[Congressional Record Volume 149, Number 160 (Thursday, November 6, 2003)]
[Senate]
[Pages S14156-S14160]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   INTERNET TAX NONDISCRIMINATION ACT

  Mr. McCAIN. Madam President, pursuant to the order of October 30, 
2003, I ask unanimous consent that the Senate proceed to the immediate 
consideration of S. 150, the Internet Tax Moratorium bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will state the bill by title.
  The legislative clerk read as follows:

       A bill (S. 150) to make permanent the moratorium on taxes 
     on Internet access and multiple and discriminatory taxes on 
     electronic commerce imposed by the Internet Tax Freedom Act, 
     which had been reported from the Committee on Commerce, 
     Science and Transportation and referred to the Committee on 
     Finance and discharged, with an amendment to strike all after 
     the enacting clause and inserting in lieu thereof the 
     following:

  (Strike the part shown in black brackets and insert the part shown in 
italic.)

                                 S. 150

       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 Non-
     discrimination Act of 2003''.

     [SEC. 2. AMENDMENT OF INTERNET TAX FREEDOM ACT.

       [Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 
     151 nt.) is amended--
       [(1) by striking ``taxes during the period beginning on 
     October 1, 1998, and ending on November 1, 2003--'' and 
     inserting ``taxes:'';
       [(2) by striking paragraph (1) and inserting the following:
       [``(1) Taxes on Internet access.''; and
       [(3) by striking ``multiple'' in paragraph (2) and 
     inserting ``Multiple''.

     [SEC. 2. REPEAL OF EXCEPTION.

       [Section 1104 of the Internet Tax Freedom Act (47 U.S.C. 
     151 nt.) is amended by striking paragraph (10).

     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) and 
     redesignating subsection (e) as 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''.

[[Page S14157]]

       (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) (as 
     redesignated by subsection (b)(1) of this Act), 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.

     SEC. 3. 3-YEAR SUNSET FOR PRE-OCTOBER, 1998, TAX EXCEPTION.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by redesignating section 1104 as section 1105; and
       (2) by inserting after section 1103 the following:

     ``SEC. 1104. PRESERVATION OF PRE-OCTOBER, 1998, STATE AND 
                   LOCAL TAX AUTHORITY UNTIL 2006.

       ``(a) In General.--Section 1101(a) does not apply to a tax 
     on Internet access that was 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.
       ``(b) Termination.--This section shall not apply after 
     October 1, 2006.
       ``(c) Tax on Internet Access.--Notwithstanding section 
     1105(10), in this section the term `tax on Internet access' 
     includes the enforcement or application of any preexisting 
     tax on the sale or use of Internet services if that tax was 
     generally imposed and actually enforced prior to October 1, 
     1998.''.

     SEC. 4. UNIVERSAL SERVICE.

       Nothing in the Internet Tax Freedom Act shall prevent the 
     imposition or collection of any fees or charges used to 
     preserve and advance Federal universal service or similar 
     State programs authorized by section 254 of the 
     Communications Act of 1934.
  Mr. McCAIN. Madam President, I ask unanimous consent that the bill as 
thus amended be treated as original text for the purpose of amendment; 
provided there be no point of order waived by virtue of this agreement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The reported amendment is agreed to. The bill will be considered as 
original text. No point of order will be waived.


                           Amendment No. 2136

  Mr. McCAIN. Madam President, I send a substitute to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain], for Mr. Allen, for 
     himself, Mr. Wyden, Mr. Burns, Mr. Ensign, Mr. Sununu, Mr. 
     Warner, Mr. Smith, Mr. Leahy, Mr. Grassley, Mr. Hatch, Mr. 
     McCain, Mr. Baucus, Mrs. Boxer, Mr. Chambliss, and Mrs. 
     Lincoln, proposes an amendment numbered 2136.

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

       Strike out all after the enacting clause and insert the 
     following:

     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) and 
     redesignating subsection (e) as subsection (d).
       (2) Section 1104(10) of the Internet Tax Freedom Act (47 
     U.S.C. 151 note) is amended to read as follows: .
       ``(10) Tax on internet access.
       ``(A) In general.--The term `tax on Internet access' means 
     a tax on Internet access, regardless of whether such tax is 
     imposed on a provider of Internet access or a buyer of 
     Internet access and regardless of the terminology used to 
     describe the tax.
       ``(B) General exception.--The term `tax on Internet access' 
     does not include a tax levied upon or measured by net income, 
     capital stock, net worth, or property value.''.
       (3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act 
     (4.7 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) Internet Access Service; Internet Access.--
       (1) Internet access service.--Paragraph (3)(D) of section 
     1101(d) (as redesignated by subsection (b)(1) of this 
     section) of the Internet Tax Freedom Act (47 U.S.C. 151 note) 
     is amended by striking the second sentence and inserting 
     ``The term `Internet access service' does not include 
     telecommunications services, except to the extent such 
     services are purchased, used, or sold by a provider of 
     Internet access to provide Internet access.''.
       (2) Internet access.--Section 1104(5) of that Act is 
     amended by striking the second sentence and inserting ``The 
     term `Internet access' does not include telecommunications 
     services, except to the extent such services are purchased, 
     used, or sold by a provider of Internet access to provide 
     Internet access.''.

     SEC. 3. 3-YEAR SUNSET FOR PRE-OCTOBER, 1998, TAX EXCEPTION.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by redesignating section 1104 as section 1105; and
       (2) by inserting after section 1103 the following:

     ``SEC. 1104. PRESERVATION OF PRE-OCTOBER, 1998, STATE AND 
                   LOCAL TAX AUTHORITY UNTIL 2006.

       ``(a) In General.--Section 1101(a) does not apply to a tax 
     on Internet access that was 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.
       ``(b) Termination.--This section shall not apply after 
     October 1, 2006.
       ``(c) Tax on Internet Access.--Notwithstanding section 
     1105(10), in this section the term `tax on Internet access' 
     includes the enforcement or application of any preexisting 
     tax on the sale or use of Internet services if that tax was 
     generally imposed and actually enforced prior to October 1, 
     1998.''.

     SEC. 4. ACCOUNTING RULE.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended by adding at the end the following:

     ``SEC. 1106. ACCOUNTING RULE.

       ``(a) In General.--If charges for Internet access are 
     aggregated with and not separately stated from charges for 
     telecommunications services or other charges that are subject 
     to taxation, then the charges for Internet access may be 
     subject to taxation unless the Internet access provider can 
     reasonably identify the charges for Internet access from its 
     books and records kept in the regular course of business.
       ``(b) Definitions.--In this section:
       ``(1) Charges for internet access.--The term `charges for 
     Internet access' means all charges for Internet access as 
     defined in section 1105(5).
       ``(2) Charges for telecommunications services.--The term 
     `charges for telecommunications services' means all charges 
     for telecommunications services except to the extent such 
     services are purchased, used, or sold by a provider of 
     Internet access to provide Internet access.''.

     SEC. 5. EFFECT ON OTHER LAWS.

       The Internet Tax Freedom Act (47 U.S.C. 151 note), as 
     amended by section 4, is amended by adding at the end the 
     following:

     ``SEC. 1107. EFFECT ON OTHER LAWS.

       ``(a) Universal Service.--Nothing in this Act shall prevent 
     the imposition or collection of any fees or charges used to 
     preserve and advance Federal universal service or similar 
     State programs--
       ``(1) authorized by section 254 of the Communications Act 
     of 1934 (47 U.S.C. 254); or
       ``(2) in effect on February 8, 1996.
       ``(b) 911 and E-911 Services.--Nothing in this Act shall 
     prevent the imposition or collection, on a service used for 
     access to 911 or E-911 services, of any fee or charge 
     specifically designated or presented as dedicated by a State 
     or political subdivision thereof for the support of 911 or E-
     911 services if no portion of the revenue derived from such 
     fee or charge is obligated or expended for any purpose other 
     than support of 911 or E-911 services.
       ``(c) Non-Tax Regulatory Proceedings.--Nothing in this Act 
     shall be construed to affect any Federal or State regulatory 
     proceeding that is not related to taxation.''.

  Mr. McCAIN. I say to my friends on both sides of the issue, I think 
we now have the proper legislative agenda in preparation for 
amendments. Before I make an opening statement, I thank Senators Allen 
and Wyden for their hard work on this issue. I also pay my respects to 
the Senator from Ohio, Senator Voinovich, and the Senator from 
Tennessee, Senator Alexander, who have taken a deep and abiding 
interest in this issue and have a very real understanding of it. This 
is a complex and difficult set of issues associated with the Internet.
  I apologize for leaving out my dear friend from Delaware, Senator 
Carper,

[[Page S14158]]

who probably knows more than the other two put together; at least, he 
believes so.
  Again, these are difficult and complex issues. They have been 
affected significantly by changes in technology over the years. When we 
first did this moratorium issue, it was much simpler than it is today. 
As the Internet has obtained dramatically new capabilities with 
dramatic changes in its nature, the issue has changed. The Senators 
from Ohio, Tennessee, and Delaware have raised significant and valid 
concerns. We believe we have tried to address those concerns.
  Definitions certainly are critical in addressing this issue. Words 
have meaning and importance when we are talking about this issue before 
us. I hope we can give fair consideration to the concerns and the 
proposals made by the opposition to this bill or those who would like 
to see it significantly modified.
  Again, I thank my friends from Virginia and Oregon who have worked 
tremendously for years in the committee on this issue. I think the 
Senator from Oregon can remind me how many hearings we have had on this 
particular issue, but it must be in double digits--more than 10--over 
the past 6 or 7 years. Those hearings have been certainly appropriate, 
because each time we have had them the technology changed and the 
issues changed.
  Madam President, this bill would ensure that consumers would never 
have to pay a toll when they access the Information Highway. Whether 
consumers log onto the Internet via cable modem, DSL, dial-up, or 
another technology that has yet to be invented, under S. 150 they will 
not see any State and local taxes on their monthly Internet bill. Now 
would their monthly Internet bills increase because of State and local 
taxes on Internet access that are passed down to consumers. Plainly and 
simply, this is a pro-consumer, pro-innovation, and pro-technology 
bill.
  S. 150, which was introduced in January by Senator Allen, would make 
permanent the current Federal prohibition on State and local taxes on 
Internet access contained in the Internet Tax Freedom Act of 1998 
(ITFA). It also would extend permanently the current moratorium in ITFA 
on multiple or discriminatory state and local taxes on e-commerce 
transactions.
  In addition, this bill would extend by 3 years the current 
grandfather clause contained in ITFA. This clause permits States that 
imposed or enforced a tax on Internet access prior to the passage of 
ITFA in 1998 to continue taxing Internet access. After 2006, this 
grandfathering protection would lapse.
  Five years ago, Congress took appropriate action when it passed the 
IFTA, legislation that encouraged the growth and the adoption of the 
Internet by exempting Internet access from State and local taxation, 
and by protecting e-commerce transactions from multiple or 
discriminatory taxation.
  As my colleagues know, over the past decade, the Internet has grown 
from a tool used primarily by academics and scientists for research 
purposes to a broadly utilized communications, information, 
entertainment, and commercial medium, as well as an important vehicle 
for political participation. Indeed, the Internet has started to become 
a fixture and core component of modern American life that has created 
and continues to generate social and economic opportunities throughout 
the United States. This was our goal then and it continues to be our 
goal today.
  There is little doubt that the development and growth of the Internet 
was aided by the moratorium. For example, in the past 5 years and with 
the help of ITFA, household use of the Internet has doubled. At the 
time of the legislation's enactment in 1998, 26 percent of United 
States households had Internet access. By 2001--the year that the 
moratorium was extended for a 2 year period--just over 50 percent of 
U.S. households had Internet access. By the end of 2002, approximately 
64 percent of American households had Internet access. However, despite 
these significant growth rates, Internet access adoption rates remain 
low relative to other basic technologies. Broadband access in 
particular remain low. Indeed, in 2002, only 15 percent of American 
households had broadband Internet access. This means that a significant 
number of American consumers still have not gained the full benefits 
that Internet technologies promise.
  Today, we have the opportunity to extend permanently the Internet tax 
moratorium and thus fulfill our promise to consumers that Government 
taxes will not inhibit the offering of affordable Internet access. By 
supporting S. 150, we can continue to promote the adoption of the 
Internet by our citizens as well as encourage innovation relating to 
this technology. Just as Internet access evolved from basic dial-up 
service to broadband services since the enactment of ITFA, a permanent 
extension of the Internet tax moratorium is expected to encourage 
businesses to further evolve Internet technologies and consumers to 
continue adopting such technologies.
  I am fully aware that State and local government groups are concerned 
about certain aspects of this bill and, in particular, worry that this 
legislation will result in significant revenue losses to the States and 
localities. As many of you know, I have worked closely with the co-
sponsors of the legislation in an attempt to accommodate many of the 
concerns of the States and local governments. In fact, I am a co-
sponsor of the substitute amendment to S. 150 only because I was 
satisfied that the amendment's co-sponsors had compromised as much as 
they reasonably could with the States and localities. What we present 
today is a good-faith effort to address State and local worries while 
still keeping intact one of the key goals of S. 150: to keep Internet 
access tax free from taxation.
  I point in particular to our efforts to clarify that traditional 
telephone services would not become tax-exempt as a result of this 
legislation. Nor will this legislation prevent the States from imposing 
property, income, and other non-transactional taxes on Internet access 
providers. Nor would this bill make tax-free any service packaged with 
Internet access solely by virtue of such bundling. In addition, in 
order to give currently grandfathered States a reasonable amount of 
time to adjust their budgets, the bill extends the existing 
grandfathering provision by 3 years instead of terminating it 
immediately.
  I also am aware that some of my colleagues object to the Internet tax 
moratorium because they believe that Congress has no role in how States 
and localities tax Internet access. I respect the views of those 
Members, but I also respectfully disagree with them on this matter. 
Interstate communications--including the Internet--are part and parcel 
of interstate commerce, which Congress has the constitutional right to 
regulate. This means that Congress does indeed have the right to 
determine how the Federal Government, the States, and localities tax 
the Internet.

  There is also the argument that this extension is an unfunded 
mandate. On this point, it is important to note that this bill would 
not impose any additional responsibilities on State or local 
governments. Rather, S. 150 only says that States and localities may 
not impose taxes on Internet access. That's it. Furthermore, Congress 
made sure that ITFA held the Federal Government to the same standards 
as those imposed on the States. The act expresses the sense of Congress 
that no new Federal taxes on Internet access should be enacted. The 
Federal Government is in this with the States and localities because 
keeping Internet access tax-free is a core goal of our national 
economic policy.
  With respect to the question of whether it's wise to make Internet 
access tax free, this body has a long history of giving tax incentives 
to commercial activities that we believe help our society. The Internet 
is a technology that is a source of and vehicle for significant 
economic benefits. The proponents of this legislation strongly believe 
the Internet clearly merits the tax incentives provided by S. 150. But 
this debate is not just about economic benefits.
  During my presidential candidacy, one of the many rewarding 
experiences I had was seeing how the Internet served as a medium for 
political participation. Hundreds of thousands of people logged on to 
may campaign website where they were able to access information and 
organize. For me, keeping Internet access tax-free is about protecting 
consumers' wallets, but it also is about improving our political 
process and the right and ability of those citizens to participate 
fully in that process.

[[Page S14159]]

  I recognize that there are others who wish to continue to make the 
Internet tax moratorium temporary. Their premise is that Internet 
technologies continue to evolve and thus Internet access may develop 
into a service the States and localities would wish to tax. I would 
respond that this moratorium should be permanent to continue 
encouraging those very Internet-related innovations. By making this 
moratorium permanent, the businesses that invest in and provide 
Internet access technologies will be able to operate in a predictable 
tax environment. This will result in continued investment in this very 
important medium.
  I will be very candid on this point, though: If a permanent 
moratorium passes and 3, 4, 5 years down the road we find that the 
effects of this moratorium were other than what we intend today, I will 
join my colleagues in reviewing this issue and work to amend the 
legislation to correct any unforeseen problems with it. But that should 
only happen if and when there is a legitimate problem. That doesn't 
need to happen, and it shouldn't have to happen, on a predetermined 
schedule.
  Today, however, we are here to vote on a bill that enjoys strong bi-
partisan support--further evidence of the fact that this Senate 
believes in a permanent extension of the moratorium and the consumer 
and business benefits such an extension will bring. Likewise, H.r. 49, 
the Internet Tax Nondiscrimination Act, which is similar to S. 150, 
also enjoyed significant support in the House of Representatives. 
Indeed, the House passed H.R. 49 in September with strong bipartisan 
support, including support from the House leadership of both parties.

  S. 150 has been thoroughly vetted and considerably negotiated. It was 
approved by the Senate Committee on Commerce, Science, and 
Transportation in July after the committee held hearings on the bill. 
In October, the Senate Committee on Finance discharged S. 150 after 
that committee examined the bill. Throughout this legislative process, 
the various stakeholders have met several times to try to come as close 
to a middle ground as possible without sacrificing the basic goals of 
this legislation. I believe that this bill is a strong attempt to 
address the concerns and needs of all the relevant stakeholders.
  For all of the reasons stated, I urge my colleagues to support this 
bill and add it to the long line of pro-consumer legislation we have 
passed this year--including the Do Not Call Registry and spam 
legislation. Let us again join together to give American consumers 
affordable access to the Internet, a crucial medium of communications, 
information, commerce, and political participation.
  I look forward to hearing the debate and discussion by my colleagues 
on both sides of the issue. We hope to have an amendment proposed by 
the Senators from Delaware, Ohio, and Tennessee, and we would like to 
debate that. Others would like to speak on that amendment, so we will 
not have a time certain set for that amendment. But we hope we can have 
it at a fairly early time in the morning. My understanding is we will 
be back in at 9:30.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon is recognized.
  Mr. WYDEN. Madam President, I thank the chairman of the Commerce 
Committee, Senator McCain, for beginning the discussion in the kind of 
tone I think we want to have for this debate. We have on the floor a 
number of Senators who have been the most interested in this issue. I 
tell them I think they represent the most thoughtful people not just in 
the Senate but in public life. We obviously have differences of 
opinion, but I think we are going to have an important debate, in a 
thoughtful fashion. The decibel level has certainly gotten pretty high 
in recent days on this issue.
  I am very appreciative to the Senate Democrats who are supportive of 
the position Senator Allen and I have put together, particularly 
Senators Leahy, Boxer, Lincoln, and Baucus, all of whom joined as 
original sponsors of the managers' effort.
  I wish to spend a few minutes tonight--I know other colleagues are 
anxious to talk--to describe how we got to this point and why I believe 
the approach Senator Allen and I are taking is a wise one.
  About 7 years ago, after I came to the Senate, I began to think about 
how the Senate could write the rules of electronic commerce so as to be 
fair to all sides while at the same time allowing this tremendously 
exciting medium, the Internet, to flourish.
  We were seeing early on problems with respect to how the Internet was 
regulated around the country. We saw discrimination. We saw in some 
jurisdictions, for example, if you bought the newspaper the traditional 
way, the snail-mail route, you would end up not paying a tax, but if 
you bought the online edition of that paper, you would pay a tax. That, 
it seemed to us, was a discrimination against technology. So about 7 
years ago, I said the bedrock of our effort ought to be technological 
neutrality. The Internet should not get a preference, nor should the 
Internet be discriminated against.
  I went to Senator McCain and Senator Leahy of Vermont, really known 
as the Senate's Mr. Internet. He was up on these issues when I think a 
lot of people thought a monitor was a television set. The two of them 
joined me in a bipartisan effort to pass this law that has now been on 
the books for more than 5 years.
  When Senator Allen came to the Senate, he and I teamed up for a 
number of years on this issue, and, of course, other Senators who have 
come to this body.
  I say in beginning the debate, many of those who now oppose the 
extension of the law we are proposing are using the very same arguments 
they made 5 years ago that have not been borne out. For example, we 
were told years ago that the States would not be able to collect 
various taxes--property taxes, corporate taxes, and other kinds of 
taxes. We were told that all across America, Main Streets would shrivel 
up and die because of Internet sales. We were told that States would 
lose an enormous amount of revenue. I want to respond to each one of 
those arguments tonight.
  First, with respect to loss of revenue, not one jurisdiction has come 
forward and given an example of how they are hurt by their inability to 
discriminate against electronic commerce. All the bill says is you 
cannot discriminate against electronic commerce, and not one State has 
come forward and given an example of how they have been hurt by their 
inability to discriminate against electronic commerce.
  Not one independent study has been done in the last 5 years 
indicating that the States would lose revenue as a result of this bill.
  Finally, with respect to this question of Main Street and the retail 
stores, what we have seen is during the period this law has been in 
effect, Internet sales have gone from 1 percent to 2 percent. I think 
it is fair to say our legislation has not exactly emptied the malls of 
America. In fact, in most of our malls, it is still pretty hard to find 
a parking spot.
  As we go at this issue, it is important to look at the record, and 
particularly it is interesting to note it in the context of what was 
discussed tonight.
  I have noted that a number of our colleagues, particularly from the 
rural areas--the Dakotas and other areas--have talked about the 
importance--and I share their view--of building the network out; of 
using funds, whether it be tax credits or Government moneys, to 
facilitate broadband to rural areas. Their effort is one that I 
support. But think about the consequences of our saying tonight on the 
floor of the Senate: Let's use Government dollars to help companies 
build out the network, promote broadband in rural areas. We will say 
that tonight, but tomorrow we will end up sticking it to consumers with 
new taxes with respect to Internet access.

  In effect, the policies we are talking about promoting tonight with 
Government dollars--and many Senators are on legislation to offer tax 
credits to promote broadband to rural areas which would, in effect, be 
negated by the effort some are offering to allow for these taxes on 
Internet access.
  Senator Allen and I have spent many months trying to work with the 
State and local governments to address their concerns. We have had 
months of negotiations, and those negotiations all went on before our 
distinguished colleagues--the Senators from Tennessee, Ohio, and 
Delaware--came into the debate.

[[Page S14160]]

  I note that in the effort to try to find common ground, Senator Allen 
and I agreed to a number of requests that were made by State and local 
officials. We agreed, for example, to the request from State and local 
officials for new statutory language further tightening the definition 
of ``Internet access.''
  We agreed to the request for new statutory language on what is called 
bundling, which is, in effect, where you have Internet access bundled 
with information technology services other than Internet access, and it 
is important to separate the two for taxable purposes.
  In addition, we agreed to the requests from State and local officials 
for new statutory language protecting a variety of other taxes, such as 
property and income taxes, that were never affected by the original 
legislation we authored, but we thought in the name of trying to find 
common ground, we would add that as well.
  We have agreed to a request for a savings clause on universal service 
and a variety of regulatory proceedings.
  Finally, we have agreed to allow States grandfathered so as to 
protect existing treatment under their State laws of these services 3 
more years of Internet access taxes.
  I say as we begin tonight, Senator Allen and I in 2 months of 
negotiations agreed to five requests from State and local officials to 
try to find common ground on this matter, and I ask tonight, what has 
been offered in return? What have been offered in return are 
essentially these projections that say vast sums are going to be lost 
to the States if this legislation that Senator Allen and I have 
proposed is extended.
  I just ask Senators to note the language associated with these 
projections. The language is always, this bill could cost such-and-
such; and the sum is, of course, a very large number. Never is it 
presented in terms of any kind of independent study that this law has, 
in fact, cost revenue or would cause revenue to be lost in the future.
  After Senator Allen and I made these five separate concessions in an 
effort to find common ground, we now have these various projections 
that, for all practical purposes, we are trying to convince the Senate 
that Western civilization is going to end if we urge that this law be 
updated.
  I know colleagues are anxious to talk, and I certainly want to give 
them that opportunity. I close with one last point as we begin this 
discussion.
  I think colleagues know the technology sector has taken a real 
pounding in the last couple of years, but what we have seen in the last 
few months is that the technology sector is beginning to have a 
resurgence. We have begun to see, both with respect to the stock market 
and capital investment in the sector, the technology area is really 
beginning to come back.
  I say to my colleagues in the Senate, I think that if, in fact, the 
Senate unravels the law of the last 5 years, fails to allow us to 
update this law, the progress that has been seen in the technology 
sector in the last few months could well unravel.
  If, in fact, the more than 7,000 taxing jurisdictions in this country 
are allowed to take a bite out of the Internet, and we have the 
Internet access area broken down into its subparts and all of them are 
taxed, I think that could derail the very impressive progress we have 
seen in the technology sector in the last few months.
  Let us not put in place a regime of multiple and discriminatory taxes 
on electronic commerce, if for no other reason than it would send a 
horrendous message to this sector where finally in the last few months 
we are beginning to see some resurgence.
  I see my good friend from Virginia on his feet. I want to tell him 
how much I appreciate his cooperation. When I began this effort, he was 
a Governor and was supportive of our efforts then. I am pleased to have 
had a chance to team up with him as a member of the Commerce Committee.
  I also say, because we have Senators who do not share the view of 
Senator Allen and myself--Senator Voinovich, Senator Alexander, and 
Senator Carper--that my door continues to be open to all Senators, 
including Senators who do not share our view, in an effort to try to 
find common ground.
  Senator Allen and I thought the five concessions we made during 8 
weeks of negotiations were part of an effort to be sensitive to the 
concerns of State and local bodies. Obviously, we have not done that to 
the satisfaction of all and our door remains open to all Senators.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Chambliss). The Senator from Virginia.
  Mr. REID. Will the Senator from Virginia yield for a unanimous 
consent request? In fact, I have two of them.
  Mr. ALLEN. I yield.


                  Unanimous Consent Request--H.R. 2559

  Mr. REID. I appreciate it very much. It will just take a few minutes. 
I have two unanimous consent requests. I ask unanimous consent that the 
Senate proceed to the conference report to accompany H.R. 2559, the 
Military Construction appropriations bill; that the conference report 
be agreed to and the motion to reconsider be laid upon the table, with 
no intervening action or debate.
  The PRESIDING OFFICER. Is there objection?
  Mr. VOINOVICH. I object.
  The PRESIDING OFFICER. The objection is heard.
  Mr. REID. I would simply say that is unfortunate. This is a military 
construction conference report. I cannot believe there is any 
controversy on that. I appreciate my friend yielding to me.

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