[Congressional Record Volume 149, Number 144 (Wednesday, October 15, 2003)]
[Senate]
[Pages S12567-S12569]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNET TAX FREEDOM ACT
Mr. WYDEN. Mr. President, the Senate knows, 5 years ago I was the
sponsor in the Senate of the Internet Tax Freedom Act. This is law that
was designed to ensure that the Internet be free of discriminatory
taxes on Internet commerce and a variety of Internet activities. And it
was designed to encourage the growth of the Internet.
The law has unquestionably worked. There is absolutely no evidence of
anyone who has been harmed by the inability to discriminate against
electronic commerce.
For many months now, Senators of both political parties have been
working together to try to ensure the law that expires shortly would be
reauthorized, and Senators have been working on a cooperative and
bipartisan basis to go forward and reauthorize this law that has
worked.
I had been under the impression that we were just about ready to
bring this bill to the floor, but in the last few days a proposal that
I find truly alarming has been brought forward by some of the State and
local officials. I come to the floor this morning to make sure the
Senate is actually familiar with the language that is being brought
forward.
Mr. President, I ask unanimous consent that this legislation I am
going to discuss be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Non-Texas Markup
moratorium on internet taxes
Pub. L. 105-277, div. C, title XI, Oct. 21, 1998, 112 Stat.
2681-719, provided that:
SEC. 1101. MORATORIUM.
(a) Moratorium.--No State or political subdivision thereof
shall impose any of the following taxes:
(1) taxes on Internet access.
(2) multiple or discriminatory taxes on electronic
commerce.
(b) Preservation of State and Local Taxing Authority.--
(1) In general.--Except as provided in this section,
nothing in this title shall be construed to modify, impair,
or supersede, or authorize the modification, impairment, or
superseding of, any State or local law pertaining to taxation
that is otherwise permissible by or under the Constitution of
the United States other Federal law [and in effect] on the
date of enactment of this Act (Oct. 21, 1998).
(2) Special rules.--If charges for Internet access are
aggregated with and not separately stated from charges that
are subject to taxation, then the charges for Internet access
may be subject to taxation unless the Internet access service
provider can reasonably identify Internet access charges not
subject to taxation from its books and records kept in the
regular course of business for other purposes
(c) Liabilities and Pending Cases.--Nothing in this title
affects liability for taxes accrued and enforced before the
date of enactment of this Act, nor does this title affect
ongoing litigation relating to such taxes.
[(d) Definition of Generally Imposed and Actually
Enforced.--For purposes of this section, a tax has been
generally imposed and actually enforced prior to October 1,
1998, if, before that date, the tax was authorized by statute
and either--
[(1) a provider of Internet access services had a
reasonable opportunity to know by virtue of a rule or other
public proclamation made by the appropriate administrative
agency of the State or political subdivision thereof, that
such agency has interpreted and applied such tax to Internet
access services; or
[(2) a State or political subdivision thereof generally
collected such tax on charges for Internet access.]
(e) Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply in the
case of any person or entity who knowingly and with knowledge
of the character of the material, in interstate or foreign
commerce by means of the World Wide Web, makes any
communication for commercial purposes that is available to
any minor and that includes any material that is harmful to
minors unless such person or entity has restricted access by
minors to material that is harmful to minors--
(A) by requiring use a credit card, debit account, adult
access code, or adult personal identification number;
(B) by accepting a digital certificate that verifies age;
or
(C) by any other reasonable measures that are feasible
under available technology.
[[Page S12568]]
(2) Scope of exception.--For purposes of paragraph (1), a
person shall not be considered to (be) making a communication
for commercial purposes of material to the extent that the
person is--
(A) a telecommunications carrier engaged in the provision
of a telecommunications service;
(B) a person engaged in the business of providing an
Internet access service;
(C) a person engaged in the business of providing an
Internet information location tool; or
(D) similarly engaged in the transmission, storage
retrieval, hosting, formatting, or translation (or any
combination thereof) of a communication made by another
person, without selection or alteration of the communication.
(3) Definitions.--In this subsection:
(A) By means of the world wide web.--The term ``by means of
the World Wide Web'' means by placement of material in a
computer server-based file archive so that it is publicly
accessible, over the Internet, using hypertext transfer
protocol, file transfer protocol, or other similar protocols.
(B) Commercial purposes; engaged in the business.--
(i) Commercial purposes.--A person shall be considered to
make a communication for commercial purposes only if such
person is engaged in the business of making such
communications.
(ii) Engaged in the business.--The term ``engaged in the
business'' means that the person who makes a communication,
or offers to make a communication, by means of the World Wide
Web, that includes any material that is harmful to minors,
devotes time, attention, or labor to such activities, as a
regular course of such person's trade or business, with the
objective of earning a profit as a result of such activities
(although it is not necessary that the person make a profit
or that the making or offering to make such communications be
the person's sole or principal business or source of income).
A person may be considered to be engaged in the business of
making, by means of the World Wide Web, communications for
commercial purposes that include material that is harmful to
minors, only if the person knowingly causes the material that
is harmful to minors to be posted on the World Wide Web or
knowingly solicits such material to be posted on the World
Wide Web.
(C) Internet.--The term ``Internet'' means collectively the
myriad of computer and telecommunications facilities,
including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ
the Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(D) Internet access service.--The term ``Internet access
service'' means a service that enables users to access
content, information, electronic mail, or other services
offered over the Internet and may also include access to
proprietary content, information, and other services as part
of a package of services offered to consumers. Such term does
not include telecommunications services, except to the extent
such services are used to provide Internet access.
(E) Internet information location tool.--The term
``Internet information location tool'' means a service that
refers or links users to an online location on the World Wide
Web. Such term includes directories, indices, references,
pointers, and hypertext links.
(F) Material that is harmful to minors.--The term
``material that is harmful to minors'' means any
communication, picture, image, graphic image file, article,
recording, writing, or other matter of any kind that is
obscene or that--
(i) the average person, applying contemporary community
standards, would find, taking the material as a whole and
with respect to minors, is designed to appeal to, or is
designed to pander to, the prurient interest;
(ii) depicts, describes, or represents, in a manner
patently offensive with respect to minors, an actual or
simulated sexual act or sexual contact, an actual or
simulated normal or perverted sexual act, or a lewd
exhibition of the genitals or post-pubescent female breast;
and
(iii) taken as a whole, lacks serious literary, artistic,
political, or scientific value for minors.
(G) Minor.--The term ``minor'' means any person under 17
years of age.
(H) Telecommunications carrier; telecommunications
service.--The terms ``telecommunications carrier'' and
``telecommunications service'' have the meanings given such
terms in section 3 of the Communications Act of 1934 (47
U.S.C. 153).
(f) Additional Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply with
respect to an Internet access provider, unless, at the time
of entering into an agreement with a customer for the
provision of Internet access services, such provider offers
such customer (either for a fee or at no charge) screening
software that is designed to permit the customer to limit
access to material on the Internet that is harmful to minors.
(2) Definitions.--In this subsection:
(A) Internet access provider.--The term ``Internet access
provider'' means a person engaged in the business of
providing a computer and communications facility through
which a customer may obtain access to the Internet, but does
not include a common carrier to the extent that it provides
only telecommunications services.
(B) Internet access services.--The term ``Internet access
services'' means the provision of computer and communications
services through which a customer using a computer and modem
or other communications device may obtain access to the
Internet, but does not include telecommunications service
provided by a common carrier.
(C) Screening software.--The term ``screening software''
means software that is designed to permit a person to limit
access to material on the Internet that is harmful to minors.
(3) Applicability.--Paragraph (1) shall apply to agreements
for the provision of Internet access services entered into on
or after the date that is 6 months after the date of
enactment of this Act (Oct. 21, 1998).
SEC. 1105. [``SEC. 1104.] DEFINITIONS.
For the purposes of this title:
(1) Bit tax.--The term ``bit tax'' means any tax on
electronic commerce expressly imposed on or measured by the
volume of digital information transmitted electronically, or
the volume of digital information per unit of time
transmitted electronically, but does not include taxes
imposed on the provision of telecommunications services.
(2) Discriminatory tax.--The term ``discriminatory tax''
means
(A) any tax imposed by a State or political subdivision
thereof on electronic commerce that--
(i) is not generally imposed and legally collectible by
such State or such political subdivision on transactions
involving similar property, goods, services, or information
accomplished through other means;
(ii) is not generally imposed and legally collectible at
the same rate by such State or such political subdivision on
transactions involving similar property, goods, services, or
information accomplished through other means, unless the rate
is lower as part of a phase-out of the tax over not more than
a 5-year period;
(iii) imposes an obligation to collect or pay the tax on a
different person or entity than in the case of transactions
involving similar property, goods, services, or information
accomplished through other means;
(iv) establishes a classification of Internet access
service providers or online service providers for purposes of
establishing a higher tax rate to be imposed on such
providers than the tax rate generally applied to providers of
similar information services delivered through other means;
or
(B) any tax imposed by a State or political subdivision
thereof, if--
(i) [except with respect to a tax (on Internet access) that
was generally imposed and actually enforced prior to October
1, 1998,] the sole ability to access a site on a remote
seller's out-of-State computer server is considered a factor
in determining a remote seller's tax collection obligation;
or
(ii) a provider of Internet access service or online
services is deemed to be the agent of a remote seller for
determining tax collection obligations solely as a result of
(I) the display of a remote seller's information or content
on the out-of-State computer server of a provider of Internet
access service or online services; or
(II) the processing of orders through the out-of-State
computer server of a provider of Internet access service or
online services.
(3) Electronic commerce.--The term ``electronic commerce''
means any transaction conducted over the Internet or through
Internet access, comprising the sale, lease, license, offer,
or delivery of property, goods, services, or information,
whether or not for consideration, and includes the provision
of Internet access.
(4) Internet.--The term ``Internet'' means collectively the
myriad of computer and telecommunications facilities,
including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ
the Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(5) Internet access.--The term ``Internet access--
(A) [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, except to the extent such services are used to
provide Internet access.]
(B) The term ``Internet access'' as described in subsection
(A) above is a service directly employed by its purchaser,
regardless of the medium by which such service is provided.
The term ``Internet access'' does not include the provision
of television programs, games, books, music, motion pictures,
newspapers, magazines, software, telecommunications services,
voice communication, financial services, research services,
information services, or other such products or services, or
products or services that are available for purchase in any
form other than over the Internet. Nothing in this title
shall be construed to modify, impair, or supersede, or
authorize the modification, impairment, or superseding of,
any State or local law pertaining to taxation that is
otherwise permissible by or under the Constitution of the
United States or other Federal
[[Page S12569]]
law as of the date of original enactment of this Act (Oct.
21, 1998).
(6) Multiple tax.--
(A) In general.--The term ``multiple tax'' means any tax
that is imposed by one State or political subdivision thereof
on the same or essentially the same electronic commerce that
is also subject to another tax imposed by another State or
political subdivision thereof (whether or not at the same
rate or on the same basis, without a credit (for example, a
resale exemption certificate) for taxes paid in other
jurisdictions.
(B) Exception.--Such term shall not include a sale or use
tax imposed by a State and 1 or more political subdivisions
thereof on the same electronic commerce or a tax on persons
engaged in electronic commerce which also may have been
subject to a sales or use tax thereon.
(C) Sales or use tax.--For purposes of subparagraph (B),
the term ``sales or use tax'' means a tax that is imposed on
or incident to the sale, purchase, storage, consumption,
distribution, or other use of tangible personal property or
services as may be defined by laws imposing such tax and
which is measured by the amount of the sales price or other
charge for such property or service.
(7) State.--The term ``State'' means any of the several
States, the District of Columbia, or any commonwealth,
territory, or possession of the United States.
(8) Tax.--
(A) In general.--The term ``tax'' means--
(i) any charge imposed by any governmental entity for the
purpose of generating revenues for governmental purposes, and
is not a fee imposed for a specific privilege, service, or
benefit conferred; or
(ii) the imposition on a seller of an obligation to collect
and to remit to a governmental entity any sales or use tax
imposed on a buyer by a governmental entity.
(B) Exception.--Such term does not include any franchise
fee or similar fee imposed by a State or local franchising
fee or similar fee imposed by a State or local franchising
authority, pursuant to section 622 or 653 of the
Communications Act of 1934 (47 U.S.C. 542, 573), or any other
fee related to obligations or telecommunications carriers
under the Communications Act of 1934 (47 U.S.C. 151 et seq.).
(9) Telecommunications service.--The term
``telecommunications service'' has the meaning given such
term in section 3(46) of the Communications Act of 1934 (47
U.S.C. 153(46)) and includes communications services (as
defined in section 4251 of the Internal Revenue Code of 1986
(26 U.S.C. 4251)).
(10) Tax on internet access.--The term ``tax on Internet
access'' means [a tax on Internet access, including] the
enforcement or application of any new or preexisting tax on
the sale or use of Internet access [services unless such tax
was generally imposed and actually enforced prior to October
1, 1998].
Mr. WYDEN. Mr. President, what some State and local officials now
seek to do is to change the definition of ``Internet access,'' which,
under current law, cannot be taxed. In doing so, what it would do is
give States and localities explicit permission to tax what Internet
users do once they get on line. That would mean you could have games,
music, magazines, newspapers, information services, financial services,
research services, or other products of services, in effect, facing a
barrage of new taxes.
The phrase ``you've got mail'' would be replaced with ``you owe
taxes.'' That is what this proposal would mean to 142 million Americans
with household Internet access. Under this proposal, the consumer could
be taxed every time they send an e-mail, every time they read their
local newspaper online or check the score of a football game.
Those who are making this proposal are not going to come out publicly
and talk about their ideas for taxing e-mail. There isn't a headline in
the language that I have put into the Congressional Record today that
says: Watch out, our plan is going to tax e-mail. But there is no
question that a clear reading of this legislative language will mean
just that. Consumers could be taxed every time they check a bank
statement online. They could be taxed for paying their bills online.
They could be taxed each time they check the sports scores online or
listen to the weather on streaming radio. Every time a consumer turns
to Google research service, they could be taxed for each key stroke. If
that happened, no question, some in my office would just go bankrupt.
As the Chair knows, being so instrumental in working with me and
members of the Senate Commerce Committee, this law has worked. It has
been a bipartisan law based on the simple proposition that you would
treat activity online just as you treat activity online. Some made dire
predictions about the law originally that States and localities would
be denied the opportunity to gain revenue for essential services. It
has been clear that they have been proven incorrect. Internet commerce
is now just a small part of our economy. In fact, what we have seen is
a merger of what I call bricks and clicks, traditional commerce with
Internet commerce. We have not seen problems under current law.
But by redefining the definition of Internet access, as the proposal
does that I have put into the Congressional Record today, in effect you
give a green light to State and local authorities all across the
country to tax services that are integral to Internet access, including
e-mail.
I believe this proposal would make wider the digital divide in this
country. I think the new taxes would restrict growth in the Internet.
The American consumer needs to know exactly what some of these taxing
authorities are really up to. What they really want is either to stop
the ban on Internet access taxes from becoming permanent or they are
looking for statutory language which would stick consumers with
hundreds of millions of dollars in new taxes each year.
In my view, either option would be unacceptable to a majority of
Senators. I hope, as the negotiations originally proceeded in the
Commerce Committee and now in the Finance Committee, that there would
be an effort to make the ban on discriminatory taxes on Internet
commerce permanent and, in particular, let us ensure that the hard hit
American consumer is protected from unfair tax schemes such as those I
have outlined this morning.
I yield the floor.
The PRESIDENT pro tempore. Who yields time? The Senator from Texas.
Mrs. HUTCHISON. Mr. President, it is my understanding that our side
took 3 minutes early. So how much time is remaining on the other side?
The PRESIDENT pro tempore. The majority has 26 minutes 58 seconds.
The minority has 13 minutes 34 seconds.
Mrs. HUTCHISON. Mr. President, I will proceed. If a Member of the
other side comes, I will be happy to yield to them under their time.
But I will start with the majority time.
The PRESIDENT pro tempore. Without objection, the Senator from Texas
is recognized.
____________________