfather'' clause and makes tax-free
Internet access a national policy. As I stated during committee
consideration of this bill, the amount of tax revenue that certain
States collect as a result of the grandfather clause pales in
comparison to the amounts of aid these States receive under President
Bush's economic package. We established a consistent national policy of
not taxing Internet access through this bill.
H.R. 49 was amended in the Committee on the Judiciary to ensure that
the moratorium is equally applied to all forms of Internet access. The
gentleman from North Carolina (Mr. Watt), my good friend, and I were
alerted to the fact that since 1998, the ITFA tax protections were not
being fairly applied by the States. In particular, some States have
begun to tax DSL Internet access in plain circumvention of the intent
of the ITFA.
I supported the gentleman from North Carolina (Mr. Watt) in an
[[Page H8297]]
amendment at the committee to achieve what we believe is a fair and
sound policy; parity of tax treatment for all forms of Internet access.
This bipartisan effort, led by the gentleman from North Carolina (Mr.
Watt) and the gentleman from Michigan (Mr. Conyers), underscores the
importance of the Internet to our economy. The result is a thoughtful
and necessary clarification restoring the ITFA to its original intent.
It strikes a careful balance between those who tax and those who are
taxed.
I want to emphasize that telecommunications services not used to
provide Internet access remain outside the moratorium and that voice
services over traditional telephone lines, therefore, remain taxable.
Not taxable are the DSL, cable, dial-up, or other Internet access
technologies that may run over those lines.
This bill, cosponsored by more than 130 Members of this body, is
endorsed by administration and supported by numerous technology
companies and organizations. Mr. Speaker, this bill makes sense for an
economy that, while improving, needs clarity of tax policy by
encouraging investment in broadband.
Finally, I want to thank again the gentleman from Wisconsin (Chairman
Sensenbrenner) for his consistent support as we move toward permanent
tax freedom for Internet access. His work has been invaluable. I urge
my colleagues to support H.R. 49 as amended.
Mr. WATT. Mr. Speaker, I yield 2 minutes to the gentleman from
Michigan (Mr. Conyers), ranking member of the full committee.
Mr. CONYERS. Mr. Speaker, I thank the gentleman from North Carolina
(Mr. Watt), ranking member, for yielding me this time, and to the
members of the Committee on the Judiciary.
I rise on the point of a simple principle in terms of the bill under
discussion. I rise against multiple and discriminatory taxes of any
kind and especially in this area of the Internet. Secondly, I
congratulate the authors of the Watt-Cannon amendment that attempts to
clarify the ban on Internet access taxes, and it applies not only to
dial-up Internet service, but also to high-speed cable. When we passed
the ban on access taxes in the mid 1990's, no one considered that we
could access the Internet over other than the telephone. This bill
resolves the ambiguity, and I have other reasons to commend the authors
of Watt-Cannon, but right now I support the bill.
Mr. Speaker, I rise in support of this legislation. This bill makes
permanent a moratorium on internet access taxes as well as multiple and
discriminatory taxes on the internet that we first passed as part of
the Telecommunications Act of 1996. It is difficult to justify multiple
and discriminatory taxes under any circumstances, on the Internet or
otherwise, so I am glad to join in bipartisan support of this
legislation.
In addition to making the moratorium permanent, the bill before us
incorporates the Watt-Cannon amendment to clarify that the ban on
internet access taxes applies to not only dial up internet service but
also high speed cable, ``DSL,'' and other technologies. When we passed
the ban on access taxes in the mid-90's, none of us considered that we
could access the internet other than over the phone. This bill resolves
that ambiguity. It is in no way intended to otherwise undermine state
and local tax bases.
My support for this bill is premised in part on commitments made by
the majority that we will be able to turn to another issue involving
interstate taxes--streamlining the sales tax system. Under current law,
the traditional brick and mortar sellers are required to collect sales
tax while the electronic retailers have no such requirement, creating
what many believe to be an unlevel playing field between the two.
I am pleased to note that both Chairman Sensenbrenner and
Subcommittee Chairman Cannon have slated hearings on the streamlining
hearing for October. I am hopeful that we will then be able to consider
provisions to provide states that simplify their sales tax systems with
the authority to collect sales taxes equitably from all retailers. I
believe that a simplified streamlined tax compact would increase our
nation's economic efficiency, facilitate the growth of electronic
commerce, and help our states maintain financial support for public
education, health and safety.
So I am glad we are able to pass this bill today, and look forward to
working on the streamlining issue in the not too distant future. I urge
a ``yes'' vote.
Mr. SENSENBRENNER. Mr. Speaker, I yield 4 minutes to the gentleman
from California (Mr. Cox), the author of the bill.
Mr. COX. Mr. Speaker, I thank the Chairman for yielding me this time.
I thank the gentleman from Michigan (Mr. Conyers). I thank the
gentleman from Utah (Chairman Cannon) and the gentleman from North
Carolina (Mr. Watt), ranking member.
This is an extraordinary moment because the Internet Tax Freedom Act,
which was originally enacted 5 years ago, was something of an
experiment. We debated it aggressively in both Chambers. We were not
sure whether it was going to work as intended. It clearly has. And so
having extended it twice, we are now back here to make it permanent.
The benefits to our economy are manifest. It is estimated that the
expansion of the Internet, the anticipated continued rollout of
broadband and perhaps the next generation of broadband will add as much
as $500 billion in gross domestic product every year in each of the
next 10 years for our country. This is an extraordinary potential.
The University of California at Los Angeles, UCLA, in a January,
2003, survey has found that for consumers in the 21st century, right
now the Internet is the most important source of information, but not
everybody can afford it. Not everybody yet has the Internet. It is
still expensive. There is about a $10 difference, perhaps more or less
in some areas, between dial-up and broadband, and people have not been
converting from dial-up to broadband, in part, because of that price
point. It is just a little bit too expensive for a lot of people.
Adding new taxes to Internet access, taxing e-mails, taxing the bits
transmitted or the bandwidth would be a profoundly bad idea for our
country. And as the gentleman from Michigan (Mr. Conyers) mentioned,
there is such a potential for multiple taxes from many jurisdictions,
all claiming that because there is a server located in their
jurisdiction, they can tax a piece of this, that even a nick here and a
little bit of nickels and dimes there would add up to a very serious
amount of taxation for most people, and it would destroy what the
Internet can become.
We are now going to put this behind us. We are going to move on. We
are going to find that this becomes one of the invisible parts of the
legal infrastructure that makes our economy great. It is going to help
consumers. It is going to help technological innovation. It is going to
help our economy and our country. And having worked for so long with
Senator Wyden on this, I want to thank him, Senator Allen, Senator
McCain as well. In this Chamber, though, there has been such leadership
from the Committee on the Judiciary, from the gentleman from Wisconsin
(Chairman Sensenbrenner), from the gentleman from Utah (Chairman
Cannon), from the ranking members of the full committee and the
subcommittee, as I mentioned, the gentleman from North Carolina (Mr.
Watt) and the gentleman from Michigan (Mr. Conyers), and from the
gentleman from Virginia (Mr. Goodlatte), whom I think we will hear from
next that, I can safely say without that kind of leadership in this
House, the American people would not be seeing this victory today.
Mr. WATT. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from
Texas (Ms. Jackson-Lee), a member of the Committee on the Judiciary.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the distinguished
ranking member and the chairman of the subcommittee both for their very
fine work and the work of this committee, and I certainly do believe
that the Internet is a major component to the development or further
development of America's economy and the utility of the Internet in
American lives is very vital.
However, I am concerned that this bill removes the moratorium as
relates to a number of States who have already been in the process of
an effective way of assessing the utilization of the Internet. I
disagree with my colleagues to suggest that this would add to multiple
taxation because it is also possible for this Congress to provide
direction and streamlining of the process of taxation or assessment.
The effect of this bill would be to remove a grandfather clause that
applies to a number
[[Page H8298]]
of States that have utilized these resources for revenue. It is crucial
to consider the rights of State legislatures that develop measures to
generate revenue that may steam from Internet use which is beginning to
take the place of retail purchases.
Let me suggest that anyone's understanding of the difficulty of State
bottom-line budgets today would be living, I guess, somewhere out of
the United States. We are in a crisis with our budgets similar to the
crisis we have here in the United States Congress as we seek to fund
the Federal Government and looking for resources where we can get them
even in the backdrop of taxation cuts or cuts in taxes that certainly
are not prudent. In this instance, we are trying to judge the minds of
those in our State legislatures and governments, State governments, who
are attempting to balance their budgets.
The other aspect that I think would warrant consideration of an
extension of the moratorium is the lack of competitiveness or the
unfairness for those retail stores who themselves have to assess taxes.
The biggest day in my community and State, in terms of sales, was when
they did not have to tax. I grant the Members that. But that makes it
unequal for one to be able to shop on the Internet with no taxes but
not in going to their retail stores.
I would ask my colleagues, as we move this legislation forward, to
consider the Senate bill, which is for more reasonable, giving
opportunity for these States to be able to move out of this by finding
other revenue sources, giving them some time, as opposed to cutting
them off and, therefore, their not having the time to be able to find
other revenue sources.
This bill has as an unfair aspect to it, and I ask my colleagues to
vote against it.
Mr. Speaker, I rise in strong opposition to the bill before the House
today, H.R. 49, to permanently extend the moratorium enacted by the
Internet Tax Freedom Act.
I participated in the markup of this bill in the Judiciary Committee,
and I maintain the posture that I expressed at that time with respect
to the bill's deleterious effect on an important source of revenue for
Texas and my district. The committee had considered this legislation
beforehand as well, and an amendment that I offered was not accepted by
the committee, unfortunately. When we once again considered this bill,
I admonished that we continue to be mindful of the importance of the
Internet to the development of the American economy, and the utility of
the Internet in Americans' lives; however, the effect of this bill
would be to remove a grandfather clause that applies specifically to
the State of Texas. It is also crucial for the distinguished Members of
the United States House of Representatives to consider the right of
State legislatures to develop measures to generate revenue that may
stem from Internet use.
H.R. 49 amends the Internet Tax Freedom Act by imposing a permanent
moratorium on ``multiple and discriminatory taxes'' and by prohibiting
any tax on Internet access. The bill also eliminates the grandfathering
of State Internet access taxes that were ``generally imposed and
actually enforced prior to October 1, 1998,'' before ITFA became law.
By so doing, H.R. 49 will have an impact on consumers and also on the
States, particularly Texas. The convenience of the Internet is
beneficial to our economy and welcomed by consumers. As such,
prohibiting Internet taxes is openly sought by our citizens. For many
of our State governments the issue is more complicated. State
governments must strike a balance between easing the financial burden
on their constituents and generating revenue. Many State and local
government officials have maintained that continuing the debate on the
Internet tax collection issue was critical because of the financial
plight of many States. The officials believe that if the State and
local governments face continued shortages, a moratorium bill that did
not advance the sales and use tax collection issue would force States
to increase taxes in other areas. Thus, State and local government
officials urged that a prolonged continuation of the moratorium without
resolution of the simplification issue be viewed as a tax increase,
most likely on individual taxpayers and in-state businesses.
Presently, my home State of Texas is one of only seven States that
imposes taxes on Internet access consistent with the grandfathering
clause of ITFA. My State has struggled with this issue. When the ITFA
bill was first introduced in March of 1998, Texas was one of 10 States
and the District of Columbia that were taxing Internet access. By June
1998, Texas elected to suspend our collection of Internet access taxes.
Due in part to budgetary concerns, in October of 1999, Texas resumed a
modified Internet tax collection system wherein we rendered exempt from
tax the first $25 of a monthly access charge.
If H.R. 49 becomes law, Texas and the seven other States that
presently collect taxes on Internet taxes will be prohibited from doing
so upon passage of the bill. This is a substantial loss of revenue for
many States that are struggling financially in our sluggish economy and
in the aftermath of September 11.
Mr. Speaker, H.R. 49, has serious implications on our burgeoning
electronic economy, on our constituents, and on all of our State
governments. I oppose H.R. 49, because it will preclude those States,
like Texas, who have legitimate Internet taxation systems to continue
to make use of this valuable source of revenue. It imposes upon
consumers and our growing electronic economy an undue burden.
Mr. SENSENBRENNER. Mr. Speaker, I yield 3 minutes to the gentleman
from Virginia (Mr. Goodlatte), the chairman of the Committee on
Agriculture.
(Mr. GOODLATTE asked and was given permission to revise and extend
his remarks.)
Mr. GOODLATTE. Mr. Speaker, I rise in strong support of H.R. 49, the
Internet Tax and Nondiscrimination Act, and commend the gentleman from
Wisconsin (Chairman Sensenbrenner) and the gentleman from Utah
(Chairman Cannon) for their leadership in moving this legislation
forward, the gentleman from California (Mr. Cox), who has been leading
this effort for many years, and my colleagues on the other side of the
aisle for working together on this.
I would point out that this has absolutely nothing to do with the
collection of sale taxes on the Internet, which is an issue to be dealt
with on another day in another way.
As cochairman of the Congressional Internet Caucus and Chairman of
the House Republican High Technology Working Group, I have long
supported efforts to eliminate Internet access taxes and other
discriminatory taxes on electronic commerce. During the 107th Congress,
I introduced the Internet Tax Fairness Act, legislation that sought in
part to permanently ban Internet access taxes and discriminatory taxes
on electronic commerce.
{time} 1115
In 2001, the ban on these taxes was temporarily continued until
November of 2003. Now it is with great pleasure that I stand here today
to urge support of this legislation to permanently ban these burdensome
taxes.
Excessive taxation and regulation will hamper the Internet's
tremendous growth and stifle investment in small businesses that
utilize this tremendous medium. The last thing that consumers need is
for the puzzling array of taxes on their phone bills to be repeated on
their Internet service bills.
In addition, excessive taxation of Internet access will increase the
costs of households going online and result in a greater disparity
between those households that can afford to go online and those that
cannot.
H.R. 49, the Internet Tax Nondiscrimination Act, will encourage
continued investment in and utilization of the Internet by permanently
banning all Internet access taxes and eliminating the grandfather
clause in the current law that allows certain States to continue
imposing these crippling taxes on the Internet. The bill also contains
language that makes it clear that protections in the bill apply equally
to all providers of Internet access, regardless of the technologies
used to provide that access.
This bill is forward-looking and will provide the certainty that
businesses need to make calculated decisions regarding the ways in
which they will utilize and invest in Internet technologies. I urge
each of my colleagues to support this important legislation to
permanently ban all Internet access taxes and discriminatory taxes on
electronic commerce.
Mr. WATT. Mr. Speaker, I yield such time as he may consume to the
gentleman from Massachusetts (Mr. Delahunt).
Mr. DELAHUNT. Mr. Speaker, I thank the gentleman for yielding me
time, and I rise in support of H.R. 49 for the reasons that have been
enumerated by the subcommittee Chair and the gentleman from Wisconsin
(Mr. Sensenbrenner), the Chair of the full committee. I want to
acknowledge the leadership of the gentleman from Wisconsin (Mr.
Sensenbrenner), the Chair of the full committee.
[[Page H8299]]
I also want to express my appreciation to the subcommittee Chair, my
good friend, the gentleman from Utah (Mr. Cannon), for his kind words
and his sincere efforts to see that Congress gives full consideration
to the issue of taxation of remote sales. I thank him for scheduling a
hearing on this issue and look forward to working with him to see that
it is a productive exercise. As the gentleman knows, I will be
introducing legislation in the near future, together with the gentleman
from Oklahoma (Mr. Istook) and the gentleman from Alabama (Mr. Bachus),
which would authorize the States that have worked so hard to simplify
their sales taxes to collect sales taxes on remote sales to in-state
purchases.
As we all know, the States are confronting their worst budget crises
since the Great Depression. A declining economy, spiralling Medicaid
costs, and the erosion of their tax base have left them with a
collective deficit of some $100 billion. Governors of both political
parties face a difficult choice between unpopular tax increases and
drastic cuts in Medicaid, education, public safety and other essential
services, or all of the above.
I appreciate the concern of the sponsors of the bill, that without a
continuation of the moratorium on Internet access taxes, some States
might be tempted to help make up their shortfalls by enacting such
taxes. At the same time, we should be as concerned about the fact that
States are losing tens of billions of dollars each year because taxable
transactions on which they rely for half their revenues are
increasingly taking place over the Internet. Some are not concerned,
such as one individual, Mr. Grover Norquist, who testified at a hearing
in support of this bill, and said that he wants to ``shrink government
until we can drown it in the bathtub.'' He stated, ``I hope a State
goes bankrupt.''
Well, unless you agree with him, the money has to come from
somewhere. Uncollected sales taxes on Internet purchases cost the
States more than $16 billion in 2001. Unless there is a system in place
that enables States and local governments to collect these taxes, their
annual losses from online sales will grow to some $45 billion by 2006
and $66 billion by 2011, with total losses coming to nearly half a
trillion dollars by that date.
What does this mean for individual States? Well, just to cite a few
examples, my home State of Massachusetts lost $256 million in 2001, and
its losses will climb to over $1 billion by 2011. Tennessee lost $450
million in 2001, and by 2011 its annual losses will grow to $1.8
billion. Florida, which relies on the sales tax for more than one-half
of its annual revenues, lost $1.2 billion in 2001, with its losses
estimated to quadruple to nearly $5 billion just 10 years from now.
Texas lost $1.4 billion in 2001 and stands to lose $5.6 billion by
2011.
These losses are magnifying the fiscal problems of the States, which
are already experiencing, because of increased costs and shrinking
revenues, losses. Additionally, by failing to ensure sales tax equity
and fairness between remote sellers and Main Street merchants, we are
putting at risk the thousands of small businesses that sustain our
economy and contribute so much to our neighborhoods and our
communities.
As former Governor Engler of Michigan said the last time we
considered this issue, ``It is time to close ranks, come together and
stand up for Main Street America. Fairness requires that remote sellers
collect and pay the same taxes that our friends and neighbors on Main
Street have to collect and pay.''
So, Mr. Speaker, while I support the moratorium on Internet access
taxes and I support H.R. 49, I think it is important that we get our
priorities straight. The Quill decision, which prompted this particular
proposal, prohibited a State from collecting sales taxes from out-of-
state businesses that do not have a physical presence in that State.
But the court said that Congress could authorize the States to collect
these taxes once they have modified their taxing systems to alleviate
the burdens placed on Internet commerce by multiple taxing
jurisdictions.
The States have made substantial progress over the past year in
developing a simplified, efficient, and technologically neutral system
for the taxation of goods and services that can meet that test. Once a
sufficient number of States have implemented the streamlined sales and
tax agreement, Congress should move expeditiously to consider our
legislation authorizing them to require remote sellers to collect and
remit sales and use taxes on in-state sales. The States, I believe, are
meeting their responsibilities, and hopefully we will meet ours.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I appreciate the support of the gentleman from
Massachusetts (Mr. Delahunt) on this bill. Lest people only heard part
of his statement, let me say very clearly that this legislation has
nothing whatsoever to do with the issue of the assessment and
collection of sales taxes on remote sellers. It only has to do with
banning multiple and discriminatory taxes on Internet access. The sales
tax issue will be dealt with another day and in the context of another
bill.
Since the gentleman from Massachusetts has raised this, I would like
to make the following observations:
First, most States that assess sales taxes also assess use taxes, so
an in-state resident who purchases goods out of state and is exempt
from the sales tax because the goods are shipped from one State to the
other, the sales tax of the State where the seller is located, is still
liable for a use tax in his or her State of residency.
There is a line on the Wisconsin State income tax form that asks how
much in use taxes you have to pay to the State of Wisconsin. If you put
down zero and you really owe taxes, you filed a false tax return. I am
sure that is the case in practically every other State that has got a
sales or a use tax.
So when we are dealing with this issue, we are dealing with the
failure of States to adequately and efficiently enforce their own use
tax law. I do not know why States have failed to do this. That is
something that Governors and legislators and State taxation department
officials ought to explain.
But I can see the two-step being put on the Congress, that if we pass
what the gentleman from Massachusetts wants us to at a later date, then
that becomes our sales tax increase of billions of dollars on the
taxpayers of Massachusetts and Texas and North Carolina.
I have told my Governors, Republican and Democrat, that have talked
to me about this, as I said, your laws are already on the books. Why do
you want us to enforce your law through an act of Congress, when you
have the means to enforce your law by yourselves as responsibilities of
the State government?
I hope that when we debate this issue of how to tax remote sales, we
do not forget that.
Mr. Speaker, I am happy to yield 2 minutes to the gentleman from
Texas (Mr. Smith).
Mr. SMITH of Texas. Mr. Speaker, I thank the chairman of the
Committee on the Judiciary for yielding me time.
Mr. Speaker, I support H.R. 49, the Internet Tax and
Nondiscrimination Act. This legislation would permanently extend the
current moratorium on Internet access taxation, as well as taxes on
electronic commerce. It would not prohibit States from imposing sales
tax on sales conducted over the Internet. However, it does prevent
States or localities from imposing a sales tax that only applies to
Internet transactions.
Mr. Speaker, Internet commerce is still relatively new and has yet to
reach its full potential. The imposition of taxes would threaten the
future growth of e-commerce and would discourage companies from using
the Internet to conduct business. Internet taxation would create
regional and international barriers to global trade.
The Internet is also a major source of information for many
individuals and families. Taxes would reduce the number of Americans
who could afford Internet access. Our goal in Congress should be to
encourage and promote Internet access, rather than to widen the digital
divide.
Mr. Speaker, Americans should be able to access the Internet without
being subject to State and local taxes.
Mr. WATT. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Texas (Mr. Green).
Mr. GREEN of Texas. Mr. Speaker, I rise today in opposition to H.R.
49, the Internet Tax Nondiscrimination Act.
[[Page H8300]]
My opposition stems not from wanting to tax the Internet access or to
impose dual taxes on e-commerce. I oppose the bill because it does not
follow the precedent set by previous Internet tax moratorium
legislation in holding harmless States that have enacted access taxes
previous to 1998.
This bill would have what I consider an enormous impact on the State
of Texas. The effect of this bill would be felt as early as November of
this year. I do not need to remind my colleagues of the fiscal crises
that our States are currently finding themselves in, including the
State of Texas.
The State of Texas is one of those States facing a budget problem,
and I cannot support legislation that would take away $45 million in
annual revenue in our State, that my State has been depending on for
the last 5 years. The $45 million in funds are needed for critical
State programs, such as children's health care. Our last legislative
session, because of our budget problem, dropped 175,000 children off of
children's health care. So what are we going to do about taking a hit
from this, drop even more children?
My State is not the only one. Connecticut would lose $15 million;
Ohio, $12 million; Wisconsin, $7.5 million; Tennessee, $4 million;
North Dakota, $2.5 million; South Dakota, $1.7 million; and New Mexico,
$1 million.
I oppose the bill for procedural reasons, because I hoped to be able
to consider this under an open rule that would allow Members from these
States adversely affected by the grandfathering provision to allow
amendments to protect their State laws. Without that opportunity, I
have no choice but to vote in the best interests of my own State, as I
assume a lot of other Members from States losing money will, and,
again, taking away the States' ability to do it, to tax what they have
already done.
I guess my frustration is that in Texas we in 1999 changed our taxes
to where everything under $25 is exempt for your access to Internet
service. But for some reason we still have State taxes and Federal
taxes on access to our telephones.
{time} 1130
On the point I am concerned about, I hope we can adopt the 3-year
extension language that is similar to the Senate bill so that we can
continue to hold harmless those States that are depending on this
crucial revenue, particularly in this time of budget shortfalls and the
disaster that is happening to some of our State programs because of
State budget cuts.
Mr. SENSENBRENNER. Mr. Speaker, I yield 1 minute to the gentleman
from New Hampshire (Mr. Bass).
Mr. WATT. Mr. Speaker, I also yield to the gentleman from New
Hampshire (Mr. Bass) for 1 minute.
The SPEAKER pro tempore (Mr. Ose.) The gentleman from New Hampshire
(Mr. Bass) is recognized for 2 minutes.
Mr. BASS. Mr. Speaker, I rise in opposition to this bill. I am
against taxation of the Internet. There is no question about that. What
concerns me is the fact that this legislation eliminates the
grandfather clause of those nine States that currently collect a
communications tax.
In my State of New Hampshire we have a 7 percent tax on access for
intrastate communications, not interstate but intrastate. It does not
matter whether it is fax, Internet communications, any other mechanism.
What this bill does is eliminate the ability of the State of New
Hampshire and eight other States to collect revenue on what is
justifiably a State-centered tax.
Now, we do not regulate sales taxes or State income taxes, what they
should do. There is a provision in this bill that would allow sales
taxes to be collected but New Hampshire does not have a sales tax. So
we get hit twice through the passage of this.
Mr. Speaker, the Senate bill has a 3-year extension of this
moratorium and there is no such extension in the House. Ultimately what
this bill does is it creates $100 million unfunded Federal mandate to
States.
I am not for taxation of the Internet, but what the bill is doing is
it is proposing to affect tax policy within States and their ability to
tax within their open telecommunications system. And, as I said a
minute ago, it is an unfunded Federal mandate.
I hope that the Committee on the Judiciary will look carefully at
what the Senate has done with this 3-year extension and will include
that 3-year extension in the House version of the bill.
It is a solution that is bad for New Hampshire and it is unfair. I
plan to vote against this bill and I urge my colleagues in the States
of Texas, Connecticut, Ohio, Wisconsin, Tennessee, North Dakota, South
Dakota, New Mexico and Washington, those States that will be losing
revenue on this with no balancing make-up from the Federal Government,
to join me in opposition to this bill.
Mr. WATT. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself the balance of the
time.
Mr. Speaker, in response to the gentleman from New Hampshire, the
States have been on notice for 5 years that national policy disfavors
taxing access to the Internet. While it is true that the grandfather
clause is repealed by this bill, in the State of New Hampshire in 2002
$2\1/2\ million was collected through Internet access taxes. That is
13/100ths of 1 percent of the total revenues of the State of New
Hampshire.
Obviously, getting rid of this multiple and discriminatory and
regressive tax is something that should be a national policy.
I think the Internet is interstate commerce, not intrastate commerce.
And, thus, I believe that the bill ought to be approved.
Ms. LOFGREN. Mr. Speaker, earlier this year, I introduced H.R. 1481,
which would have extended the Internet tax moratorium for another 5
years. I introduced a 5-year extension because at the time, I believed
that politically, it was the longest extension that we could get. But I
am now convinced that we must make every effort to extend the
moratorium permanently. That's why I am a strong supporter and
cosponsor of H.R. 49.
Let's be clear on what H.R. 49 does and does not do. It prohibits
states from taxing people for simply logging onto the Internet. This is
absolutely essential to the growth of the Internet. It is also
important because access taxes hit those with lower incomes the
hardest. We need to find ways to bridge the digital divide in this
country, not make it harder for lower income Americans to get online.
H.R. 49 also prohibits multiple and discriminatory taxes on Internet
transactions. This is simply a matter of fairness. If I buy a CD on the
Internet, it should not be taxed at a higher rate than if I buy that CD
in a store. There should be an even playing field.
That's what H.R. 49 does. What it doesn't do is affect the ability of
a State to impose and collect sales taxes on Internet transactions.
Over the years, there has been a lot of confusion on this point. Some
have tried to link the moratorium with the sales tax issue. But they
are separate and distinct issues. The ability of states to impose sales
taxes is not limited by H.R. 49, it is limited by the Supreme Court's
Quill decision, which prevents taxes on remote sellers unless they have
a ``substantial nexus'' to the taxing authority.
We cannot risk harming the future of the Internet by conditioning an
extension of the moratorium on resolution of the sales tax issue. Let's
deal with the separate sales tax issue separately.
A toll to enter the information superhighway is not good policy
today, and it won't be good policy in a year, two years, or 5 years. I
urge my colleagues to support a permanent extension.
Mr. DREIER. Mr. Speaker, as an original co-sponsor of H.R. 49, the
Internet Tax Nondiscrimination Act, I want to congratulate Chairman Cox
and Chairman Sensenbrenner for their work in bringing before us this
very significant electronic commerce bill. After two temporary
moratoriums in the last 5 years, we have the opportunity today to
finally pass a permanent ban on Internet access taxes, as well as
multiple and discriminatory State and local taxes on electronic
commerce.
It is important to note that the primary reason it took us 5 years to
make this moratorium permanent was the linkage between two issues that
are truly unrelated: (1) keeping down the cost of consumer access to
the Internet; and (2) the issue of streamlined sales taxes and remote
tax collection authority by States. H.R. 49 now moves us away from that
linkage.
However, during Judiciary Committee debate on this bill, a number of
Members continued to voice their belief that we still need to address
the State tax simplification issue and ``level the playing field''
between brick-and-mortar and online sellers.
While the State sales tax simplification debate should be considered
in Congress--and I know that Chairman Cannon will be holding
[[Page H8301]]
hearings on that issue--I want to caution my colleagues who believe
that leveling the playing field between offline and online sellers is a
quick and easy policy decision. We need to be very careful that we do
not create a precedent that would allow States and localities to tax a
transaction, simply because the seller sells something to a purchaser
in their jurisdiction.
One of the fundamental principles motivating America's struggle for
independence from Britain was the idea that citizens should to face
taxation without representation. To require that sellers pay taxes to a
governmental body that in no way represents its interests is contrary
to that basic premise of our democracy. In continuing to pursue a
resolut8inon of the streamlined State sales tax issue, it is important
that we continue to be guided by that principle.
Mr. LANGEVIN. Mr. Speaker. Today, I rise in support of H.R. 49, the
Internet Tax Nondiscrimination Act. This bill is the result of a
bipartisan compromise to the benefit of consumers in Rhode Island and
around the country.
H.R. 49 makes permanent the current moratorium on Internet access
taxes, which was scheduled to expire on November 1, 2003. This
moratorium, in effect since October 1998, has greatly contributed to
the rapid expansion of the Internet.
For the second quarter of 2003, e-commerce accounted for only 1.5
percent of total goods and services sold in the country, but this is an
increase of 28 percent from the previous year. By 2005, worldwide
online sales are expected to total $8.6 trillion online, up from $3.6
trillion this year. This bill will maintain the United States' position
as a leader in online commerce because H.R. 49 protects consumers from
double taxation of online purchases, which would slow the growth of
Internet sales.
I am pleased to see that the Judiciary Committee adopted the Watts-
Cannon amendment, which ensures that all technologies, including
traditional modem, cable modem, DSL, wireless, and future access
methods, are subject to the same tax treatment. In addition, this bill
ensures a nondiscriminatory tax system, which neither encourages nor
discourages purchases online. The legislation is fair to existing brick
and mortar businesses, while continuing to foster the expansion of e-
commerce.
I urge my colleagues to support H.R. 49, this bipartisan legislation
that benefits consumers and businesses.
Mr. KIND. Mr. Speaker, I am pleased to support H.R. 49, the Internet
Tax Non-Discrimination Act. This bill would make permanent the national
moratorium on Internet access taxes and multiple and discriminatory
taxes on e-commerce.
The United States has made great strides in the goal of achieving
Internet access for all Americans. As I travel throughout my district
in western Wisconsin, I am constantly amazed to see the continued use
of the Internet in public libraries, schools and hospitals, as well as
individual homes and businesses. As the telephone did 100 years ago,
the Internet is improving our lives and bringing us closer together as
a world community.
Mr. Speaker, the previous legislation dealing with Internet taxation
grandfathered existing laws in 10 states, including Wisconsin that
imposed taxes on Internet access. The revenue from the taxes was used
to pay for police officers, firefighters, hospital personnel, and
elementary and secondary school teachers.
In these times of tight state budgets and fiscal uncertainty, every
tax dollar is crucial to deliver needed services to citizens throughout
the country. However, when the Federal Government unilaterally removes
tax revenue by superceding state laws, state budgets take the hit.
Congress must take state government needs and budget schedules when
passing laws that supercede state taxation laws.
Mr. Speaker, the language in the Senate version of this bill includes
a provision providing for a 3-year delay in the implementation of the
law in those states with previous Internet access tax laws. This
provision will afford those states the opportunity to plan for the loss
of revenue from H.R. 49.
I am voting for H.R. 49 because I believe it is important to keep
Internet access affordable so all Americans across the economic
spectrum. However, I think it is only fair to state governments that
they have proper notice about the lost of tax revenue dollars. Thus, I
will be urging conferees to adopt the Senate language allowing for a 3-
year delay of this law in those 10 states with Internet access tax
laws.
Mr. SENSENBRENNER. Mr. Speaker, I urge support for the bill and I
yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Wisconsin (Mr. Sensenbrenner) that the House suspend the
rules and pass the bill, H.R. 49, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________