[Congressional Record (Bound Edition), Volume 149 (2003), Part 16]
[House]
[Pages 22209-22215]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   INTERNET TAX NONDISCRIMINATION ACT

  Mr. SENSENBRENNER. Mr. Speaker, I move to suspend the rules and pass 
the bill (H.R. 49) to permanently extend the moratorium enacted by the 
Internet Tax Freedom Act, and for other purposes, as amended.
  The Clerk read as follows:

                                H.R. 49

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Internet Tax 
     Nondiscrimination Act''.

     SEC. 2. PERMANENT EXTENSION OF INTERNET TAX FREEDOM ACT 
                   MORATORIUM.

       (a) In General.--Subsection (a) of section 1101 of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) is amended to 
     read as follows:
       ``(a) Moratorium.--No State or political subdivision 
     thereof may impose any of the following taxes:
       ``(1) Taxes on Internet access.
       ``(2) Multiple or discriminatory taxes on electronic 
     commerce.''.
       (b) Conforming Amendments.--(1) Section 1101 of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by 
     striking subsection (d).
       (2) Section 1104(10) of the Internet Tax Freedom Act (47 
     U.S.C. 151 note) is amended by striking ``unless'' and all 
     that follows through ``1998''.
       (3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act 
     (47 U.S.C. 151 note) is amended by striking ``except with 
     respect to a tax (on Internet access) that was generally 
     imposed and actually enforced prior to October 1, 1998,''.
       (c) Clarification.--The second sentence of section 1104(5), 
     and the second sentence of section 1101(e)(3)(D), of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) are each 
     amended by inserting ``, except to the extent such services 
     are used to provide Internet access'' before the period.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Wisconsin (Mr. Sensenbrenner) and the gentleman from North Carolina 
(Mr. Watt) each will control 20 minutes.
  The Chair recognizes the gentleman from Wisconsin (Mr. 
Sensenbrenner).


                             General Leave

  Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous material on H.R. 49, the bill 
currently under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Wisconsin?
  There was no objection.
  Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 49, the Internet Tax 
Nondiscrimination Act. Over the last several years, the Internet has 
revolutionized commerce, become an economic engine and is a major 
source of information for Americans in virtually every segment of the 
population. It has expanded consumer choices, enhanced competition and 
enabled individuals as well as brick and mortar retailers to 
participate in a national marketplace once reserved to a privileged 
few.
  In 1998, Congress passed the Internet Tax Freedom Act to facilitate 
the commercial development of the Internet, and in 2001 this body voted 
to extend the moratorium through this year. This act prohibits States 
from imposing multiple and discriminatory taxes on electronic commerce 
and shields consumers from new Internet access taxes. However, it does 
not exempt Internet retailers from collecting and remitting sales taxes 
to the States.
  Introduced by the gentleman from California (Mr. Cox), H.R. 49 makes 
permanent the ban on taxes that target the Internet for discriminatory 
treatment as well as all taxes on Internet

[[Page 22210]]

access by States and localities. This sound policy reflects the 
experience and insights gained over the last 5 years and represents the 
position of a wide bipartisan cosponsorship.
  The Subcommittee on Commercial and Administrative Law conducted a 
hearing on this bill in April. On July 16, the full Judiciary Committee 
reported the bill favorably by voice vote with one bipartisan amendment 
in the nature of a substitute offered by the subcommittee's ranking 
member, the gentleman from North Carolina, and its chairman, the 
gentleman from Utah. This amendment ensures that the original intent of 
the law, to provide tax freedom for all forms of Internet access, is 
preserved. I commend the gentleman from Utah and the gentleman from 
North Carolina for their work to clarify in this amendment that tax 
freedom must be tech neutral.
  If H.R. 49 is not passed, Internet commerce will be subject to State 
and local taxes in thousands of jurisdictions. Failure to make the 
moratorium permanent could result in the imposition of a complex web of 
taxes that would create uncertainty for the information technology 
industry, a sector of the economy which can ill afford further 
setbacks.
  Further, we must encourage equal participation in the digital age by 
keeping Internet access as affordable as possible. A recent survey 
confirmed that poorer Americans and those in rural or urban areas are 
most likely to cite cost pressures as a major reason why they would not 
avail themselves of the resources found online. Taxes on Internet 
access would only deepen the digital divide between those who have 
access to the Internet and those who do not. This bill has had 
virtually unanimous support in the Committee on the Judiciary and it 
has more than 130 bipartisan cosponsors. It is supported by the 
administration and has garnered the endorsement of numerous IT 
businesses and organizations.
  Last Congress, the House and Senate passed a temporary extension of 
the moratorium by voice vote. These limited protections expire November 
1 of this year. It is now time to make the benefits created by the 
moratorium permanent. Doing so will vitalize the IT economy, assist 
consumers and stimulate equal access to the invaluable resource that is 
the Internet.
  I urge my colleagues to support this bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. WATT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 49, the Internet Tax 
Nondiscrimination Act. H.R. 49 would permanently extend the existing 
moratorium against taxes on Internet access by all State and local 
governments, including those that were previously grandfathered by the 
Internet Tax Freedom Act. Although this bill will necessarily result in 
the loss or potential loss of revenue to some States, it will promote 
the continued development, emergence and widespread access to the 
Internet and it will do so in a fair and technologically neutral 
manner.
  During the full committee markup of H.R. 49, I, together with the 
chairman of the Subcommittee on Commercial and Administrative Law, the 
gentleman from Utah, offered an amendment to help clarify the meaning 
of Internet access and to put an end to the current confusion that has 
led to discriminatory and inconsistent State taxation on Internet 
access. The bill before us today incorporates that amendment and is the 
product of industry-wide and bipartisan negotiations. The principle I 
pursued in offering the amendment was simple. If we are to prohibit 
taxes on Internet access, we must do so regardless of how that access 
is provided. Otherwise, we would give a competitive advantage to those 
providers covered by the moratorium over those providers that remained 
subject to taxation. This would limit the choices of consumers and 
raise the costs of alternative means of accessing the Internet, such as 
DSL. By making the moratorium applicable to all Internet service 
providers, we have created a level playing field for the consumer. In 
the process, we have had no intention to otherwise undermine State and 
local telecommunications tax bases.
  Indeed, I, along with the gentleman from Massachusetts (Mr. Delahunt) 
and other colleagues on the subcommittee, have insisted throughout that 
we remain mindful of the fiscal crisis currently confronting many of 
our States. Toward that end, Chairman Cannon has agreed to conduct 
hearings this month on the States' attempt to establish a unified tax 
system that would enable them to impose and collect sales taxes on 
transactions over the Internet in a manner that is fair and manageable. 
I commend Chairman Cannon for his commitment to those hearings and look 
forward to working toward a solution to the streamlining issue.
  In closing, I believe that H.R. 49 ensures that the ban on Internet 
access taxes is neutral as to technology, speed and provider.

                              {time}  1100

  I believe that the bill will lower costs to the consumer, enhance 
competition, clarify for State and local governments the type of 
services subject to tax, and facilitate narrowing the digital divide 
that presently impedes access to the Internet in disadvantaged 
communities. I urge my colleagues to support H.R. 49.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SENSENBRENNER. Mr. Speaker, I yield 4 minutes to the gentleman 
from Utah (Mr. Cannon), the chairman of the subcommittee.
  Mr. CANNON. Mr. Speaker, I thank the gentleman for yielding me this 
time. I would also like to thank the gentleman from North Carolina (Mr. 
Watt), the distinguished ranking member of the subcommittee, for his 
long hours and hard work on this issue. We appreciate that very much. 
Also, the gentleman from Massachusetts (Mr. Delahunt), who has been 
very clear and very helpful in setting up the issue of the Streamlined 
Sales Tax Project, and others who have worked on this bill who I will 
mention during my speech; but I also want to mention the gentleman from 
Virginia (Mr. Goodlatte), chairman of the Committee on Agriculture, who 
for years has worked on this issue.
  Mr. Speaker, I rise in support of H.R. 49. I would like to thank the 
gentleman from Wisconsin (Mr. Sensenbrenner), chairman of this 
committee, the Committee on the Judiciary, and the gentleman from 
Michigan (Mr. Conyers) for their constant support of preventing 
taxation on Internet access. I also want to thank the gentleman from 
California (Mr. Cox) for championing this issue since he, together with 
Senator Wyden, first introduced this legislation.
  I also wish to recognize the efforts of my friend from Virginia, 
Senator Allen, on companion legislation in the other body. I look 
forward to working with him and others to guide our product to the 
President's desk for signature.
  This body has debated Internet tax moratorium bills several times 
since 1998. In the past, efforts were made to link these moratoria to 
consideration of whether Congress should adopt legislation authorizing 
States to compel the collection of sales taxes from remote vendors. 
This effort, known as the ``Streamlined Sales Tax Project,'' or SSTP, 
has made progress without Federal intervention. But as we know, before 
interstate compacts can become effective, the Constitution requires 
congressional approval.
  I thank the gentleman from Massachusetts (Mr. Delahunt) for his 
attention to the SSTP and assure him of my cooperation in considering 
all facets of this effort. My subcommittee has scheduled a hearing on 
the project for October 1 in order to give Members an opportunity to 
examine this issue fully.
  Mr. Speaker, I support H.R. 49. This bill would broaden access to the 
Internet, expand consumer choice, promote certainty in growth in the IT 
sector of our economy, and encourage deployment of broadband services 
at lower prices.
  The bill puts to rest the ``grandfather'' clause and makes tax-free

[[Page 22211]]

Internet access a national policy. As I stated during committee 
consideration of this bill, the amount of tax revenue that certain 
States collect as a result of the grandfather clause pales in 
comparison to the amounts of aid these States receive under President 
Bush's economic package. We established a consistent national policy of 
not taxing Internet access through this bill.
  H.R. 49 was amended in the Committee on the Judiciary to ensure that 
the moratorium is equally applied to all forms of Internet access. The 
gentleman from North Carolina (Mr. Watt), my good friend, and I were 
alerted to the fact that since 1998, the ITFA tax protections were not 
being fairly applied by the States. In particular, some States have 
begun to tax DSL Internet access in plain circumvention of the intent 
of the ITFA.
  I supported the gentleman from North Carolina (Mr. Watt) in an 
amendment at the committee to achieve what we believe is a fair and 
sound policy; parity of tax treatment for all forms of Internet access. 
This bipartisan effort, led by the gentleman from North Carolina (Mr. 
Watt) and the gentleman from Michigan (Mr. Conyers), underscores the 
importance of the Internet to our economy. The result is a thoughtful 
and necessary clarification restoring the ITFA to its original intent. 
It strikes a careful balance between those who tax and those who are 
taxed.
  I want to emphasize that telecommunications services not used to 
provide Internet access remain outside the moratorium and that voice 
services over traditional telephone lines, therefore, remain taxable. 
Not taxable are the DSL, cable, dial-up, or other Internet access 
technologies that may run over those lines.
  This bill, cosponsored by more than 130 Members of this body, is 
endorsed by administration and supported by numerous technology 
companies and organizations. Mr. Speaker, this bill makes sense for an 
economy that, while improving, needs clarity of tax policy by 
encouraging investment in broadband.
  Finally, I want to thank again the gentleman from Wisconsin (Chairman 
Sensenbrenner) for his consistent support as we move toward permanent 
tax freedom for Internet access. His work has been invaluable. I urge 
my colleagues to support H.R. 49 as amended.
  Mr. WATT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Michigan (Mr. Conyers), ranking member of the full committee.
  Mr. CONYERS. Mr. Speaker, I thank the gentleman from North Carolina 
(Mr. Watt), ranking member, for yielding me this time, and to the 
members of the Committee on the Judiciary.
  I rise on the point of a simple principle in terms of the bill under 
discussion. I rise against multiple and discriminatory taxes of any 
kind and especially in this area of the Internet. Secondly, I 
congratulate the authors of the Watt-Cannon amendment that attempts to 
clarify the ban on Internet access taxes, and it applies not only to 
dial-up Internet service, but also to high-speed cable. When we passed 
the ban on access taxes in the mid 1990's, no one considered that we 
could access the Internet over other than the telephone. This bill 
resolves the ambiguity, and I have other reasons to commend the authors 
of Watt-Cannon, but right now I support the bill.
  Mr. Speaker, I rise in support of this legislation. This bill makes 
permanent a moratorium on internet access taxes as well as multiple and 
discriminatory taxes on the internet that we first passed as part of 
the Telecommunications Act of 1996. It is difficult to justify multiple 
and discriminatory taxes under any circumstances, on the Internet or 
otherwise, so I am glad to join in bipartisan support of this 
legislation.
  In addition to making the moratorium permanent, the bill before us 
incorporates the Watt-Cannon amendment to clarify that the ban on 
internet access taxes applies to not only dial up internet service but 
also high speed cable, ``DSL,'' and other technologies. When we passed 
the ban on access taxes in the mid-90's, none of us considered that we 
could access the internet other than over the phone. This bill resolves 
that ambiguity. It is in no way intended to otherwise undermine state 
and local tax bases.
  My support for this bill is premised in part on commitments made by 
the majority that we will be able to turn to another issue involving 
interstate taxes--streamlining the sales tax system. Under current law, 
the traditional brick and mortar sellers are required to collect sales 
tax while the electronic retailers have no such requirement, creating 
what many believe to be an unlevel playing field between the two.
  I am pleased to note that both Chairman Sensenbrenner and 
Subcommittee Chairman Cannon have slated hearings on the streamlining 
hearing for October. I am hopeful that we will then be able to consider 
provisions to provide states that simplify their sales tax systems with 
the authority to collect sales taxes equitably from all retailers. I 
believe that a simplified streamlined tax compact would increase our 
nation's economic efficiency, facilitate the growth of electronic 
commerce, and help our states maintain financial support for public 
education, health and safety.
  So I am glad we are able to pass this bill today, and look forward to 
working on the streamlining issue in the not too distant future. I urge 
a ``yes'' vote.
  Mr. SENSENBRENNER. Mr. Speaker, I yield 4 minutes to the gentleman 
from California (Mr. Cox), the author of the bill.
  Mr. COX. Mr. Speaker, I thank the Chairman for yielding me this time. 
I thank the gentleman from Michigan (Mr. Conyers). I thank the 
gentleman from Utah (Chairman Cannon) and the gentleman from North 
Carolina (Mr. Watt), ranking member.
  This is an extraordinary moment because the Internet Tax Freedom Act, 
which was originally enacted 5 years ago, was something of an 
experiment. We debated it aggressively in both Chambers. We were not 
sure whether it was going to work as intended. It clearly has. And so 
having extended it twice, we are now back here to make it permanent. 
The benefits to our economy are manifest. It is estimated that the 
expansion of the Internet, the anticipated continued rollout of 
broadband and perhaps the next generation of broadband will add as much 
as $500 billion in gross domestic product every year in each of the 
next 10 years for our country. This is an extraordinary potential.
  The University of California at Los Angeles, UCLA, in a January, 
2003, survey has found that for consumers in the 21st century, right 
now the Internet is the most important source of information, but not 
everybody can afford it. Not everybody yet has the Internet. It is 
still expensive. There is about a $10 difference, perhaps more or less 
in some areas, between dial-up and broadband, and people have not been 
converting from dial-up to broadband, in part, because of that price 
point. It is just a little bit too expensive for a lot of people. 
Adding new taxes to Internet access, taxing e-mails, taxing the bits 
transmitted or the bandwidth would be a profoundly bad idea for our 
country. And as the gentleman from Michigan (Mr. Conyers) mentioned, 
there is such a potential for multiple taxes from many jurisdictions, 
all claiming that because there is a server located in their 
jurisdiction, they can tax a piece of this, that even a nick here and a 
little bit of nickels and dimes there would add up to a very serious 
amount of taxation for most people, and it would destroy what the 
Internet can become.
  We are now going to put this behind us. We are going to move on. We 
are going to find that this becomes one of the invisible parts of the 
legal infrastructure that makes our economy great. It is going to help 
consumers. It is going to help technological innovation. It is going to 
help our economy and our country. And having worked for so long with 
Senator Wyden on this, I want to thank him, Senator Allen, Senator 
McCain as well. In this Chamber, though, there has been such leadership 
from the Committee on the Judiciary, from the gentleman from Wisconsin 
(Chairman Sensenbrenner), from the gentleman from Utah (Chairman 
Cannon), from the ranking members of the full committee and the 
subcommittee, as I mentioned, the gentleman from North Carolina (Mr. 
Watt) and the gentleman from Michigan (Mr. Conyers), and from the 
gentleman from Virginia (Mr. Goodlatte), whom I think we will hear from 
next that, I can safely say without that kind of leadership in this 
House, the American people would not be seeing this victory today.

[[Page 22212]]


  Mr. WATT. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from 
Texas (Ms. Jackson-Lee), a member of the Committee on the Judiciary.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the distinguished 
ranking member and the chairman of the subcommittee both for their very 
fine work and the work of this committee, and I certainly do believe 
that the Internet is a major component to the development or further 
development of America's economy and the utility of the Internet in 
American lives is very vital.
  However, I am concerned that this bill removes the moratorium as 
relates to a number of States who have already been in the process of 
an effective way of assessing the utilization of the Internet. I 
disagree with my colleagues to suggest that this would add to multiple 
taxation because it is also possible for this Congress to provide 
direction and streamlining of the process of taxation or assessment. 
The effect of this bill would be to remove a grandfather clause that 
applies to a number of States that have utilized these resources for 
revenue. It is crucial to consider the rights of State legislatures 
that develop measures to generate revenue that may steam from Internet 
use which is beginning to take the place of retail purchases.
  Let me suggest that anyone's understanding of the difficulty of State 
bottom-line budgets today would be living, I guess, somewhere out of 
the United States. We are in a crisis with our budgets similar to the 
crisis we have here in the United States Congress as we seek to fund 
the Federal Government and looking for resources where we can get them 
even in the backdrop of taxation cuts or cuts in taxes that certainly 
are not prudent. In this instance, we are trying to judge the minds of 
those in our State legislatures and governments, State governments, who 
are attempting to balance their budgets.
  The other aspect that I think would warrant consideration of an 
extension of the moratorium is the lack of competitiveness or the 
unfairness for those retail stores who themselves have to assess taxes. 
The biggest day in my community and State, in terms of sales, was when 
they did not have to tax. I grant the Members that. But that makes it 
unequal for one to be able to shop on the Internet with no taxes but 
not in going to their retail stores.
  I would ask my colleagues, as we move this legislation forward, to 
consider the Senate bill, which is for more reasonable, giving 
opportunity for these States to be able to move out of this by finding 
other revenue sources, giving them some time, as opposed to cutting 
them off and, therefore, their not having the time to be able to find 
other revenue sources.
  This bill has as an unfair aspect to it, and I ask my colleagues to 
vote against it.
  Mr. Speaker, I rise in strong opposition to the bill before the House 
today, H.R. 49, to permanently extend the moratorium enacted by the 
Internet Tax Freedom Act.
  I participated in the markup of this bill in the Judiciary Committee, 
and I maintain the posture that I expressed at that time with respect 
to the bill's deleterious effect on an important source of revenue for 
Texas and my district. The committee had considered this legislation 
beforehand as well, and an amendment that I offered was not accepted by 
the committee, unfortunately. When we once again considered this bill, 
I admonished that we continue to be mindful of the importance of the 
Internet to the development of the American economy, and the utility of 
the Internet in Americans' lives; however, the effect of this bill 
would be to remove a grandfather clause that applies specifically to 
the State of Texas. It is also crucial for the distinguished Members of 
the United States House of Representatives to consider the right of 
State legislatures to develop measures to generate revenue that may 
stem from Internet use.
  H.R. 49 amends the Internet Tax Freedom Act by imposing a permanent 
moratorium on ``multiple and discriminatory taxes'' and by prohibiting 
any tax on Internet access. The bill also eliminates the grandfathering 
of State Internet access taxes that were ``generally imposed and 
actually enforced prior to October 1, 1998,'' before ITFA became law.
  By so doing, H.R. 49 will have an impact on consumers and also on the 
States, particularly Texas. The convenience of the Internet is 
beneficial to our economy and welcomed by consumers. As such, 
prohibiting Internet taxes is openly sought by our citizens. For many 
of our State governments the issue is more complicated. State 
governments must strike a balance between easing the financial burden 
on their constituents and generating revenue. Many State and local 
government officials have maintained that continuing the debate on the 
Internet tax collection issue was critical because of the financial 
plight of many States. The officials believe that if the State and 
local governments face continued shortages, a moratorium bill that did 
not advance the sales and use tax collection issue would force States 
to increase taxes in other areas. Thus, State and local government 
officials urged that a prolonged continuation of the moratorium without 
resolution of the simplification issue be viewed as a tax increase, 
most likely on individual taxpayers and in-state businesses.
  Presently, my home State of Texas is one of only seven States that 
imposes taxes on Internet access consistent with the grandfathering 
clause of ITFA. My State has struggled with this issue. When the ITFA 
bill was first introduced in March of 1998, Texas was one of 10 States 
and the District of Columbia that were taxing Internet access. By June 
1998, Texas elected to suspend our collection of Internet access taxes. 
Due in part to budgetary concerns, in October of 1999, Texas resumed a 
modified Internet tax collection system wherein we rendered exempt from 
tax the first $25 of a monthly access charge.
  If H.R. 49 becomes law, Texas and the seven other States that 
presently collect taxes on Internet taxes will be prohibited from doing 
so upon passage of the bill. This is a substantial loss of revenue for 
many States that are struggling financially in our sluggish economy and 
in the aftermath of September 11.
  Mr. Speaker, H.R. 49, has serious implications on our burgeoning 
electronic economy, on our constituents, and on all of our State 
governments. I oppose H.R. 49, because it will preclude those States, 
like Texas, who have legitimate Internet taxation systems to continue 
to make use of this valuable source of revenue. It imposes upon 
consumers and our growing electronic economy an undue burden.
  Mr. SENSENBRENNER. Mr. Speaker, I yield 3 minutes to the gentleman 
from Virginia (Mr. Goodlatte), the chairman of the Committee on 
Agriculture.
  Mr. GOODLATTE. Mr. Speaker, I rise in strong support of H.R. 49, the 
Internet Tax and Nondiscrimination Act, and commend the gentleman from 
Wisconsin (Chairman Sensenbrenner) and the gentleman from Utah 
(Chairman Cannon) for their leadership in moving this legislation 
forward, the gentleman from California (Mr. Cox), who has been leading 
this effort for many years, and my colleagues on the other side of the 
aisle for working together on this.
  I would point out that this has absolutely nothing to do with the 
collection of sale taxes on the Internet, which is an issue to be dealt 
with on another day in another way.
  As cochairman of the Congressional Internet Caucus and Chairman of 
the House Republican High Technology Working Group, I have long 
supported efforts to eliminate Internet access taxes and other 
discriminatory taxes on electronic commerce. During the 107th Congress, 
I introduced the Internet Tax Fairness Act, legislation that sought in 
part to permanently ban Internet access taxes and discriminatory taxes 
on electronic commerce.

                              {time}  1115

  In 2001, the ban on these taxes was temporarily continued until 
November of 2003. Now it is with great pleasure that I stand here today 
to urge support of this legislation to permanently ban these burdensome 
taxes.
  Excessive taxation and regulation will hamper the Internet's 
tremendous growth and stifle investment in small businesses that 
utilize this tremendous medium. The last thing that consumers need is 
for the puzzling array of taxes on their phone bills to be repeated on 
their Internet service bills.
  In addition, excessive taxation of Internet access will increase the 
costs of households going online and result in a greater disparity 
between those households that can afford to go online and those that 
cannot.
  H.R. 49, the Internet Tax Nondiscrimination Act, will encourage 
continued investment in and utilization of the Internet by permanently 
banning all Internet access taxes and

[[Page 22213]]

eliminating the grandfather clause in the current law that allows 
certain States to continue imposing these crippling taxes on the 
Internet. The bill also contains language that makes it clear that 
protections in the bill apply equally to all providers of Internet 
access, regardless of the technologies used to provide that access.
  This bill is forward-looking and will provide the certainty that 
businesses need to make calculated decisions regarding the ways in 
which they will utilize and invest in Internet technologies. I urge 
each of my colleagues to support this important legislation to 
permanently ban all Internet access taxes and discriminatory taxes on 
electronic commerce.
  Mr. WATT. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Massachusetts (Mr. Delahunt).
  Mr. DELAHUNT. Mr. Speaker, I thank the gentleman for yielding me 
time, and I rise in support of H.R. 49 for the reasons that have been 
enumerated by the subcommittee Chair and the gentleman from Wisconsin 
(Mr. Sensenbrenner), the Chair of the full committee. I want to 
acknowledge the leadership of the gentleman from Wisconsin (Mr. 
Sensenbrenner), the Chair of the full committee.
  I also want to express my appreciation to the subcommittee Chair, my 
good friend, the gentleman from Utah (Mr. Cannon), for his kind words 
and his sincere efforts to see that Congress gives full consideration 
to the issue of taxation of remote sales. I thank him for scheduling a 
hearing on this issue and look forward to working with him to see that 
it is a productive exercise. As the gentleman knows, I will be 
introducing legislation in the near future, together with the gentleman 
from Oklahoma (Mr. Istook) and the gentleman from Alabama (Mr. Bachus), 
which would authorize the States that have worked so hard to simplify 
their sales taxes to collect sales taxes on remote sales to in-state 
purchases.
  As we all know, the States are confronting their worst budget crises 
since the Great Depression. A declining economy, spiralling Medicaid 
costs, and the erosion of their tax base have left them with a 
collective deficit of some $100 billion. Governors of both political 
parties face a difficult choice between unpopular tax increases and 
drastic cuts in Medicaid, education, public safety and other essential 
services, or all of the above.
  I appreciate the concern of the sponsors of the bill, that without a 
continuation of the moratorium on Internet access taxes, some States 
might be tempted to help make up their shortfalls by enacting such 
taxes. At the same time, we should be as concerned about the fact that 
States are losing tens of billions of dollars each year because taxable 
transactions on which they rely for half their revenues are 
increasingly taking place over the Internet. Some are not concerned, 
such as one individual, Mr. Grover Norquist, who testified at a hearing 
in support of this bill, and said that he wants to ``shrink government 
until we can drown it in the bathtub.'' He stated, ``I hope a State 
goes bankrupt.''
  Well, unless you agree with him, the money has to come from 
somewhere. Uncollected sales taxes on Internet purchases cost the 
States more than $16 billion in 2001. Unless there is a system in place 
that enables States and local governments to collect these taxes, their 
annual losses from online sales will grow to some $45 billion by 2006 
and $66 billion by 2011, with total losses coming to nearly half a 
trillion dollars by that date.
  What does this mean for individual States? Well, just to cite a few 
examples, my home State of Massachusetts lost $256 million in 2001, and 
its losses will climb to over $1 billion by 2011. Tennessee lost $450 
million in 2001, and by 2011 its annual losses will grow to $1.8 
billion. Florida, which relies on the sales tax for more than one-half 
of its annual revenues, lost $1.2 billion in 2001, with its losses 
estimated to quadruple to nearly $5 billion just 10 years from now. 
Texas lost $1.4 billion in 2001 and stands to lose $5.6 billion by 
2011.
  These losses are magnifying the fiscal problems of the States, which 
are already experiencing, because of increased costs and shrinking 
revenues, losses. Additionally, by failing to ensure sales tax equity 
and fairness between remote sellers and Main Street merchants, we are 
putting at risk the thousands of small businesses that sustain our 
economy and contribute so much to our neighborhoods and our 
communities.
  As former Governor Engler of Michigan said the last time we 
considered this issue, ``It is time to close ranks, come together and 
stand up for Main Street America. Fairness requires that remote sellers 
collect and pay the same taxes that our friends and neighbors on Main 
Street have to collect and pay.''
  So, Mr. Speaker, while I support the moratorium on Internet access 
taxes and I support H.R. 49, I think it is important that we get our 
priorities straight. The Quill decision, which prompted this particular 
proposal, prohibited a State from collecting sales taxes from out-of-
state businesses that do not have a physical presence in that State. 
But the court said that Congress could authorize the States to collect 
these taxes once they have modified their taxing systems to alleviate 
the burdens placed on Internet commerce by multiple taxing 
jurisdictions.
  The States have made substantial progress over the past year in 
developing a simplified, efficient, and technologically neutral system 
for the taxation of goods and services that can meet that test. Once a 
sufficient number of States have implemented the streamlined sales and 
tax agreement, Congress should move expeditiously to consider our 
legislation authorizing them to require remote sellers to collect and 
remit sales and use taxes on in-state sales. The States, I believe, are 
meeting their responsibilities, and hopefully we will meet ours.
  Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I appreciate the support of the gentleman from 
Massachusetts (Mr. Delahunt) on this bill. Lest people only heard part 
of his statement, let me say very clearly that this legislation has 
nothing whatsoever to do with the issue of the assessment and 
collection of sales taxes on remote sellers. It only has to do with 
banning multiple and discriminatory taxes on Internet access. The sales 
tax issue will be dealt with another day and in the context of another 
bill.
  Since the gentleman from Massachusetts has raised this, I would like 
to make the following observations:
  First, most States that assess sales taxes also assess use taxes, so 
an in-state resident who purchases goods out of state and is exempt 
from the sales tax because the goods are shipped from one State to the 
other, the sales tax of the State where the seller is located, is still 
liable for a use tax in his or her State of residency.
  There is a line on the Wisconsin State income tax form that asks how 
much in use taxes you have to pay to the State of Wisconsin. If you put 
down zero and you really owe taxes, you filed a false tax return. I am 
sure that is the case in practically every other State that has got a 
sales or a use tax.
  So when we are dealing with this issue, we are dealing with the 
failure of States to adequately and efficiently enforce their own use 
tax law. I do not know why States have failed to do this. That is 
something that Governors and legislators and State taxation department 
officials ought to explain.
  But I can see the two-step being put on the Congress, that if we pass 
what the gentleman from Massachusetts wants us to at a later date, then 
that becomes our sales tax increase of billions of dollars on the 
taxpayers of Massachusetts and Texas and North Carolina.
  I have told my Governors, Republican and Democrat, that have talked 
to me about this, as I said, your laws are already on the books. Why do 
you want us to enforce your law through an act of Congress, when you 
have the means to enforce your law by yourselves as responsibilities of 
the State government?
  I hope that when we debate this issue of how to tax remote sales, we 
do not forget that.
  Mr. Speaker, I am happy to yield 2 minutes to the gentleman from 
Texas (Mr. Smith).

[[Page 22214]]


  Mr. SMITH of Texas. Mr. Speaker, I thank the chairman of the 
Committee on the Judiciary for yielding me time.
  Mr. Speaker, I support H.R. 49, the Internet Tax and 
Nondiscrimination Act. This legislation would permanently extend the 
current moratorium on Internet access taxation, as well as taxes on 
electronic commerce. It would not prohibit States from imposing sales 
tax on sales conducted over the Internet. However, it does prevent 
States or localities from imposing a sales tax that only applies to 
Internet transactions.
  Mr. Speaker, Internet commerce is still relatively new and has yet to 
reach its full potential. The imposition of taxes would threaten the 
future growth of e-commerce and would discourage companies from using 
the Internet to conduct business. Internet taxation would create 
regional and international barriers to global trade.
  The Internet is also a major source of information for many 
individuals and families. Taxes would reduce the number of Americans 
who could afford Internet access. Our goal in Congress should be to 
encourage and promote Internet access, rather than to widen the digital 
divide.
  Mr. Speaker, Americans should be able to access the Internet without 
being subject to State and local taxes.
  Mr. WATT. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Texas (Mr. Green).
  Mr. GREEN of Texas. Mr. Speaker, I rise today in opposition to H.R. 
49, the Internet Tax Nondiscrimination Act. My opposition stems not 
from wanting to tax the Internet access or to impose dual taxes on e-
commerce. I oppose the bill because it does not follow the precedent 
set by previous Internet tax moratorium legislation in holding harmless 
States that have enacted access taxes previous to 1998.
  This bill would have what I consider an enormous impact on the State 
of Texas. The effect of this bill would be felt as early as November of 
this year. I do not need to remind my colleagues of the fiscal crises 
that our States are currently finding themselves in, including the 
State of Texas.
  The State of Texas is one of those States facing a budget problem, 
and I cannot support legislation that would take away $45 million in 
annual revenue in our State, that my State has been depending on for 
the last 5 years. The $45 million in funds are needed for critical 
State programs, such as children's health care. Our last legislative 
session, because of our budget problem, dropped 175,000 children off of 
children's health care. So what are we going to do about taking a hit 
from this, drop even more children?
  My State is not the only one. Connecticut would lose $15 million; 
Ohio, $12 million; Wisconsin, $7.5 million; Tennessee, $4 million; 
North Dakota, $2.5 million; South Dakota, $1.7 million; and New Mexico, 
$1 million.
  I oppose the bill for procedural reasons, because I hoped to be able 
to consider this under an open rule that would allow Members from these 
States adversely affected by the grandfathering provision to allow 
amendments to protect their State laws. Without that opportunity, I 
have no choice but to vote in the best interests of my own State, as I 
assume a lot of other Members from States losing money will, and, 
again, taking away the States' ability to do it, to tax what they have 
already done.
  I guess my frustration is that in Texas we in 1999 changed our taxes 
to where everything under $25 is exempt for your access to Internet 
service. But for some reason we still have State taxes and Federal 
taxes on access to our telephones.

                              {time}  1130

  On the point I am concerned about, I hope we can adopt the 3-year 
extension language that is similar to the Senate bill so that we can 
continue to hold harmless those States that are depending on this 
crucial revenue, particularly in this time of budget shortfalls and the 
disaster that is happening to some of our State programs because of 
State budget cuts.
  Mr. SENSENBRENNER. Mr. Speaker, I yield 1 minute to the gentleman 
from New Hampshire (Mr. Bass).
  Mr. WATT. Mr. Speaker, I also yield to the gentleman from New 
Hampshire (Mr. Bass) for 1 minute.
  The SPEAKER pro tempore (Mr. Ose.) The gentleman from New Hampshire 
(Mr. Bass) is recognized for 2 minutes.
  Mr. BASS. Mr. Speaker, I rise in opposition to this bill. I am 
against taxation of the Internet. There is no question about that. What 
concerns me is the fact that this legislation eliminates the 
grandfather clause of those nine States that currently collect a 
communications tax.
  In my State of New Hampshire we have a 7 percent tax on access for 
intrastate communications, not interstate but intrastate. It does not 
matter whether it is fax, Internet communications, any other mechanism.
  What this bill does is eliminate the ability of the State of New 
Hampshire and eight other States to collect revenue on what is 
justifiably a State-centered tax.
  Now, we do not regulate sales taxes or State income taxes, what they 
should do. There is a provision in this bill that would allow sales 
taxes to be collected but New Hampshire does not have a sales tax. So 
we get hit twice through the passage of this.
  Mr. Speaker, the Senate bill has a 3-year extension of this 
moratorium and there is no such extension in the House. Ultimately what 
this bill does is it creates $100 million unfunded Federal mandate to 
States.
  I am not for taxation of the Internet, but what the bill is doing is 
it is proposing to affect tax policy within States and their ability to 
tax within their open telecommunications system. And, as I said a 
minute ago, it is an unfunded Federal mandate.
  I hope that the Committee on the Judiciary will look carefully at 
what the Senate has done with this 3-year extension and will include 
that 3-year extension in the House version of the bill.
  It is a solution that is bad for New Hampshire and it is unfair. I 
plan to vote against this bill and I urge my colleagues in the States 
of Texas, Connecticut, Ohio, Wisconsin, Tennessee, North Dakota, South 
Dakota, New Mexico and Washington, those States that will be losing 
revenue on this with no balancing make-up from the Federal Government, 
to join me in opposition to this bill.
  Mr. WATT. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. SENSENBRENNER. Mr. Speaker, I yield myself the balance of the 
time.
  Mr. Speaker, in response to the gentleman from New Hampshire, the 
States have been on notice for 5 years that national policy disfavors 
taxing access to the Internet. While it is true that the grandfather 
clause is repealed by this bill, in the State of New Hampshire in 2002 
$2\1/2\ million was collected through Internet access taxes. That is 
13/100ths of 1 percent of the total revenues of the State of New 
Hampshire.
  Obviously, getting rid of this multiple and discriminatory and 
regressive tax is something that should be a national policy.
  I think the Internet is interstate commerce, not intrastate commerce. 
And, thus, I believe that the bill ought to be approved.
  Ms. LOFGREN. Mr. Speaker, earlier this year, I introduced H.R. 1481, 
which would have extended the Internet tax moratorium for another 5 
years. I introduced a 5-year extension because at the time, I believed 
that politically, it was the longest extension that we could get. But I 
am now convinced that we must make every effort to extend the 
moratorium permanently. That's why I am a strong supporter and 
cosponsor of H.R. 49.
  Let's be clear on what H.R. 49 does and does not do. It prohibits 
states from taxing people for simply logging onto the Internet. This is 
absolutely essential to the growth of the Internet. It is also 
important because access taxes hit those with lower incomes the 
hardest. We need to find ways to bridge the digital divide in this 
country, not make it harder for lower income Americans to get online.
  H.R. 49 also prohibits multiple and discriminatory taxes on Internet 
transactions. This is simply a matter of fairness. If I buy a CD on the 
Internet, it should not be taxed at a higher rate than if I buy that CD 
in a store. There should be an even playing field.

[[Page 22215]]

  That's what H.R. 49 does. What it doesn't do is affect the ability of 
a State to impose and collect sales taxes on Internet transactions. 
Over the years, there has been a lot of confusion on this point. Some 
have tried to link the moratorium with the sales tax issue. But they 
are separate and distinct issues. The ability of states to impose sales 
taxes is not limited by H.R. 49, it is limited by the Supreme Court's 
Quill decision, which prevents taxes on remote sellers unless they have 
a ``substantial nexus'' to the taxing authority.
  We cannot risk harming the future of the Internet by conditioning an 
extension of the moratorium on resolution of the sales tax issue. Let's 
deal with the separate sales tax issue separately.
  A toll to enter the information superhighway is not good policy 
today, and it won't be good policy in a year, two years, or 5 years. I 
urge my colleagues to support a permanent extension.
  Mr. DREIER. Mr. Speaker, as an original co-sponsor of H.R. 49, the 
Internet Tax Nondiscrimination Act, I want to congratulate Chairman Cox 
and Chairman Sensenbrenner for their work in bringing before us this 
very significant electronic commerce bill. After two temporary 
moratoriums in the last 5 years, we have the opportunity today to 
finally pass a permanent ban on Internet access taxes, as well as 
multiple and discriminatory State and local taxes on electronic 
commerce.
  It is important to note that the primary reason it took us 5 years to 
make this moratorium permanent was the linkage between two issues that 
are truly unrelated: (1) keeping down the cost of consumer access to 
the Internet; and (2) the issue of streamlined sales taxes and remote 
tax collection authority by States. H.R. 49 now moves us away from that 
linkage.
  However, during Judiciary Committee debate on this bill, a number of 
Members continued to voice their belief that we still need to address 
the State tax simplification issue and ``level the playing field'' 
between brick-and-mortar and online sellers.
  While the State sales tax simplification debate should be considered 
in Congress--and I know that Chairman Cannon will be holding hearings 
on that issue--I want to caution my colleagues who believe that 
leveling the playing field between offline and online sellers is a 
quick and easy policy decision. We need to be very careful that we do 
not create a precedent that would allow States and localities to tax a 
transaction, simply because the seller sells something to a purchaser 
in their jurisdiction.
  One of the fundamental principles motivating America's struggle for 
independence from Britain was the idea that citizens should to face 
taxation without representation. To require that sellers pay taxes to a 
governmental body that in no way represents its interests is contrary 
to that basic premise of our democracy. In continuing to pursue a 
resolut8inon of the streamlined State sales tax issue, it is important 
that we continue to be guided by that principle.
  Mr. LANGEVIN. Mr. Speaker. Today, I rise in support of H.R. 49, the 
Internet Tax Nondiscrimination Act. This bill is the result of a 
bipartisan compromise to the benefit of consumers in Rhode Island and 
around the country.
  H.R. 49 makes permanent the current moratorium on Internet access 
taxes, which was scheduled to expire on November 1, 2003. This 
moratorium, in effect since October 1998, has greatly contributed to 
the rapid expansion of the Internet.
  For the second quarter of 2003, e-commerce accounted for only 1.5 
percent of total goods and services sold in the country, but this is an 
increase of 28 percent from the previous year. By 2005, worldwide 
online sales are expected to total $8.6 trillion online, up from $3.6 
trillion this year. This bill will maintain the United States' position 
as a leader in online commerce because H.R. 49 protects consumers from 
double taxation of online purchases, which would slow the growth of 
Internet sales.
  I am pleased to see that the Judiciary Committee adopted the Watts-
Cannon amendment, which ensures that all technologies, including 
traditional modem, cable modem, DSL, wireless, and future access 
methods, are subject to the same tax treatment. In addition, this bill 
ensures a nondiscriminatory tax system, which neither encourages nor 
discourages purchases online. The legislation is fair to existing brick 
and mortar businesses, while continuing to foster the expansion of e-
commerce.
  I urge my colleagues to support H.R. 49, this bipartisan legislation 
that benefits consumers and businesses.
  Mr. KIND. Mr. Speaker, I am pleased to support H.R. 49, the Internet 
Tax Non-Discrimination Act. This bill would make permanent the national 
moratorium on Internet access taxes and multiple and discriminatory 
taxes on e-commerce.
  The United States has made great strides in the goal of achieving 
Internet access for all Americans. As I travel throughout my district 
in western Wisconsin, I am constantly amazed to see the continued use 
of the Internet in public libraries, schools and hospitals, as well as 
individual homes and businesses. As the telephone did 100 years ago, 
the Internet is improving our lives and bringing us closer together as 
a world community.
  Mr. Speaker, the previous legislation dealing with Internet taxation 
grandfathered existing laws in 10 states, including Wisconsin that 
imposed taxes on Internet access. The revenue from the taxes was used 
to pay for police officers, firefighters, hospital personnel, and 
elementary and secondary school teachers.
  In these times of tight state budgets and fiscal uncertainty, every 
tax dollar is crucial to deliver needed services to citizens throughout 
the country. However, when the Federal Government unilaterally removes 
tax revenue by superceding state laws, state budgets take the hit. 
Congress must take state government needs and budget schedules when 
passing laws that supercede state taxation laws.
  Mr. Speaker, the language in the Senate version of this bill includes 
a provision providing for a 3-year delay in the implementation of the 
law in those states with previous Internet access tax laws. This 
provision will afford those states the opportunity to plan for the loss 
of revenue from H.R. 49.
  I am voting for H.R. 49 because I believe it is important to keep 
Internet access affordable so all Americans across the economic 
spectrum. However, I think it is only fair to state governments that 
they have proper notice about the lost of tax revenue dollars. Thus, I 
will be urging conferees to adopt the Senate language allowing for a 3-
year delay of this law in those 10 states with Internet access tax 
laws.
  Mr. SENSENBRENNER. Mr. Speaker, I urge support for the bill and I 
yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Wisconsin (Mr. Sensenbrenner) that the House suspend the 
rules and pass the bill, H.R. 49, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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