[Congressional Record Volume 150, Number 134 (Friday, November 19, 2004)]
[House]
[Pages H10025-H10029]
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 Senate 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.
The Clerk read as follows:
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
Nondiscrimination Act''.
SEC. 2. FOUR-YEAR EXTENSION OF INTERNET TAX 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 during the
period beginning November 1, 2003, and ending November 1,
2007:
``(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 subsections (e) and
(f) as subsections (d) and (e), respectively.
(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
(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) 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. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.
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. GRANDFATHERING OF STATES THAT TAX INTERNET
ACCESS.
``(a) Pre-October 1998 Taxes.--
``(1) 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--
``(A) 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
``(B) a State or political subdivision thereof generally
collected such tax on charges for Internet access.
``(2) Termination.--This subsection shall not apply after
November 1, 2007.
``(b) Pre-November 2003 Taxes.--
``(1) In general.--Section 1101(a) does not apply to a tax
on Internet access that was generally imposed and actually
enforced as of November 1, 2003, if, as of that date, the tax
was authorized by statute and--
``(A) a provider of Internet access services had a
reasonable opportunity to know by virtue of a public 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; and
``(B) a State or political subdivision thereof generally
collected such tax on charges for Internet access.
``(2) Termination.--This subsection shall not apply after
November 1, 2005.''.
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.
[[Page H10026]]
``(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.''.
SEC. 6. EXCEPTION FOR VOICE AND OTHER SERVICES OVER THE
INTERNET.
The Internet Tax Freedom Act (47 U.S.C. 151 note), as
amended by section 5, is amended by adding at the end the
following:
``SEC. 1108. EXCEPTION FOR VOICE SERVICES OVER THE INTERNET.
``Nothing in this Act shall be construed to affect the
imposition of tax on a charge for voice or similar service
utilizing Internet Protocol or any successor protocol. This
section shall not apply to any services that are incidental
to Internet access, such as voice-capable e-mail or instant
messaging.''.
SEC. 7. GAO STUDY OF EFFECTS OF INTERNET TAX MORATORIUM ON
STATE AND LOCAL GOVERNMENTS AND ON BROADBAND
DEPLOYMENT.
The Comptroller General shall conduct a study of the impact
of the Internet tax moratorium, including its effects on the
revenues of State and local governments and on the deployment
and adoption of broadband technologies for Internet access
throughout the United States, including the impact of the
Internet Tax Freedom Act (47 U.S.C. 151 note) on build-out of
broadband technology resources in rural under served areas of
the country. The study shall compare deployment and adoption
rates in States that tax broadband Internet access service
with States that do not tax such service, and take into
account other factors to determine whether the Internet Tax
Freedom Act has had an impact on the deployment or adoption
of broadband Internet access services. The Comptroller
General shall report the findings, conclusions, and any
recommendations from the study to the Senate Committee on
Commerce, Science, and Transportation and the House of
Representatives Committee on Energy and Commerce no later
than November 1, 2005.
SEC. 8. EFFECTIVE DATE.
The amendments made by this Act take effect on November 1,
2003.
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 S. 150, the Senate
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 today in support of S. 150, the Internet Tax
Nondiscrimination Act.
In 1998, Congress passed the Internet Tax Freedom Act to protect the
Internet from crippling taxation and piecemeal regulation. The act
prohibited States from imposing multiple and discriminatory taxes on
electronic commerce and shielded consumers from new Internet access
taxes. However, some States that had already begun taxing on Internet
access by 1998 were allowed to continue such taxation temporarily.
During the 107th Congress, we extended the moratorium until November
1, 2003. On July 24, 2003, well before the November expiration
deadline, the House Committee on the Judiciary reported H.R. 49, the
Internet Tax Nondiscrimination Act. Introduced by the gentleman from
California (Mr. Cox), H.R. 49 made permanent the ban on taxes that
targeted the Internet for discriminatory treatment and immediately
ended all taxes on Internet access by all States and localities.
Unlike the Senate bill, H.R. 49 also eliminated the so-called
grandfather clause for States that taxed Internet access prior to
October 1, 1998; and through a bipartisan amendment offered in
subcommittee by the gentleman from Utah (Mr. Cannon) and the gentleman
from North Carolina (Mr. Watt), the House bill preserved the original
intent of the law by not punishing broadband users, then providing tax
freedom for all forms of Internet access, whether by dial-up, cable, or
DSL line. H.R. 49 passed the House by voice vote on September 17, 2003.
Unfortunately, the other body was unable to pass legislation extending
the moratorium until April 29, 2004, 6 months after the moratorium
expires.
The Senate bill differs from H.R. 49 in several ways. First, rather
than a permanent moratorium, it creates a temporary 4-year moratorium
on Internet access taxes running retroactively from November 1, 2003,
until November 1, 2007. Secondly, it extends the 1998 grandfather
clause for the life of the moratorium so that all those States
currently taxing Internet access will continue to do so with the one
notable exception of Wisconsin, which I already addressed fully when we
considered the related enrolling resolution.
{time} 1215
Third, it creates a new, 2-year grandfather clause for States that
tax Internet access after the expiration of the moratorium.
Despite these weaknesses which I believe to be substantial, passing
the Senate bill extending the Internet tax moratorium is still a big
win for the vast majority of American Internet users. Without any
action by this Congress, Internet commerce would still be subject to
State and local taxes in thousands of jurisdictions. The digital
economy and its participants are more vulnerable if we do not act, even
if we must act on a weaker bill.
For those reasons I support passage of S. 150, which will extend the
benefits of the moratorium until 2007.
At this time, let me put everyone on notice that in the next
Congress, even though the moratorium does not expire during the life of
the 109th Congress, I will attempt, once again, to make this moratorium
permanent so that no State, when it puts together its budget in January
of 2007, will fall into the trap of counting Internet access taxes as
revenue.
The bill, together with the enrolling resolution just passed, will at
least temporarily protect against those States and localities taxing
our e-mail and taxing Web service. The extension of the moratorium will
help vitalize the Internet economy, provide tax relief to consumers no
matter how they get their Internet access, and will stimulate equal
access to this increasingly important medium. I will continue to assess
future avenues that will promote greater Internet access at higher
speeds and at less cost for all Americans. Let everybody be on notice
that that is going to happen sooner rather than later.
For now, I urge my colleagues to join me in supporting S. 150 and
making the Internet a less taxing and more productive experience.
Mr. Speaker, I reserve the balance of my time.
Mr. WATT. Mr. Speaker, I yield myself such time as I may consume,
which will be a very short amount of time, just to make two points.
Number one, the chairman of my committee and I have served so long
together that he did not even flinch when I was debating a bill that I
thought was all part of one big parcel, because he has seen me many
times debate something that we were not discussing in committee, so it
did not come as any surprise to him at all. He did not even flinch.
So I think on that what I will do is roll the statement that I read
on S. 150 into this debate. That was the discussion on the last bill. I
thought we were doing this, all this part and parcel of one big bill
here, rather than in two stages. So I hope I can just roll that last
statement on to this debate and save myself from having to read it
again.
Second, I would just say to the gentleman on his ``do not surprise us
in the next Congress'' that I think there has been a long-term
agreement and commitment to making the Internet exempt from taxation a
permanent moratorium. The thing that has held that up is that, at the
same time, States and local governments have wanted to work out a
national uniform system for taxing remote sales that take place over
the Internet so that they do not lose substantial revenues from that
source. So I think if we could come up with a system to put into place
some uniform standards for taxation of remote sales over the Internet,
making the moratorium on Internet access would be a no-brainer and a
very noncontroversial step.
So I would hope that I would be able to join the chairman of the full
committee in supporting a permanent moratorium on Internet access
taxes, but I would be able to do that only if we can work out this
other deal having to do
[[Page H10027]]
with putting in place a taxation system for taxation of remote sales
that are taking place over the Internet.
Because what is happening now is that brick and mortar retailers in
all of our communities are collecting sales taxes on sales that are
taking place in those brick and mortar stores and, at the same time,
people are able to buy over the Internet the same product and be exempt
from paying taxes on it because there is no uniform way for collecting
those taxes at remote locations. That is costing local governments and
State governments in some cases enormous amounts of tax revenues,
because most of them are supported by sales taxes or local property
taxes, and this is eroding a primary base of tax income for local
communities and State communities.
So if we can get that part of this equation worked out, I think the
chairman would see a virtual landslide of support for making the
moratorium on Internet access a permanent moratorium, and I would be
right in the lead of the march with my chairman, and I hope he will
join us in trying to make that happen in the next term of Congress.
Mr. WATT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of S. 150, the Internet Tax
Nondiscrimination Act, and urge my colleagues to support its passage.
It has been a long journey to get here, but I believe that the
compromise forged in the Senate preserves the goals we sought here in
the House both at the subcommittee and full committee levels.
Specifically, S. 150 extends 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, and
there is a new grandfather for States that imposed taxes on access to
the Internet until November 1, 2005. Although this bill will
necessarily result in the potential loss of some 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 proceedings on this bill in the House, I, together with
the gentleman from Utah (Mr. Cannon), the chairman of the Subcommittee
on Commercial and Administrative Law, on which I am the ranking member,
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 represents a compromise on that amendment which is supported by
the relevant stakeholders, including the industry and the State and
local government representatives.
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 remain subject to taxation. This would limit the choices
of consumers and raise the cost 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.
With this issue now behind us if we pass this bill, this Congress
must turn to the issue of State sales and use taxes. I, along with the
gentleman from Massachusetts (Mr. Delahunt) and other colleagues on our
subcommittee, have insisted throughout our deliberations to ban
Internet access taxes that we remain mindful of the fiscal crisis
currently confronting many of our States. Toward that end, 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 has progressed; and I believe that
during the next term of Congress we will be able to work toward a
sensible solution to solve the remote sales tax issue when remote sales
are taking place over the Internet.
In closing, I believe that S. 150 will ensure that the ban on
Internet access taxes is neutral as to technology, speed, and provider.
I urge my colleagues to vote in favor of this bill.
I thank the gentleman for his hard work on this and certainly thank
the gentleman from Utah (Mr. Cannon), my subcommittee Chair, in his
absence, for the tremendous amount of work he has put into this issue.
Mr. Speaker, I have no further requests for time either on S. Con.
Res. 146, which I thought I was debating the last time, or on S. 150,
which I understand we are debating now, so I will be happy, unless the
chairman wants to promise me he is going to work with me on this remote
sales tax issue and wants to have a dialogue about that, I am happy to
yield back the balance of my time, or yield to the chairman if he wants
to comment on it.
Mr. Speaker, I yield back the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself 15 seconds to say that
access taxes and remote sales tax collections are two separate issues.
It is like apples and oranges, and when you mix apple juice and orange
juice in the same concoction, frequently it is not very tasty. But we
will deal with both of those issues and consider them in the next
Congress.
Mr. Speaker, I yield such time as he may consume to the gentleman
from California (Mr. Cox), the author of H.R. 49.
Mr. COX. Mr. Speaker, I thank the gentleman from Wisconsin (Chairman
Sensenbrenner) and thanks also to the gentleman from Michigan (Ranking
Member Conyers) for the Committee on the Judiciary's staunch leadership
on this issue. Special thanks also to the chairman of the Subcommittee
on Commercial and Administrative Law of the Committee on the Judiciary,
the gentleman from Utah (Mr. Cannon), and, of course, to the Ranking
Member, the gentleman from North Carolina (Mr. Watt), the author of a
critical amendment to this bill which makes it explicit that the
Internet tax moratorium provides consumers with tax freedom from all
forms of Internet access, regardless of the technology, wired or
wireless, broadband or dial-up, or any pathway yet to be invented.
While I am proud to be the author of the Internet Tax Freedom Act,
which created the Internet tax moratorium in 1998, and the Internet Tax
Nondiscrimination Act, which passed this Congress unanimously last
year, this is the work of a great bipartisan team led on the Senate
side by George Allen of Virginia and my original moratorium coauthor,
who was then a member of the House, Ron Wyden of Oregon, and by
President Bush who urged this Congress to extend this most valuable of
consumer protections from taxation.
Republicans and Democrats have come together to say that, no matter
how we might choose to fund government services, we all agree that the
worst way to do it would be to create new taxes on the Internet. That
would be harmful to consumers, destructive to technological innovation,
and bad for our economy.
The case for allowing Internet access to remain tax-free has never
been stronger. With 200 million Americans now online, a new tax on
access would be a tax on working families. Our citizens recognize the
danger. Eighty-eight percent of Americans oppose new Internet access
taxes. So one might say that this legislation, the Internet Tax Freedom
Act and the Internet Nondiscrimination Act, this moratorium, are the
most popular tax issues in America.
New Internet taxes would also be highly destructive to the American
economy. Studies from the Brookings Institution, the University of
California, Harvard, Stanford, MIT, the Congressional Budget Office,
the Department of Commerce, and the Federal Reserve all confirm the
positive role of the Internet in making Americans more productive. New
taxes can only slow this valuable and powerful engine of our economy
and job growth, productivity and prosperity in America.
Finally, Mr. Speaker, the United States of America needs to regain
world leadership in encouraging other countries around the world to
keep taxes off of the World Wide Web. The Internet is truly global
commerce. The original Internet Tax Freedom Act instructed the
executive branch to negotiate bilateral understandings with
[[Page H10028]]
other countries, and our executive branch has done so. During the
period of time when this moratorium was expired, America could hardly
lead when our own policy was not clear that we forbid taxation of the
Internet. Now we are back where we belong in our role of world
leadership, and the Bush administration can once again resume with
confidence negotiations with other countries to make sure that when we
go online it is not just other foreign states that will not be taxing
you, your Internet activities will not be prey to predatory tax
policies from other countries as well.
Mr. Speaker, I urge all Members to vote yes on this excellent
legislation, S. 150, and yes on the enrolling resolution. I thank the
chairman for this great success for consumers.
Mr. WATT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would just like to assure the gentleman from
California (Mr. Cox) that he did not really say anything that I
disagree with. Neither did the chairman say anything that I disagree
with.
I agree that taxation of Internet access and taxation of remote sales
are like apples and oranges. But both of them have economic impact on
State and local communities, and just because they are apples and
oranges does not mean that they do not have an economic impact. So what
has been keeping this from moving forward is that if you take away the
Internet access issue and you do not resolve the remote sales issue,
then local and State communities are being doubly impacted in some
cases, and they would like us to resolve both of those issues. They do
not necessarily want us to mix orange juice and apple juice together,
but they do want us to be able to drink apple juice at one point and
drink orange juice at the other point, and they are not mutually
exclusive, and they have a similar impact in local communities.
So I am in full agreement that we ought to make this moratorium
permanent on Internet access. I am supporting both of these bills, and
I do not think there is any controversy about that.
My only point is we also need to now roll up our sleeves in this next
term of Congress and resolve the remote sales tax issue so that we can
put all of this to rest, and then we can drink both apple juice and
orange juice and enjoy both of them in due course.
Mr. Speaker, I have no other speakers, and I yield back the balance
of my time.
Mr. PICKERING. Mr. Speaker, I rise today for two reasons: First, to
support S. 150, ``The Internet Tax Nondiscrimination Act,'' and,
second, to clarify a mischaracterization of a provision of S. 150 that
has appeared in the media and perhaps in the minds of some of my
colleagues concerning the affect of S. 150 on Voice over Internet
Protocol or VoIP.
First, I support passage of S. 150 and commend my colleagues in both
the House and the Senate for working vigorously to forge a compromise
that addresses, albeit in a temporary fashion, the most important issue
we face today concerning what's been termed the ``digital divide''--
bridging the gap between those who have Internet access and those who
do not by protecting such access for all Americans from overburdensome
taxation by a multiplicity of State and local governments that would
directly and substantially inhibit the growth and expansion of this
still relatively young technology. This bill extends until November
2007 the current moratorium that prohibits States, or their political
subdivisions, from taxing Internet access or imposing multiple or
discriminatory taxes on electronic commerce. Both houses of Congress
also compromised on the treatment of States who had been taxing
Internet access even before 1998 when Congress passed the Internet Tax
Freedom Act. The grandfathered status of those States to continue
taxation of Internet access will be extended for 3 more years under S.
150. While I support the compromise we are voting on today because it
accomplishes our intent to prohibit State and local taxation of
Internet access in the interim, I still firmly believe that we should
permanently prohibit State taxation of Internet access in the future.
However, I do look forward to working with our State, county, and city
leaders in the future to address the broader issue of taxation of goods
and services over the Internet. Everyone recognizes that the Internet
knows no borders, domestically or globally, and we should treat it as
such by permanently prohibiting an estimated 30,000 different
jurisdictions nationwide from imposing taxes on Internet access and
stifling this innovative technology that has become not only a useful
informational, educational, and recreational technology for most
Americans but also an economical necessity for our business community.
Second, and more importantly for my purposes as the lead sponsor in
the House of H.R. 4129, the ``VoIP Regulatory Freedom Act of 2004,'' S.
150 as passed by the Senate contains a provision specifying that Voice-
over-Internet-Protocol (``VoIP'') services are not covered by the
moratorium. That provision states:
SEC. 1108. EXCEPTION FOR VOICE SERVICES OVER THE INTERNET.
Nothing in this Act shall be construed to affect the
imposition of tax on a charge for voice or similar service
utilizing Internet Protocol or any successor protocol. This
section shall not apply to any services that are incidental
to Internet access, such as voice-capable e-mail or instant
messaging.
While it has been misreported in the media and possibly misconstrued
by others that this provision somehow specifically authorizes or
requires the taxation of VoIP by States, nothing could be farther from
the truth. This exception merely provides that the moratorium makes no
inference as to the tax treatment of voice services provided over the
Internet. Even Senator Patrick Leahy, Ranking Member of the Senate
Judiciary Committee, has acknowledged the same when he stated during
debate of S. 150 on the Senate floor on April 29, 2004, that ``the
McCain amendment [S. 150] . . . does not affect the emerging technology
of Voice over Internet Protocol, VoIP.'' This provision does not
authorize State and local governments to impose a tax on customers or
require the collection of the tax by vendors. Nor does it provide that
state and local taxes currently apply to VoIP services. Whether these
services meet the definition of taxable telecommunications or other
services under state and local statutes is a question of law and will
be determined at a future date by Congress.
VoIP services as transactions in electronic commerce should not be
burdened by the multiple and discriminatory taxes that States and
localities currently apply to telecommunications services. The Federal
Communications Commission (FCC) has recently ruled that VoIP is
inextricably interstate by its very nature and therefore States are
specifically prevented from regulating the type of VoIP provided by
Vonage Holdings Corporation. However, the FCC specifically expressed no
opinion on the applicability of State general laws governing entities
conducting business within the State, such as laws concerning taxation,
to VoIP providers. The FCC's decision, however, has ensured an
environment in which VoIP can develop, prosper and grow to provide more
choices for consumers and a more competitive communications industry.
The FCC's decision also has ensured a greater degree of market
certainty, will encourage investment, will create jobs and will prevent
a misguided approach to regulating VoIP. The drafters of S. 150 had the
same intent and goals in mind. In the House, 61 members joined me in
sending a letter to the FCC on October 5, 2004, calling on the
Commission to rule that VoIP is an interstate application and thus
subject to FCC jurisdiction. The letter, signed by a bipartisan
majority of the House Energy and Commerce Committee, urged a ruling
that VoIP is interstate in nature and subject to the Commission's
exclusive jurisdiction.
I mention all this to make the point that, because S. 150 does not
determine the taxable treatment of VoIP, the issue will be dealt with
in the near future in Congress where I believe, based upon the facts
and goals espoused above, that a majority of both houses will agree
that taxation and regulation of VoIP, if any, should be left to the
Federal Government. To avoid any confusion for the future, our approval
of S. 150 today does not in any way imply any support for taxation of
VoIP by the States or the Federal Government. The provision was merely
inserted to clarify that the moratorium does not make a decision
concerning the taxability of VoIP.
Again, thanks to all those involved in this great legislative
accomplishment and I look forward to working with my colleagues here in
Congress to address the issues of VoIP and taxation in the near future.
Mr. SMITH of Texas. Mr. Speaker, I support S. 150, the Internet Tax
and Nondiscrimination Act.
This legislation would reinstate the moratorium on Internet access
taxation and multiple or discriminatory taxes on electronic commerce
for three years.
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 and resources for
many individuals and families. Taxes could make Internet access
unaffordable for some Americans. Our goal should be to encourage and
promote Internet access.
[[Page H10029]]
Americans should be able to access the Internet without being subject
to state and local taxes.
{time} 1230
Mr. SENSENBRENNER. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Shimkus). The question is on the motion
offered by the gentleman from Wisconsin (Mr. Sensenbrenner) that the
House suspend the rules and pass the Senate bill, S. 150.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the Senate bill was passed.
A motion to reconsider was laid on the table.
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