[House Report 107-240]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-240
======================================================================
INTERNET TAX NONDISCRIMINATION ACT
_______
October 16, 2001.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1552]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1552) to extend the moratorium enacted by the
Internet Tax Freedom Act through 2006, and for other purposes,
having considered the same, reports favorably thereon with
amendments and recommends that the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 1
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 7
Committee Consideration.......................................... 8
Votes of the Committee........................................... 8
Committee Oversight Findings..................................... 10
Performance Goals and Objectives................................. 10
New Budget Authority and Tax Expenditures........................ 10
Congressional Budget Office Cost Estimate........................ 10
Constitutional Authority Statement............................... 11
Section-by-Section Analysis and Discussion....................... 11
Changes in Existing Law Made by the Bill, as Reported............ 12
Markup Transcript................................................ 12
The amendments are as follows:
Strike 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. EXTENSION OF INTERNET TAX FREEDOM ACT MORATORIUM.
Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 151
note) is amended by striking ``3 years after the date of the enactment
of this Act'' and inserting ``on November 1, 2003''.
Amend the title so as to read:
A bill to extend the moratorium enacted by the Internet
Tax Freedom Act through November 1, 2003; and for other
purposes.
Purpose and Summary
H.R. 1552, the ``Internet Tax Nondiscrimination Act,''
preserves and promotes the commercial potential of the Internet
by protecting electronic commerce from discriminatory State and
local taxes. H.R. 1552, as amended, accomplishes this purpose
by extending for an additional 2 years the moratorium on
multiple and discriminatory taxes on electronic commerce
created by the Internet Tax Freedom Act of 1998.\1\ It also
maintains for 2 years the authority of States to collect
Internet access taxes only if these taxes were generally
imposed and collected before October 1, 1998.
---------------------------------------------------------------------------
\1\ Pub. L. No. 105-277, 112 Stat. 261 (1998) (codified at 47
U.S.C. 151 (2000)).
---------------------------------------------------------------------------
Background and Need for the Legislation
Background
The Scope of Electronic Commerce
The Internet and information technology (IT) industries
comprise an increasingly vital component of U.S. economic
health. According to the U.S. Department of Commerce, IT
industries (which include the Internet) accounted for 35
percent of real U.S. economic growth in the year 2000.\2\
Internet retail \3\ sales continue to accelerate at an
impressive rate. In the first quarter of 2001, e-commerce
retail sales reached $7.5 billion.\4\ While some forecasts
estimate Internet retail sales might soon reach $300
billion,\5\ these claims have yet to materialize. For example,
during the first quarter of 2000, online retail sales
represented less than 1 percent of overall retail sales.\6\
Moreover, recent weakness in the retail and technology sectors
led to a decline in online retail sales during the second
quarter of this year.\7\
---------------------------------------------------------------------------
\2\ ``Digital Economy 2000,'' U.S. Dep't Of Commerce, text
available at: ``Emerging Digital
Economy II,'' U.S. Dep't Of Commerce (June 1999) at 4.
\3\ Retail sales include the sale of tangible goods, not services.
\4\ ``Retail E-Commerce Sales In First Quarter 2001 Were $7.0
Billion, Up 33.4 Percent From First Quarter 2000, Census Bureau
Reports.'' U.S. Dep't Of Commerce Press Release, May 16, 2001,
available at http://www.census.gov/mrts/www/current.html.
\5\ Clayton W. Shan, Taxation of Global E-Commerce on the Internet:
The Underlying Issues and Proposed Plans, 9 Minn. J. Global Trade 233,
235 (2000).
\6\ Supra note 4.
\7\ Id.
---------------------------------------------------------------------------
Taxing Status of the Internet
Contrary to the widespread impression that the Internet is
a tax-free haven, electronic commercial transactions are
subject to various State and local taxes. Telecommunications
channels such as telephone lines, wireless transmissions,
cable, and satellites are subject to taxation. Electronic
merchants are required to pay State and local income,
licensing, franchise, business activity and other direct taxes.
In addition, physically-present electronic merchants are
required to collect and remit applicable sales and use taxes
for all intrastate transactions. In short, online transactions
are subject to nearly all taxes imposed on traditional, brick
and mortar enterprises. The only substantive difference between
the tax treatment of online and traditional retailers is a
State's authority to require nonresident electronic merchants
to collect and remit sales and use taxes.\8\ While State and
local governments have continually sought to expand their
ability to tax nonresident businesses, constitutional
limitations on State and local taxing authority have made it
considerably more difficult for them to do so.
---------------------------------------------------------------------------
\8\ A sales tax is a percentage-based ``consumption tax'' collected
at the point of sale by the seller and remitted to the appropriate
taxing authorities. Advisory Commission On Electronic Commerce, Report
to Congress, April 3, 2000, at 19. Currently, approximately 7,500
taxing jurisdictions throughout the United States collect sales taxes.
Id. A use tax is a sales tax that is collectible by the seller where
the purchaser is domiciled in a different State. Black's Law Dictionary
1543 (6th Ed. 1990). Use taxes are imposed on personal tangible
property purchased out of State, but used or consumed in the taxing
State. As a result of the administrative difficulties associated with
collecting use taxes from individual consumers, most States require
remote sellers to collect and remit these taxes. See Advisory
Commission Report at 19.
---------------------------------------------------------------------------
Constitutional Limitations On State Taxing Authority
While State and local governments may tax most transactions
occurring within their taxing jurisdictions, this authority is
not unlimited. More specifically, the Constitution has been
interpreted to constrain State power to compel nonresident,
remote sellers to collect and remit State sales and use taxes.
Dormant Commerce Clause
The Commerce Clause of the Constitution authorizes Congress
to ``regulate Commerce with foreign Nations, and among the
several States.'' \9\ While the Commerce Clause establishes a
predicate for congressional commercial regulation, the Supreme
Court has also interpreted the Commerce Clause to create a
``negative'' limitation on State power to regulate in areas
that might adversely affect interstate commerce. This
limitation on State power is referred to as the ``Dormant
Commerce Clause.''\10\ Because State and local taxes might
unduly burden the course of interstate commerce, the Supreme
Court has placed constitutional constraints on State and local
taxing authority.
---------------------------------------------------------------------------
\9\ U.S. Const. art. I, Sec. 8, cl. 2.
\10\ Ronald Rotunda, Modern Constitutional Law 135 (5th ed. 1998);
See also Pike v. Bruce Church, Inc. 397 U.S. 137 (1978) and Healy v.
Beer Institute, 91 U.S. 324 (1989).
---------------------------------------------------------------------------
The fullest legal explanation of Dormant Commerce Clause
limitations on State taxing authority is Quill Corp. v. North
Dakota.\11\ Quill concerned North Dakota's attempt to require
an out-of-State mail order catalog retailer to collect and pay
a use tax on goods purchased for use within the State. Quill
Corp., a Delaware corporation, grossed more than $1 million a
year in mail order catalog sales to North Dakota residents, but
lacked a physical presence in the State. When North Dakota
moved to compel Quill Corp. to collect and remit use taxes,
Quill claimed the tax was unconstitutional. The Supreme Court
concluded North Dakota's efforts to compel a remote seller to
collect and remit use taxes to that State without a physical
presence or other ``substantial [taxing] nexus'' violated the
Commerce Clause.\12\ By conditioning State authority to collect
use taxes on a remote seller is physical presence in the taxing
State, the Court maintained a previously enunciated use tax
safe harbor for remote vendors ``whose only connection with
customers in the taxing State is by common carrier or United
States mail.'' \13\ While the Supreme Court has yet to
specifically rule on the constitutionality of requiring
nonresident, Internet merchants to collect and remit State and
local use taxes, these enterprises are analogous to mail
catalog companies to the extent they may lack a ``substantial
nexus'' to justify the imposition of State and local taxes
under the Commerce Clause. State and local efforts to require
nonresident Internet retailers to collect and remit State use
taxes would thus likely fail constitutional scrutiny.
---------------------------------------------------------------------------
\11\ 504 U.S. 298 (1992).
\12\ The Quill Court reiterated the four part test enunciated in
Complete Auto Transit Inc. v. Brady, 430 U.S. 274 (1977), holding that
State taxation survives Dormant Commerce Clause challenge if the tax:
(1) is applied to an activity with a substantial nexus with the taxing
State; (2) is fairly apportioned; (3) does not discriminate against
interstate commerce and; (4) is fairly related to services provided by
the State. Quill, 504 U.S. at 311.
\13\ National Bellas Hess, Inc. v. Dept. of Revenue of Illinois,
386 U.S. 753 (1967).
---------------------------------------------------------------------------
Due Process Clause
The Fourteenth Amendment of the Constitution provides that
no State shall ``deprive any person of life, liberty or
property without due process of law.'' \14\ This provision has
been interpreted to limit the power of a State government to
assert taxing jurisdiction over parties who do not reside in
the forum State. A State statute imposing a tax on sales by
out-of-State retailers will withstand Due Process challenge if
the taxing State demonstrates ``some definite link, some
minimum connection, between a State and the person, property or
transaction it seeks to tax.'' \15\ As long as the taxpayer
``purposefully avails itself of the benefits of an economic
market in the forum State, it may be subject to that State
jurisdiction even if it has no physical presence in the
State.'' \16\
---------------------------------------------------------------------------
\14\ U.S. Const. amend. XIV. Sec. 1.
\15\ Quill at 306 (quoting Miller Bros. Co. v. Maryland, 311 U.S.
457, 463 (1940)).
\16\ Id. at 307.
---------------------------------------------------------------------------
The Supreme Court has yet to rule on the degree of
connection a nonresident electronic merchant must have with a
taxing State in order to satisfy the Due Process ``minimum
contacts'' test. It is likely a nonresident retailer that seeks
to sell merchandise through advertisement or other solicitation
will be considered to have ``purposefully availed'' itself of
the benefits of the taxing State's market for purposes of
meeting the Due Process requirement set out in Quill. However,
meeting this requirement would not necessarily validate the
constitutionality of the tax since a corporation ``may have the
`minimum contacts' with a taxing State as required by the Due
Process Clause and still lack the `substantial nexus' required
by the Commerce Clause.'' \17\
---------------------------------------------------------------------------
\17\ Id. at 313.
---------------------------------------------------------------------------
State and Local Efforts to Tax Electronic Commerce
Sales and use taxes comprise a substantial portion of State
tax revenues. Last year, State and local governments collected
$181 billion in sales and use taxes, accounting for 25 percent
of all state government revenue.\18\ Based on an estimated $25
billion in Internet retail sales in 2000, States claim to have
lost an estimated $950 million in unpaid sales and use
taxes.\19\
---------------------------------------------------------------------------
\18\ ``Summary of State and Local Tax Revenue,'' U.S. Dep't Of
Commerce, Bureau of the Census, Government and Finance Branch (Dec. 14,
1999); text available at: http://www.census.gov:80/govs/www/
qtax00.html.
\19\ Internet Sales Taxes, N.Y.L.J., Mar. 9, 2000 at 6.
---------------------------------------------------------------------------
To stanch perceived future tax revenue losses,\20\ some
States have begun to consider novel theories for expanding
their taxing authority over online sellers. Some State taxing
officials have speculated that an Internet service provider
(ISP), which connects consumers to the Internet, acts as an
agent of online sellers and therefore creates ``nexus'' for
electronic merchants ``doing business'' in the taxing State.
The potential exposure of electronic merchants to a myriad of
State and local taxing jurisdictions threatens the development
and commercial viability of this increasingly important
commercial medium.
---------------------------------------------------------------------------
\20\ The General Accounting Office has estimated that States and
localities ``lost'' between $0.3 and $3.8 billion in sales tax revenue
to the Internet in 2000 and stand to forfeit between $1.0 and $12.4
billion in uncollectible Internet-based sales taxes by 2003. See Sales
Taxes--Electronic Commerce Growth Presents Challenges: Revenue Losses
Are Uncertain, GAO/GGD/OCE-00, 165, June 2000.
---------------------------------------------------------------------------
The Federal Legislative Response
Internet Tax Freedom Act
The Internet Tax Freedom Act of 1998 (ITFA) was enacted to
help address some of the emerging challenges associated with
electronic commerce. The ITFA had four major components: 1) a
moratorium on new Federal Internet or Internet-access taxes; 2)
a declaration that the Internet should be free of international
tariffs and other trade barriers; 3) a 3-year prohibition on
new taxes imposed on Internet access and on multiple or
discriminatory taxes on Internet commerce; and 4) the
establishment of a nineteen-member Advisory Commission on
Electronic Commerce (ACEC) to study and submit a report to
Congress on international, Federal, State, and local tax issues
pertaining to the Internet.
Principle Terms and Definitions Contained in the ITFA
The ITFA established a 3-year prohibition on State and
local assessment of ``multiple'' or ``discriminatory'' taxes on
electronic commerce and barred States from collecting
``Internet access'' taxes unless these taxes were imposed and
collected before its passage.
Section 1104(3) of the ITFA defines ``electronic commerce''
as ``any transaction conducted over the Internet or through
Internet access, comprising the sale, lease, license, offer of
delivery of property, goods, services or information . . . and
includes the provision of Internet access.'' This definition
encompasses the sale of goods and services online. Section
1104(2)(A) of the ITFA defines a ``multiple tax'' as ``any tax
that is imposed by one State or political subdivision thereof
on the same or essentially the same electronic commerce that is
also subject to another tax imposed by another State or
political subdivision . . . without a credit . . . for taxes
paid in other jurisdictions.''
For example, if State A imposes a tax on an online
transaction that occurs between an Internet seller in State A
and a consumer in State B, only one of these States would be
permitted to collect taxes on the transaction unless a tax
credit were provided. The ITFA ban on multiple taxes also
prohibits more than one State from collecting taxes on an
electronic transaction that might involve more than two taxing
jurisdictions. This situation might arise if an Internet server
is located in a State different from that of the Internet
retailer and customer.
Section 1104(2) of the ITFA defines a ``discriminatory
tax'' as: (A) any tax imposed by a State or political
subdivision on electronic commerce that--(i) is not generally
imposed and legally collectible by such State or political
subdivision on transactions involving similar property, goods,
services or information accomplished through other means; (ii)
is not generally imposed and legally collectible at the same
rate by such State or such political subdivision on
transactions involving similar property, goods, services or
information accomplished through other means (unless the rate
is lower as part of a phase-out of the tax over not more than a
5-year period); (iii) imposes an obligation to collect or pay
the tax on a different person or entity than in the case of
transactions involving similar property, goods, services, or
information accomplished through other means; or (iv)
establishes a classification of Internet access service
providers for purposes of establishing a higher tax rate than
the tax rate generally applied to providers of similar
information services delivered through other means.
Discriminatory taxes include taxes levied specifically on
electronic transactions or taxes that single out electronic
transactions for higher rates of taxation. For example, if
State A collects a 5-percent sales tax on the sale of retail
goods, State A could not impose a higher tax rate on retail
goods sold online. This provision also prohibits States from
imposing a tax collection requirement on persons or businesses
who would not have to collect these taxes if they occurred in a
similar, nonelectronic transaction. Thus, State A can not
require a remote electronic seller to collect and remit sales
taxes if other merchants selling similar goods are not required
to do so. Finally, this section prohibits States from
subjecting Internet service providers to a tax burden higher
than that placed on information services delivered through
other means (e.g. over a cable line).
The ITFA defines an ``Internet access'' service as one that
``that enables users to access content information, electronic
mail, or other services over the Internet.'' \21\ An Internet
access tax is one imposed ``on the sale or use of Internet
services,'' \22\ such as an Internet Service Provider (ISP).
The ITFA bars the imposition of taxes on Internet access. Thus,
States are barred from taxing a customer's monthly ISP (e.g.,
America Online) billing statement. However, Section 1101(a)(1)
of the ITFA applies only to Internet access taxes that were not
``generally imposed and actually enforced'' prior to October 1,
1998. Hence, a number of States that collected these taxes
before October 1, 1998 presently have authority to do so. These
States are: Connecticut, Montana, New Mexico, Ohio, South
Carolina, North Dakota, Tennessee, Texas, Washington, and
Wisconsin.\23\
---------------------------------------------------------------------------
\21\ ITFA, Sec. 1104 (5).
\22\ Id.
\23\ See H.R. Rep. No. 106-609, at 4-5.
---------------------------------------------------------------------------
Advisory Commission on Electronic Commerce
The following key findings received a majority (11) of the
Commissioners' support:
Sales and Use Taxes
LFor a period of 5 years, extend the current
moratorium barring multiple and discriminatory taxation
of e-commerce and prohibit taxation of sales of
digitized goods and products and their non-digitized
counterparts.
LClarify which factors would not, in and of
themselves, establish a seller's physical presence in a
State for purposes of determining whether a seller has
sufficient nexus with that State to impose tax
collection obligations.
Internet Access
LMake permanent the current moratorium on any
transaction taxes on the sale of Internet access,
including taxes that were grandfathered under the ITFA.
Taxation of Telecommunications Services and Providers
LEliminate the 3% Federal excise tax on
communications services (originally enacted to raise
revenue to support the cost of the Spanish-American
War, a bill to repeal this tax passed Congress but was
vetoed by then-President Clinton).
LEliminate excess tax burdens on
telecommunications real, tangible, and intangible
property.
LAfford similar taxing treatment of
telecommunications infrastructure in States that exempt
purchases of certain types of business equipment from
sales and use taxes.
LEncourage State and local governments to work
with and through the National Conference on
Commissioners of Uniform State Laws (NCCUSL) in
drafting a uniform telecommunications State and local
excise tax act, within 3 years, that would require
States to follow one of two simplified tax structure
models.
Last Congress, the House of Representatives overwhelmingly
approved H.R. 3709, the Internet Nondiscrimination Act. H.R.
3709 would have abolished all Internet access taxes and
extended the ban on multiple or discriminatory taxes on
electronic commerce for 5 years. The bill did not receive a
vote in the Senate.
Hearings
The Subcommittee on Commercial and Administrative Law of
the Committee on the Judiciary held 3 days of hearings on H.R.
1552 and related bills H.R. 1675, the Internet Tax
Nondiscrimination Act, H.R. 1410, the Internet Tax Moratorium
and Equity Act, and H.R. 2524, the Internet Tax Fairness Act of
2001.
On June 26, 2001 the Subcommittee held a hearing on H.R.
1552 and H.R. 1675, both titled the ``Internet Tax
Nondiscrimination Act.'' The hearing examined the importance of
maintaining and enhancing the commercial potential of the
Internet and emphasized the importance of moving swiftly to
ensure the Internet is not singled out for unfair,
discriminatory taxation. Testimony was received from the
following witnesses: Virginia Governor and Chairman of the
Advisory Commission on Electronic Commerce James Gilmore; Rep.
Christopher Cox (R-CA); Robert Comfort, Vice President for Tax
and Tax Policy, Amazon.com; and Michigan Governor John Engler,
on behalf of the National Governors Association. Additional
information was submitted by the Internet Tax Fairness
Coalition and by Frank Julian, Operating Vice President of
Federated Department Stores, Inc.
The Subcommittee on Commercial and Administrative Law held
a hearing on H.R. 1410, the ``Internet Tax Moratorium and
Equity Act'' on July 18, 2001. The hearing focused on the
importance of extending the Internet tax moratorium and
examined claims that the current taxing environment favors
nontraditional retailers. The following witnesses testified:
Rep. Ernest Istook (R-OK); Grover Norquist, President of
Americans for Tax Reform and Member of the Advisory Commission
on Electronic Commerce; Frank Julian, Operating Vice President
and Tax Counsel, Federated Department Stores, Inc., on behalf
of the Direct Marketing Association and the Internet Tax
Fairness Coalition; and Jon W. Abolins, Chief Tax Counsel and
Vice President for Tax and Government Affairs, TAXWARE
International, Inc.
Finally, on September 11, 2001, the Subcommittee held a
hearing on H.R. 2526, the ``Internet Tax Fairness Act of
2001''. Written testimony was received by the following
witnesses: Arthur Rosen, Chairman, Coalition for Rational and
Fair Taxation; Stanley Sokul, Member, Advisory Commission on
Electronic Commerce, on behalf of the Internet Tax Fairness
Coalition and the Direct Marketing Association; Fred
Montgomery, Director, State and Local Tax, Sara Lee
Corporation, on behalf of the Committee on State Taxation; and
June Summers Haas, Commissioner of Revenue, State of Michigan.
The events of September 11th, which included terrorist attacks
upon New York City and Washington, D.C., necessitated the early
adjournment of the hearing.
Committee Consideration
On August 2, 2001, the Subcommittee on Commercial and
Administrative Law met in open session and ordered favorably
reported the bill H.R. 1552 by voice vote, a quorum being
present. On October 10, 2001, the Judiciary Committee met in
open session and ordered favorably reported the bill H.R. 1552,
with amendment, by voice vote, a quorum being present.
Votes of the Committee
1. An amendment offered by Mr. Bachus, Mr. Watt, and Mr.
Delahunt to extend the ITFA moratorium on multiple or
discriminatory and new Internet access taxes until June 30,
2002. Defeated 12 to 19.
ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................ X
Mr. Gekas....................................................... X
Mr. Coble....................................................... X
Mr. Smith (Texas)............................................... X
Mr. Gallegly.................................................... X
Mr. Goodlatte................................................... X
Mr. Bryant...................................................... X
Mr. Chabot...................................................... X
Mr. Barr........................................................ X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Graham......................................................
Mr. Bachus...................................................... X
Mr. Hostettler.................................................. X
Mr. Green....................................................... X
Mr. Keller...................................................... X
Mr. Issa........................................................
Ms. Hart........................................................ X
Mr. Flake....................................................... X
Mr. Pence....................................................... X
Mr. Conyers.....................................................
Mr. Frank....................................................... X
Mr. Berman...................................................... X
Mr. Boucher.....................................................
Mr. Nadler...................................................... X
Mr. Scott.......................................................
Mr. Watt........................................................ X
Ms. Lofgren..................................................... X
Ms. Jackson Lee................................................. X
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt.................................................... X
Mr. Wexler......................................................
Ms. Baldwin..................................................... X
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Mr. Sensenbrenner, Chairman..................................... X
-----------------------------------------------
Total....................................................... 12 19
----------------------------------------------------------------------------------------------------------------
2. An amendment offered by Mr. Bachus, Mr. Watt, and Mr.
Delahunt to extend the ITFA moratorium on multiple or
discriminatory and new Internet access taxes until November 1,
2003. Passed 19-15.
ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................ X
Mr. Gekas....................................................... X
Mr. Coble....................................................... X
Mr. Smith (Texas)............................................... X
Mr. Gallegly.................................................... X
Mr. Goodlatte................................................... X
Mr. Bryant...................................................... X
Mr. Chabot...................................................... X
Mr. Barr........................................................ X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Graham...................................................... X
Mr. Bachus...................................................... X
Mr. Hostettler..................................................
Mr. Green....................................................... X
Mr. Keller...................................................... X
Mr. Issa........................................................ X
Ms. Hart........................................................ X
Mr. Flake....................................................... X
Mr. Pence....................................................... X
Mr. Conyers..................................................... X
Mr. Frank....................................................... X
Mr. Berman...................................................... X
Mr. Boucher..................................................... X
Mr. Nadler...................................................... X
Mr. Scott....................................................... X
Mr. Watt........................................................ X
Ms. Lofgren..................................................... X
Ms. Jackson Lee................................................. X
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt.................................................... X
Mr. Wexler......................................................
Ms. Baldwin..................................................... X
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Mr. Sensenbrenner, Chairman.....................................
-----------------------------------------------
Total....................................................... 19 15
----------------------------------------------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
The moratorium in certain taxes on electronic commerce
expires on October 21st of this year. If Congress fails to
extend this limited protection, electronic commerce will be
exposed to a multiplicity of discriminatory and potentially
fatal State and local taxes. H.R. 1552, as amended, maintains
the ITFA prohibition on multiple or discriminatory taxes for an
additional 2 years and preserves the authority of States to
collect existing taxes on Internet access.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of Rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 169, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 12, 2001.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1552, the Internet
Tax Nondiscrimination Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Ken Johnson
(for Federal costs), who can be reached at 226-2860, and
Theresa Gullo (for the state and local impact), who can be
reached at 225-3220.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 1552--Internet Tax Nondiscrimination Act.
H.R. 1552 would extend a moratorium on certain state and
local taxation of on-line services and electronic commerce
through November 1, 2003. Under current law, the moratorium is
set to expire on October 21, 2001.
CBO estimates that enacting H.R. 1552 would have no impact
on the Federal budget. Because the bill would not affect direct
spending or receipts, pay-as-you-go procedures would not apply.
By extending the prohibition on collecting certain types of
state and local taxes, H.R. 1552 would impose an
intergovernmental mandate as defined in Unfunded Mandates
Reform Act (UMRA). The bill, however, would allow states that
are currently collecting a sales tax on Internet access to
continue doing so. Based on information from the Multistate Tax
Commission and the Federation of Tax Administrators, CBO
believes enacting this bill would not affect state and local
revenues currently being collected. Thus, CBO estimates that
the cost of complying with the mandate would not be significant
and would not exceed the threshold established in the act ($56
million in 2001, adjusted annually for inflation). The bill
contains no private-sector mandates as defined in UMRA.
The CBO staff contacts for this estimate are Ken Johnson
(for Federal costs), who can be reached at 226-2860, and
Theresa Gullo (for the State and local impact), who can be
reached at 225-3220. This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8, clause 2 of the
Constitution.
Section-by-Section Analysis and Discussion
Section 1. Section 1 titles the bill the ``Internet Tax
Nondiscrimination Act''.
Section 2. Section 2 amends the Internet Tax Freedom Act
(47 U.S. C. 151 note) to extend the moratorium on multiple or
discriminatory State and local taxes on electronic commerce
until November 1, 2003. This section also preserves until
November 1, 2003, the authority of States to collect Internet
access taxes if they were generally imposed and collected
before October 1, 1998.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
INTERNET TAX FREEDOM ACT
TITLE XI--MORATORIUM ON CERTAIN TAXES
SEC. 1100. SHORT TITLE.
This title may be cited as the ``Internet Tax Freedom
Act''.
SEC. 1101. MORATORIUM.
(a) Moratorium.--No State or political subdivision
thereof shall impose any of the following taxes during the
period beginning on October 1, 1998, and ending [3 years after
the date of the enactment of this Act] on November 1, 2003--
(1) * * *
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, OCTOBER 10, 2001
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to call, at 2:35 p.m., in Room
2141 Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. (Chairman of the Committee) presiding.
Chairman Sensenbrenner. The next item on the agenda is
consideration of H.R. 1552, the Internet Tax Nondiscrimination
Act. The Chair recognizes the gentleman from Georgia, Mr. Barr,
Chairman of the Subcommittee on Commercial and Administrative
Law.
Mr. Barr. Mr. Chairman, the Subcommittee on Commercial and
Administrative Law reports favorably the bill H.R. 1552, and
moves its favorable recommendation to the full House.
[The bill, H.R. 1552, follows:]
Chairman Sensenbrenner. Without objection, the bill will be
considered as read and open for amendment at any time, and the
Chair recognizes the gentleman from Georgia, Mr. Barr, for 5
minutes.
Mr. Barr. Thank you, Mr. Chairman. I appreciate the Chair
and the Committee's indulgence on bringing up this bill, which
is extremely timely for two reasons: one, because the current
moratorium on Internet taxes expires on October 21st; and,
secondly, we have an opportunity today to send to the full
House a bill that will assist our economy by continuing to
prohibit additional and discriminatory taxes at a time when our
Nation can ill afford such taxation.
In a few short years, Mr. Chairman, the Internet has
revolutionized commerce in a manner few could have foreseen.
Businesses have utilized the commercial potential of the
Internet to reach out to customers in a digital national
marketplace. These commercial opportunities have leveled the
playing field by allowing small businesses to avail themselves
of a national market once reserved to a handful of major
corporations.
In 1998 Congress passed the Internet Tax Freedom Act.
Contrary to popular misconceptions, this legislation does not
exempt Internet retailers from collecting and remitting sales
taxes. Rather, it only limits State authority to impose new
taxes on Internet access, and it protects Internet commerce
from multiple or discriminatory taxes.
This limited protection expires on October 21st, a short 11
days from today. Failure to renew this protection gives States
and localities free rein to impose crippling and potentially
fatal taxes on Internet commerce.
Since passage of the Internet Tax Freedom Act, on-line
commerce has seen steady growth rates, but predictions the
Internet would quickly dominate all retail sales have failed to
materialize. In fact, Internet sales comprised less than 1
percent of total retail sales in FY 2000, and actually declined
during the second quarter of this year. Recent weakness in the
technology sector only underlines the vulnerability of this
medium.
The Subcommittee on Commercial and Administrative Law
conducted a number of hearings into this issue. On June 26th we
held a hearing on H.R. 1552 and H.R. 1675, two bills introduced
by Representative Cox that would preserve the taxing stability
of the Internet by extending the moratorium.
On July 18th the Subcommittee held a hearing on legislation
introduced by Representative Istook that would renew the
moratorium while authorizing States to collect taxes on remote
sellers.
Finally, on September 11th the Committee scheduled a
hearing on H.R. 2524, legislation introduced by Representative
Goodlatte that permanently extends the Internet tax moratorium
while clarifying the nexus standards for the collection of
business activity taxes on multi-State enterprises.
The current myriad of State and local taxing jurisdictions
imposes considerable administrative costs on multi-State
businesses. Many States have been working to simplify their tax
systems in order to collect taxes on nonresident businesses.
While some have sought congressional intervention to facilitate
this effort, not all knowledge emanates from Washington, and I
believe elected representatives at the State and local level
are better suited to resolve this question.
The Senate has been involved in ongoing discussions
concerning the congressional role in this debate. While halting
progress has been made, the time to act is quickly running out.
The bill we consider today extends the moratorium on
discriminatory taxes created by the Internet Tax Freedom Act
for an additional 5 years. It also permanently bans all taxes
on Internet access. In so doing, the bill reflects the majority
recommendations of the bipartisan Advisory Commission on
Electronic Commerce, and helps to narrow the digital divide
separating on-line and off-line worlds of commerce.
Last year, the House overwhelmingly passed an extension of
the moratorium, but it did not receive a vote in the other
body. This year there is no time to delay, and I urge this
Committee's full support for H.R. 1552. I yield back.
Chairman Sensenbrenner. The Chair recognizes the gentleman
from Michigan, Mr. Conyers.
Mr. Conyers. Thank you, Mr. Chairman. I strike the
requisite number of words to commend my friend, Mr. Barr, and
his Subcommittee for this good work, with only one relatively
small reservation, and that is on the 5-year extension itself.
The problem with a period this long, it would really create
the risk that so many will become dependent on the current
system that it will be very difficult to ever really revisit
this issue, even after the end of 5 years, going into the year
2006. And what about the continuing hemorrhaging, the loss of
financial taxes that would be coming to States and localities.
Many of them, one-half of their revenues come from sales tax.
And so this is a serious problem, and I have got a lot of
detail to back that up, but I think everyone knows and agrees
with it.
The question here for me this afternoon is whether it would
be more appropriate to find a shorter period of time. A number
of Members on the Committee have been working on this issue,
and I am happy to support the work product that they will
shortly offer.
Notice that the National Governors Association is not happy
with the 5-year extension. Notice that organized labor, AFL-
CIO, NEA, AFT, AFSCME, is not satisfied with the 5-year
extension; notice that the business organizations, the National
Retail Federation, Home Depot, K-Mart, Wal-Mart, Sears.
So that we have, to me, this one number here to resolve and
I think we can be on our way. I hope that there is a mood in
the Committee this afternoon to find a way to cure this problem
that I respectfully raise.
I thank you, Mr. Chairman.
Chairman Sensenbrenner. Without objection, all Members'
opening statements may be placed in the record at this point.
Are there amendments to the bill?
Mr. Bachus. Mr. Chairman, I would like to offer an
amendment.
Chairman Sensenbrenner. The clerk will report the
amendment.
Mr. Bachus. I would like to----
Mr. Barr. Mr. Chairman, I reserve a point of order.
Chairman Sensenbrenner. Well, opening statements you know
traditionally have been with the Subcommittee Chair, and----
Mr. Bachus. I have an amendment at the desk.
Chairman Sensenbrenner. And the clerk will report the
amendment.
Mr. Barr. I reserve a point of order.
Chairman Sensenbrenner. A point of order is reserved.
The Clerk. Mr. Chairman, I have several. Which one?
Mr. Bachus. Amendment No. 1.
Chairman Sensenbrenner. The clerk will report Bachus 1.
The Clerk. Amendment to H.R. 1552 offered by Mr. Bachus,
Mr. Watt, and Mr. Delahunt. Page 2, after line 11, insert the
following and make such technical and conforming changes as may
be appropriate.
[The amendment follows:]
Mr. Bachus. Mr. Chairman, I make a motion that----
Chairman Sensenbrenner. Without objection, the amendment
will be considered as read and open for amendment at any point,
subject to the reservation of the point of order by the
gentleman from Georgia. The gentleman from Alabama is
recognized for 5 minutes.
Mr. Bachus. Thank you. Mr. Chairman, right now as a
practical matter States and local governments cannot collect
sales taxes on e-commerce transactions. Now, these are taxes
that the people of that State or that city or that county have
voted to impose. They have imposed them on themselves. The
taxes are to be paid by people of the States that imposed it,
by the cities that imposed it, or by the counties that imposed
it. But, as a practical matter, they cannot collect this tax.
The current system is not fair because retailers who sell
exclusively over the Internet have a substantial advantage over
those who do business in brick-and-mortar stores. The result of
the States, the counties and the localities being unable to
collect these taxes is the loss of billions of dollars for the
States.
In fact, Mr. Chairman, what we are talking about here when
we talk about the collection of sales tax or the inability to
collect these taxes, we are talking about the very taxes that
support law enforcement, fire protection, the public schools,
and there is inability to collect those taxes. Last week, 1
week from today, 1 week ago there were new figures released,
and they show that State and local governments will lose $13.3
billion in revenue this year.
Now, when I testified before this Committee about 4 months
ago, I used a figure of $9 billion, and another Member of this
Committee actually, in response to my testimony that State and
local governments would lose $9 billion, said that he thought
the figure would be substantially less than that. Well, now we
have pretty much the final estimates, and not only was it not
lower than $9 billion, it was higher. It was $13.3 billion. So
instead of a smaller problem than we thought 4 months ago, and
it was said that I was exaggerating the problem, in fact it was
a bigger problem than I claimed it to be.
And what I am doing, I am passing out to the Members,
because I think each and every Member ought to take a look at
what this is costing your State, and we are passing those out
right now. This was released on October the 2nd, what it cost
your State, 2001.
[The material referred to follows:]
Mr. Bachus. Now, these were taxes that were not available
for public schools. These were taxes that were not available
for law enforcement, were not available for police protection,
were not available for road projects, for bridges, were not
available to your local cities and counties and State.
Is it any wonder, Mr. Chairman, that several of our States
have gone into proration over the past few months? And if they
are in proration now, think of, with the economic downturn,
what we are going to be facing. Without some ability to States
to collect a simplified tax, you are going to see teachers laid
off, you are going to see governmental services cut.
What my amendment does is extends the current moratorium on
Internet access taxes, but it establishes an approval mechanism
for an interstate compact. Your State and mine will be able to
collect sales taxes that are due when we in Congress exercise
our exclusive constitutional right to approve an interstate
compact between the States to adopt a simplified tax system.
The States need direction and encouragement in order to
craft a uniform sales tax simplification system. The amendment
includes a one-stop, multi-State registration system for
sellers, uniform rules on what may be taxed, uniform tax forms
and audit procedures, reasonable compensation for tax
collection by sellers, and protections for consumer privacy.
I can go into specifics, but I think my 5 minutes is about
out. I sense----
Chairman Sensenbrenner. And the time of the gentleman has
just expired.
Does the gentleman from Georgia persist in his point of
order?
Mr. Barr. I do, based on germaneness, Mr. Chairman.
Mr. Delahunt. Mr. Chairman, on the point of order.
Chairman Sensenbrenner. The gentleman from Massachusetts,
on the point of order and not on the merits of the amendment.
Mr. Delahunt. Well, if that is the case, Mr. Chairman----
Mr. Bachus. I am prepared to argue germaneness if I had
some time.
Chairman Sensenbrenner. The Chair controls the time on the
point of order, but the Chair will also request that those who
wish to speak on the point of order, speak on the point of
order rather than on the bill and the amendment.
Mr. Bachus. I would like to speak on the point of order.
Chairman Sensenbrenner. The gentleman from Alabama is
recognized to speak on the point of order, which is
germaneness.
Mr. Bachus. Mr. Chairman, Mr. Barr has ruled that my
amendment is nongermane, and by ruling my amendment nongermane,
what we are doing is, this Committee is going to unnecessarily
delay the establishment of a uniform, streamlined sales tax
system----
Chairman Sensenbrenner. Would the gentleman please restrict
his comments to why this is germane or not germane, rather than
what the effect of a ruling one way or the other will be.
Mr. Bachus. Well, yes. It, the amendment is crafted where
if the compact--well, I think it is germane because Congress
can simply----
Mr. Delahunt. Would the gentleman yield?
Mr. Bachus [continuing]. By voting yes or no. That is one.
Chairman Sensenbrenner. Does the gentleman from
Massachusetts wish to speak to the point of order?
Mr. Delahunt. I do, Mr. Chairman. The amendment is germane
because it was the purpose of the moratorium in the first place
to provide sufficient time for Congress, the States, local
governments, the business community, and all the stakeholders
interested in this issue, to develop a simplified, efficient,
fair and technology-neutral system for taxation of sales in
goods and services, and the amendment does exactly that. It
assures that similar sales transactions are treated in a
similar fashion, without regard to the medium by which the
sales are transacted. It prohibits a two-tiered system of the
business community here in this country.
Many States have used that time----
Chairman Sensenbrenner. Would the gentleman kindly advise
the Chair on whether this amendment is germane or not, not what
the amendment does. I think that the gentleman from Alabama has
very well explained what the amendment does.
Mr. Delahunt. Well, Mr. Chairman, I think again, for the
reasons that I just articulated, and I am sure that were
presented by my friend from Alabama, it is germane.
Chairman Sensenbrenner. The Chair is prepared to rule.
The amendment offered by the gentleman from Alabama
pertains to State simplification of remote sales taxes, and for
other purposes. The underlying bill is drafted with
specificity, and pertains to Internet access taxes as defined
by section 1104(5) of the Internet Tax Freedom Act, and
multiple and discriminatory taxes on electronic commerce, which
is defined by section 1104(2)(a) of the ITFA.
Because the underlying proposition is fundamentally
separate and distinct from the amendment offered by the
gentleman from Alabama, the amendment fails the fundamental
purpose and subject matter tests of the germaneness rule found
in Clause 7 of rule XVI. Therefore, the point of order is
sustained.
Now, let the Chair state that the way this bill is drafted,
about the only germane amendments will relate to the dates that
are contained in the bill--longer, shorter, and the same--and
the Chair is placing folks on notice that amendments that
relate to other subjects and introduce extraneous material, if
a proper point of order is made, will probably be ruled out of
order as well.
Mr. Bachus. Mr. Chairman?
Chairman Sensenbrenner. The gentleman from----
Mr. Frank. Mr. Chairman, I move to strike the last word.
Chairman Sensenbrenner. The gentleman from Massachusetts is
recognized for 5 minutes.
Mr. Frank. Mr. Chairman, I was contemplating one other
amendment, but it might be out of order on the grounds that it
is not the appropriate procedure. I was going to move to strike
the number, and instead of H.R. 1552, I was going to move that
it be H.R. 22, in honor of the Catch 22 which many of us now
confront. [Laughter.]
On the one hand, we are told that we have to extend the
moratorium because there is not in place the system which would
allow for the effective collection of State sales taxes. This
is interesting. The gentleman from Georgia correctly pointed
out that it is a misconception that sales taxes are not now to
be collected in many circumstances by the Internet retailer.
But I would point out that the reason we have such a
misconception is that most of the retailers don't collect it
and don't remit it, and most of the people don't pay it. And so
the problem is that while the theoretical obligation is there,
the reality is that people are not paying those taxes in many
instances.
Now, what we, many of us, want to do is instead of having a
simple moratorium, we agree that there should not be sales
taxes or other kinds of service taxes that single out the
Internet, but we do believe that States ought to be able to get
together and have an effective collection mechanism. As long as
legislation is not allowed to come up which does that, we have
this dilemma.
Because when we say we don't want to simply extend the
moratorium, we are told, ``Well, you have to. Otherwise, the
wrong kind of taxation will be imposed.'' But when we then say,
``Okay, let's put legislation forward that will allow the
correct taxation methods, the bills are drafted so they are not
germane.''
So I agree, the Chairman is correct, this bill is drafted
so that no words will be germane. Only numbers will be germane:
one, six, a half. I understand that. But the effect of drafting
the bill in that restrictive a fashion and bringing up only
this bill, is to foreclose the opportunity many of us would
like to have had to have debated the substance, to have brought
forward the kind of thoughtful approach that the gentleman from
Alabama had brought forward.
And that is why, as I said, we have this kind of a Catch
22. And I believe when people said, ``Oh, we must extend this
moratorium,'' in fact it is only when we confront people with
the potential that this moratorium will end at some point, only
then will we get the cooperation we need so that an effective
and fair system of sales tax collection, administered by the
States and requested by the Governors, can be put in place.
Chairman Sensenbrenner. Are there further germane
amendments?
Mr. Bachus. Mr. Chairman, I have a germane amendment at the
desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
Mr. Barr. Mr. Chairman, I reserve a point of order.
Chairman Sensenbrenner. And the gentleman from Georgia
reserves a point of order.
Mr. Bachus. Thank you. Mr. Chairman, it is Amendment 106,
and I ask that it be passed out.
Chairman Sensenbrenner. The clerk will report amendment
106.
The Clerk. Amendment to H.R. 1552 offered by Mr. Bachus,
Mr. Watt, and Mr. Delahunt.
[The amendment follows:]
Mr. Bachus. Mr. Chairman, I move that the amendment be
considered as read.
Chairman Sensenbrenner. Without objection, the amendment is
considered as read, and the gentleman from Alabama is
recognized for 5 minutes, subject to the point of order
reserved.
Mr. Bachus. Mr. Chairman, because this Committee either
will not or cannot address--and I say will not or is not
willing to address the sales tax issue in conjunction with an
extension of the moratorium, and in fact the underlying
legislation, as Mr. Frank said, was drafted so that we could
not consider a comprehensive approach, I am offering an
amendment which simply shortens the moratorium to 8 months.
Under this amendment, the Internet Tax Freedom Act would be
extended until June 30, 2001.
This amendment is in line with a Senate bill which has
bipartisan support, which was introduced by Senators Dorgan,
Breaux, and Kay Bailey Hutchinson. They support this bill
because they believe the Senate will be able to establish the
guidelines for a uniform, streamlined sales tax system within
that timetable. Once those guidelines are complete, we can
couple them with the moratorium and create a truly level
playing field.
Mr. Chairman, I would say in connection with this, the
difference between my extension and the one proposed in this
bill is also that I discovered, by reading their legislation,
that the original 1998 bill placed a moratorium on both types
of taxes and grandfathered those 11 States that already have
existing taxes in place.
This new legislation as it has come before us today, not as
it came before us 4 months ago, places a 5-year moratorium on
multiple and discriminatory tax and also a permanent ban on
access taxes, but it ends the grandfathering of States with
access taxes. So a vote on this would immediate end existing
taxes in the following States: Connecticut, Hawaii, New
Hampshire, New Mexico, North Dakota, Ohio, South Dakota,
Tennessee, Texas, Washington, and Wisconsin.
So if we extend this moratorium as it is now drafted, if we
don't make an amendment to it, you will end some of the
collection of taxes in those 11 States, reducing State tax
revenue in those States. You are voting to do that. These were
taxes that the people of those States overwhelmingly voted in
their legislatures and are presently collecting them. Something
I don't think we need to do.
And Mr. Barr said one thing in arguing for his extension of
the moratorium. He said the States should do this on their own
and not rely on us. Well, these States have done that. They
have passed these taxes. They have imposed them on their own
people. And what he is asking you to do is, in 11 cases, to
repeal through an act of Congress those taxes, and in the other
39 States, make it impossible for those States to collect
existing sales taxes.
And what he is now calling on and saying is a matter for
the States is in direct contradiction to what our own Supreme
Court said in the Quill case when they said, on pages 18 and
19, it is an issue that is one that Congress may be better
qualified to resolve and one that it has the ultimate power to
resolve and must resolve. So when he says the States must
resolve it, the Supreme Court has said it is Congress which is
not only better qualified to resolve it but the one which has
the ultimate power to resolve it. And he as well as I, and I
hope most every Member of this Committee, knows that the States
cannot do this without congressional approval.
So with that, I offer my amendment to square it with the
Senate, because I think they have chosen a wise course.
Chairman Sensenbrenner. Does the gentleman from Georgia
persist in his point of order?
Mr. Delahunt. Mr. Chairman?
Mr. Barr. I do not, but I move to strike the last word, and
I will----
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes. The reservation is withdrawn.
Mr. Barr. Thank you. Mr. Chairman, this is, as usual at
some point in the consideration of every bill, we have an
amendment that is proposed to be a moderate modification of a
bill but actually guts a bill, and that is what this amendment
would do. It would extend the Internet access tax until June
30, 2002, which according to most calculations is only a number
of months away.
I would remind all of our colleagues that, contrary to the
implication of the proponent of this amendment, the bill before
us today mirrors the very extensive, very deliberative work
over many months of a 19-member Advisory Commission on
Electronic Commerce. And while we have different groups that
line up on different sides of this bill, the fact of the matter
is that our bill goes no further than the recommendations of
that advisory commission which was comprised of very learned
individuals from all over the country, from various
organizations, including as its chairman the Governor of the
Commonwealth of Virginia. So this bill hardly is an effort to
sneak under the radar screen or go around State Governors.
It is a very simple bill. It simply protects Internet
commerce against taxation. Not sales tax, but access and
multiple or discriminatory taxes. That is all it does. And to
say that the access tax moratorium should be extended only a
number of months does absolutely nothing to solve the problem.
So if anybody is truly interested in solving the problem,
whether it is by way of simplification--and I would remind all
Members that there is nothing in this bill or in the ruling on
germaneness that prevents any Member from introducing a piece
of legislation, as some already have, to address the
simplification issue, and have the will of this body and of the
full House work on that legislation. This legislation today and
the Chairman's ruling earlier does nothing to prohibit that.
This is a very limited piece of legislation. But to adopt
this amendment, which would free up the Internet for access
taxation within a few months from now, I don't think is the
direction that a majority of the people of this country and
their representatives really want to be going. And I yield
back.
Chairman Sensenbrenner. The Chair will announce that there
will be a closed briefing for Members on the House floor today
at 4 p.m. with the following Administration officials: The
Honorable Peter Rodman, Assistant Secretary of Defense for
International Security Affairs; Major General Pete Ozman, Joint
Chiefs Operation Directive; Colonel Jeff Burton, Joint Chiefs
Intelligence Directive. This is a classified briefing, I guess
pursuant to the presidential memo, and the Chair will announce
that we intend to stay in session here until we finish this
bill.
Mr. Delahunt. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from Massachusetts, Mr. Delahunt, seek recognition?
Mr. Delahunt. I move to strike the last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Delahunt. I also ask that the exhibits and the charts
that I have given to the clerk be distributed, if they haven't
already.
I would encourage my colleagues to join with the gentleman
from Alabama in support of this amendment, and I suspect that
many of us would support a longer moratorium if it were coupled
with simplification legislation along the lines of the
amendment previously offered by the gentleman, providing
guidelines to the States. But without such legislation, I
believe a long-term extension will be counterproductive.
When we enacted the moratorium, it was with the express
understanding that the purpose was to give Congress and the
States additional time to develop a simplified, efficient, fair
system for taxation of sales of goods and services, in light of
the Quill case. Now Congress has allowed the moratorium to run
out without providing meaningful guidance to the States, and we
are being asked to provide still more time. Time for whom? One
keeps hearing that it is the States that need more time. They
are moving expeditiously.
But it is not just the States, it is Congress itself. It is
time for Congress to exercise our authority to provide guidance
to the States as to how they should proceed in this very
important matter to the States. Our failure to do so is taking
a serious toll on businesses and essential public services
across the country. The magnitude of the problem is illustrated
by the charts to the left of the dais and the ones that we have
made copies of and have distributed them through the clerk.
The first chart shows that this year State and local
governments are projected to lose $13.3 billion in anticipated
sales tax revenues on Internet sales. Unless there is a system
that enables State and local governments to collect taxes on
their sales to in-State residents, these annual losses from on-
line sales will grow to $45.2 billion by the year 2006 and
$54.8 billion by 2011, with total losses coming to $440 billion
over the 10-year period.
Now, the second chart shows what this means to some
individual States. Tennessee, for example, will lose $362
million this year, and by 2011 its losses will grow to $1.5
billion. Florida, which relies on the sales tax for some 57
percent of its annual revenues, will lose $932 million this
year, with its losses quadrupling to $3.9 billion just 10 years
from now. I invite my colleagues to examine the charts to see
how your State will fare.
Now, what do these kind of losses mean in real terms? It
means that the States will face the difficult choice of raising
other taxes, probably the property tax, or curtailing basic
services such as police, fire, and education. Last week it was
reported that Florida is already facing a budget shortfall of
$3 billion, and Governor Bush has asked the legislature to
postpone a scheduled tax cut of $120 million.
That is why a 5-year extension without simplification is
opposed by every leading State and local government
organization and by 44 State Governors, Republicans and
Democrats alike, including Governor Levitt of Utah, Sundquist
of Tennessee, Thompson of Wisconsin, Ryan of Illinois, Engler
of Michigan, Taft of Ohio, and our new Chief of Homeland
Security, former Governor Ridge of Pennsylvania.
No one wants to see the moratorium run out. The Bachus
amendment would assure that this doesn't happen. But if we pass
a long-term extension of the moratorium now, we will be
removing the key incentive for Congress to address the real
problem here. And when put into the context of what is
happening with our economy that was already slowing down, the
question of the inability of the States to collect from out-of-
State sellers for purchases made by in-State residents will
compound our problem, and the States will face a real fiscal,
economic crisis.
I yield back my time.
Mr. Goodlatte. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from Virginia, Mr. Goodlatte, seek recognition?
Mr. Goodlatte. I move to strike the last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Goodlatte. Thank you, Mr. Chairman. Mr. Chairman, the
gentleman's amendment is designed for one purpose and one
purpose only, and that is to force the Committee to do what the
Chair has correctly already ruled to be nongermane. And 8
months from now when we are back here again, and offering
another extension of this moratorium, the gentleman's amendment
will again be nongermane.
The reason is that these are two separate issues, and no
matter how much the gentleman or the gentleman from
Massachusetts may say about it, there is a lot of work the
States need to do before it is appropriate for the Congress to
take up this issue, and that work will not be accomplished in 8
months.
The fact of the matter is that the States, about 45 of
which have sales taxes, are attempting to collect taxes on
individuals that are outside of the State's jurisdiction. That
creates enormous problems for anybody doing business in
multiple jurisdictions, particularly small businesses.
Chairman Sensenbrenner. Will the gentleman yield?
Mr. Goodlatte. I would be happy to yield to the Chairman.
Chairman Sensenbrenner. I think what is missing from this
debate is, practically every State that has a sales tax also
has a use tax, and the use tax falls on the consumer of the
goods who buys goods from out-of-State and brings them into
their own State of residence. Very few States aggressively
collect use taxes, even though they are on the books. It is
probably the most ignored tax on the books.
We would not be debating this issue here today if the
States collected the use taxes that they already have levied,
because that obligation does belong on the consumer. So I guess
my question as we are debating this is, why should we bail lax
State use tax enforcement out by getting rid of the moratorium
on Internet taxes? And I answered that question no, and that is
why I support the bill that was introduced by Mr. Cox of
California.
Mr. Goodlatte. I thank the Chair. I agree 100 percent with
the Chairman. That point is exactly correct.
Even taking it from the perspective, though, of the
gentleman from Alabama or the gentleman from Massachusetts,
there are 4,000 different taxing jurisdictions in this country.
We are not just talking about 45 State sales taxes because most
States allow individual jurisdictions within the State to
impose separate, additional, supplemental taxes.
In addition, every one of those States and every one of
those local jurisdictions have a different definition of what
is subject to that tax. In some States, a bag of potato chips
is not taxed because it is considered a meal. In other States
they don't make an exemption for the meal. In other States, the
tax is applied because it is considered to be a snack. And in
other States it is depending upon the size of the bag of potato
chips.
Now, if you have a grocery store in one State, you can
figure all of that out. But if you are attempting to do
business by catalog--and let's remember, this is not just about
the Internet, it involves all manner of catalog sales, and the
issue is not new, it is not caused by the Internet, it has been
in existence for dozens and dozens of years based upon catalog
sales--if you are a small business person or even a large
business attempting to do business on the Internet, to keep
track of 4,000 different jurisdictions and hundreds if not
thousands of different definitions of what is subject to a tax
requires simplification.
Now, the States have spent a lot of time talking about
this, but the States have not adopted a uniform resolution, a
uniform State law saying, ``This is how we will collect this
tax, this is the definition of what will be subject to the tax,
and this is the uniform law, the percentage rate for all taxes
collected, no matter where they are in the country.''
Mr. Watt. Would the gentleman yield?
Mr. Goodlatte. So to say that we are going to do this for 8
months and then expect that that will have been accomplished,
it is not going to happen.
Secondly, every single State is looking to the Congress to
pass the political buck here, because this is in effect a tax
increase. And I know those who favor it are saying this is
simply tax fairness because it applies in one area and not
another, but there are a lot of other considerations that are
not true for transactions that take place in a store relative
to transactions that take place on-line or by catalog, like
shipping and handling charges and so on.
Finally, when you talk about that disparity, what you are
overlooking is the very basic, simple point that if you are
going to impose these taxes on the Internet, you are going to
harm the growth of an economy, an industry, that is already
struggling. Why we would want to do that, I don't know. But we
are going to get the blame because when somebody goes on-line
to Amazon.com or some other location on the Internet and
suddenly they have to pay a sales tax on a book that they
bought, where the last time they bought a book, they didn't
have to, the fact of the matter is, the difference will be that
the Amazon----
Chairman Sensenbrenner. The gentleman's time has expired.
Mr. Goodlatte. I would ask the Chairman for an additional
30 seconds.
Chairman Sensenbrenner. Without objection, the gentleman is
recognized for an additional 30 seconds.
Mr. Goodlatte. The difference will be that Amazon.com and
anybody else will say, ``Well, the Congress made us do it.''
Now, if the Congress is going to eventually change these nexus
rules that are imposed not by any statute of the Congress but
by the Supreme Court, the States ought to first go do all of
those things and then come and ask us to do it, and it is not
going to happen in 8 months. So I would strongly oppose this
amendment and urge the adoption of the bill.
Chairman Sensenbrenner. For what purpose does the gentleman
from North Carolina, who has been very patient, seek
recognition?
Mr. Watt. Thank you, Mr. Chairman.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Watt. I actually agree with Mr. Goodlatte that this
can't be done, the simplification, the coming up with a system
can't be done in 8 months. But I am going to vote for this
amendment, and the reason I am going to vote for it is because
every effort that we have made in the Subcommittee and now in
the full Committee to put in this bill incentives for the
States to simplify and come up with a system for doing this
that can then be submitted to Congress for us to at on, not
passing the buck, not imposing on us an obligation to act on
it, but with more than half of the States and local governments
having bought into the system, every effort that we have made
to put that in front of this body and the Subcommittee has been
beaten back by germaneness, by ``We can't do this, we can't do
that.'' And the only way we are ever going to get all of this
dealt with is to keep the pressure on everybody to deal with
it.
Now, I absolutely agree with Mr. Goodlatte that the States
are not going to be able to complete this process in an 8-month
time period, but we have talked about 2 years, we have talked
about 5 years, coupled with some language that would keep the
pressure on States to work on these issues. And when you start
talking about trying to put language in the bill that would
keep the pressure on the States to streamline the system and
work on these issues, then all of a sudden you run into a
roadblock.
So don't come to me, telling me that the problem is lack of
consistency and lack of simplification and lack of having a
system out of one side of your mouth, and then telling me out
of the other side of your mouth, ``We are not going to put
anything in this bill that incentivizes coming up with that
system.'' I have made every concession that I could try to make
to every side in this, to just get some language that
encourages the States to do it, and people are, they are off on
this 5-year tangent, 10-year tangent, 2-year tangent, 8-year
tangent.
Then we have this rhetoric about, ``Well, we can't do this
because the States haven't come up with a system.'' Well, give
them a chance. And if we give them a chance and give them a
reasonable time frame to do it, then that is what this--both of
those things should be in this bill. And that is exactly what I
have been saying from day one.
So we can engage in all this rhetorical stuff, we can
confront each other on whether the magic number is 8 months or
1 year or 2 years or 5 years, but the reason we keep having
this debate is because you won't allow the real issue to be
inserted in the bill that encourages and drives the States to
do this.
Now, I think the reasonable thing to do, and I am going to
conclude with this, is to put a 2-year window on this thing and
put some language in this bill that requires the States, at
least incentivizes the States to use that 2 years to get to a
uniform, well-thought-out, simplified system so that local
government's don't get cheated, State governments don't get
cheated, and the Internet does not get dealt with unfairly.
Mr. Delahunt. Will the gentleman yield?
Mr. Watt. And until we can come together in this Committee
around that notion----
Chairman Sensenbrenner. The gentleman's time has expired.
Mr. Coble. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from North Carolina, Mr. Coble, seek recognition.
Mr. Coble. Move to strike the last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Coble. Mr. Chairman, I too, not unlike my friend from
North Carolina, agree with the gentleman from Virginia when he
says that the 8-month time frame is probably too restrictive. I
disagree, however, with my friend from Virginia when he
declares that this proposal amounts to a tax increase. We are
in disagreement there.
Now, Mr. Bachus, when we involve ourselves with
hypothetical questions, sometimes hypothetical questions can be
troublesome. Nonetheless, I want to put a hypothetical question
to you if you would be willing to answer it.
In the event, I say to the gentleman from Alabama, that
your present proposal of 8 months fails to survive, do you
anticipate that there may be a forthcoming amendment that would
strike 3 years and insert therefor a period of 2 years?
Mr. Bachus. I intend to offer such an amendment, but I am
hopeful that my amendment for 8 months will prevail.
Mr. Coble. Reclaiming my time, I realize that, but I wanted
to just sort of get the--I didn't mean for you to tip your mitt
or the cards in your hand, but I wanted to know where you are
thinking now. And I think you asked of me to yield some time to
you, Mr. Bachus, which I will do.
Mr. Bachus. Yes, thank you. You know, just by listening to
the various speakers that have opposed this amendment, you have
seen some differences of opinion. For instance, Mr. Chairman,
you state that the use tax is not a realistic way to collect
taxes.
Chairman Sensenbrenner. No, that is not what I said.
That the States ought to collect their use taxes rather
than having us do their job for them.
Mr. Bachus. That they should, but then Mr. Goodlatte in his
statement basically acknowledged that people don't pay it now,
nor do they want to pay it, and if they have to start paying
it, they are going to be mad at the Congress for making them
pay it. Because he said when they buy something from AOL, which
happens to be a Virginia company and they are buying them by
the hundreds of millions, that when they have to pay the use
tax, they are going to be mad. That is an acknowledgement by
him that they are not paying them.
And I would agree that it is fairly unenforceable because
in fact the States don't know who is purchasing what over the
Internet. They don't even have the information of who owes the
tax. They can't get that information. It requires someone who
the government has no knowledge of what they owe in taxes or
what they have earned or what they purchased, to voluntarily
submit that tax.
Now, can you imagine all of a sudden if the government had
no way of keeping up with anyone's income, but they just asked
for the American people to voluntarily send in income taxes? I
mean, that is basically what we are saying. How many, what do
you think would be the chances, if the government had no way of
knowing what you made, no way of finding out what you made, but
voluntarily asked you to send in 20 percent of your income? Can
you imagine what the compliance would be?
But there are Members of this Committee that are actually
saying that is a problem for the States, the fact that they
can't do that. They are saying the States ought to be able to
do something about it, knowing very well if the Federal taxes
were set up that way, they would never be collected either.
One thing that Mr. Barr did not say in response, he didn't
dispute what I said, that basically his proposal is going to
end existing taxes in 11 States. He didn't deny that. I named
those States, and those States, every one of those States, when
we end those taxes, that is going to be a loss of revenue from
those taxes, and every one of those State legislatures is going
to face a difficult choice.
They are going to, each of those 11 States will have to
decide to do one of two things. They will either have to raise
sales, income, or property tax rates to compensate for that
loss, or they will have to cut services for education or public
safety, or they will have to do a combination of both. Those 11
States will have to vote to raise taxes and cut services. And
basically, again, he says that is something he is prepared to
let them do. I am not prepared to do that.
The other thing I would say is that the gentleman from
Virginia, although he spoke in opposition to my amendment, he
did not dispute what I said, and that is that when I was here 4
months ago and said the States could lose up to $4 billion,
that he said he felt that was an exaggeration, and in fact it
was $13 billion.
Chairman Sensenbrenner. The time of the gentleman has
expired. May the Chair suggest that we vote on the 8-month
amendment of Mr. Bachus, and if that gets voted down, the Chair
will recognize Mr. Bachus for his 2-year amendment.
The question is on the amendment offered by the gentleman
from Alabama, Mr. Bachus. Those in favor will signify by saying
aye.
Opposed, no.
The noes appear to have it, and----
Mr. Bachus. Mr. Chairman, I ask for a roll call.
Chairman Sensenbrenner. A roll call is requested and will
be ordered. Those in favor of the Bachus amendment will, as
your names are called, answer aye, those opposed, no, and the
clerk will call the roll.
The Clerk. Mr. Hyde?
Mr. Hyde. No.
The Clerk. Mr. Hyde, no.
Mr. Gekas?
[No response.]
The Clerk. Mr. Coble?
Mr. Coble. No.
The Clerk. Mr. Coble, no.
Mr. Smith?
Mr. Smith. No.
The Clerk. Mr. Smith, no.
Mr. Gallegly?
Mr. Gallegly. No.
The Clerk. Mr. Gallegly, no.
Mr. Goodlatte?
Mr. Goodlatte. No.
The Clerk. Mr. Goodlatte, no.
Mr. Bryant?
Mr. Bryant. Aye.
The Clerk. Mr. Bryant, aye.
Mr. Chabot?
Mr. Chabot. No.
The Clerk. Mr. Chabot, no.
Mr. Barr?
Mr. Barr. No.
The Clerk. Mr. Barr, no.
Mr. Jenkins?
Mr. Jenkins. Aye.
The Clerk. Mr. Jenkins, aye.
Mr. Cannon?
Mr. Cannon. No.
The Clerk. Mr. Cannon, no.
Mr. Graham?
[No response.]
The Clerk. Mr. Bachus?
Mr. Bachus. Aye.
The Clerk. Mr. Bachus, aye.
Mr. Hostettler?
Mr. Hostettler. No.
The Clerk. Mr. Hostettler, no.
Mr. Green?
Mr. Green. No.
The Clerk. Mr. Green, no.
Mr. Keller?
Mr. Keller. No.
The Clerk. Mr. Keller, no.
Mr. Issa?
[No response.]
The Clerk. Ms. Hart?
Ms. Hart. No.
The Clerk. Ms. Hart, no.
Mr. Flake?
Mr. Flake. No.
The Clerk. Mr. Flake, no.
Mr. Pence?
Mr. Pence. No.
The Clerk. Mr. Pence, no.
Mr. Conyers?
[No response.]
The Clerk. Mr. Frank?
Mr. Frank. Aye.
The Clerk. Mr. Frank, aye.
Mr. Berman?
Mr. Berman. No.
The Clerk. Mr. Berman, no.
Mr. Boucher?
[No response.]
The Clerk. Mr. Nadler?
Mr. Nadler. Aye.
The Clerk. Mr. Nadler, aye.
Mr. Scott?
[No response.]
The Clerk. Mr. Watt?
Mr. Watt. Aye.
The Clerk. Mr. Watt, aye.
Ms. Lofgren?
Ms. Lofgren. No.
The Clerk. Ms. Lofgren, no.
Ms. Jackson Lee?
Ms. Jackson Lee. Aye.
The Clerk. Ms. Jackson Lee, aye.
Ms. Waters?
Ms. Waters. Aye.
The Clerk. Ms. Waters, aye.
Mr. Meehan?
Mr. Meehan. No.
The Clerk. Mr. Meehan, no.
Mr. Delahunt?
Mr. Delahunt. Aye.
The Clerk. Mr. Delahunt, aye.
Mr. Wexler?
[No response.]
The Clerk. Ms. Baldwin?
Ms. Baldwin. Aye.
The Clerk. Ms. Baldwin, aye.
Mr. Weiner?
Mr. Weiner. Aye.
The Clerk. Mr. Weiner, aye.
Mr. Schiff?
Mr. Schiff. Aye.
The Clerk. Mr. Schiff, aye.
Mr. Chairman?
Chairman Sensenbrenner. No.
The Clerk. Mr. Chairman, no.
Chairman Sensenbrenner. Are there additional Members who
wish to cast or change their votes? The gentleman from
Pennsylvania.
Mr. Gekas. No.
The Clerk. Mr. Gekas, no.
Chairman Sensenbrenner. Anybody else wish to case or change
their vote?
If not, the clerk will report.
The Clerk. Mr. Chairman, there are 12 ayes and 19 nays.
Chairman Sensenbrenner. And the amendment is not agreed to.
Mr. Bachus. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from Alabama seek recognition?
Mr. Bachus. Mr. Chairman, I have an amendment, Amendment
No. 107.
Chairman Sensenbrenner. The Clerk will report the
amendment.
The Clerk. Amendment to H.R. 1552 offered by Mr. Bachus,
Mr. Watt, and Mr. Delahunt.
[The amendment follows:]
Chairman Sensenbrenner. Without objection, the amendment is
considered as read, and the gentleman from Alabama will be
recognized for a quick 5 minutes.
Mr. Bachus. Thank you, Mr. Chairman. First I would like to
point out, and I should have pointed out this in the argument
on the last one although it may not have changed any votes, but
Mr. Barr spoke of the findings of the bipartisan Committee, and
what he was referring to is the Internet Advisory Commission.
But I would correct Mr. Barr, and I think he would agree with
me, in fact they made no findings. They were not able to
statutorily make any findings because they could not get the
agreed number of people.
Mr. Barr. Does the gentleman yield?
Mr. Bachus. Well, no. I will just simply say that, for the
record, I don't know what you are going to say, but I will tell
you for the record that it----
Mr. Barr. I would correct the gentleman.
Mr. Bachus [continuing]. Required a two-thirds vote, and
the findings that you said, they did not make findings because
they could not get the requisite number to do that, so those
were not findings. They were a majority report. They were a
report of 10 of the 19.
What this amendment does is, it extends the Internet Tax
Freedom Act by a little over 2 years to November the 1st, 2003.
I am offering this amendment because 5 years is simply too long
to let the sales tax problem linger. I am going to again refer
you to the year 2006, and show you what it is going to cost
your State if we continue to not address this problem which the
Supreme Court asked us to address several years ago.
By passing this amendment as it now stands, we will be
basically sending a message to the States, ``Don't bother. We
don't care about your plight.'' Mr. Chairman, the States have
worked too hard, they have made too much progress for us to
send them home now. Already, 20 States have passed enabling
legislation allowing them to enter into compact negotiations.
They have made tremendous progress. Let's reward, not deter,
that progress.
When we passed the Internet Tax Freedom Act of 1998, we
were only willing to institute a 3-year moratorium. We said
that was long enough. Why would we now move to extend that 5
years more for a total of 8 years, when the States and the
Senate are going close to a resolution of the matter? Make no
mistake about it a 5-year moratorium would merely push off
resolution of this issue. I hope we will, at the very least,
honor the democracy of those States today, the governments of
those States which legally passed those taxes, and pass this 2-
year extension.
With that, Mr. Chairman, I yield back this short time.
Mr. Frank. Mr. Chairman?
Ms. Lofgren. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from Massachusetts, Mr. Frank, seek recognition?
Mr. Frank. Mr. Chairman, I move to strike the requisite
number of words----
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Frank [continuing]. And I strongly support the
amendment of the gentleman from Alabama. We should be clear
here. We all are internally. Let's be as clear externally.
Here is the issue: Do we favor cooperating with the States
and allowing them effectively to collect existing sales taxes
on Internet purchases, or do we want to maintain the status quo
in which the collection of those legally owed taxes is a
practical impossibility?
The gentleman from Virginia was quite right. If we were in
fact to collaborate in a system which allows taxes that are
already due and legally levied to be in fact collected, some
people would be angry because they would decide that we had
imposed on them a new tax. No clearer argument could be given
as to the noncollection.
The gentleman from Wisconsin correctly pointed out that the
States do have use taxes, and of course in this situation where
we are talking not about large pieces of machinery, not about
very unique, very obvious purchases, but about millions of
retail purchases, we hope. I mean, one of the things I suppose
those of us who have been against those indefinite moratorium
ought to be glad about is that we didn't pass it 2 years ago,
because we would have been blamed for the downturn in Internet
commerce.
But, given the volume of the commerce, the number and type
of items, a use tax would clearly be wholly impractical. An
effort to enforce a use tax on widespread retail purchases of
this sort would probably be oppressive, and would certainly eat
up in collection costs much of what you would get. It would
become a very inefficient tax.
That is why the most efficient way to collect these kinds
of transaction taxes is at point of sale.
Now we are told that, oh, the poor Internet companies, it
is so complicated, it is so complicated to try and deal with
these different jurisdictions. Now, we agree that there should
be some simplification, but the notion that the avatars of the
new economy, the people who have brought to use technological
advance previously unthought of in human history, can't keep
track of these sales taxes, belies their own arguments.
First they are the technological geniuses of the year, are
transforming our lives by the magical qualities of the
Internet. Next thing you know, they are the poor corner grocer
trying to add these things up with a black pencil on a brown
paper bag. ``Oh, gee, that's Mississippi. That's, what is it,
California. Where is California? Is that a State? I'm not
sure.'' I mean, how did the brightest people in the world with
the best equipment in the world suddenly become so retarded
that they can't collect these taxes? Of course they could.
It's not automatic and easy. That's why we--what we are
saying is we want to cooperate with the people in the State
governments. And what we are saying is--and let's also be
clear, the strategy on the other side is very simple. This is
not a moratorium. It's a more and more and more-atorium,
because it will never die. This is eternal life, this
moratorium. It will be 5 years. Then it will be 8 years. Then
it will be 13 years, throw in a leap year. It'll never end. And
the Internet people are very happy because, as the gentleman
from Virginia honestly acknowledged, nobody's collecting those
taxes now and nobody practically can.
States have got very important problems. We now have
situations right now when the States, through no fault of their
own, find theirselves with increased security needs and
decreased revenues. If in fact the Internet proceeds the way
people hope it will, the competition between retail at Internet
and retail in situ in the States will increase and the revenue
drain will increase. No one is saying it is easy, but to say
that the technical problem of collecting sales taxes if
everybody cooperates is somehow beyond the capacity of the
greatest work of the human mind, this Internet, simply isn't
plausible.
So I just would close, Mr. Chairman, by saying it's very
clear what we're talking about. On the one hand are those who
think that this country is best served and the economy is best
served--I think we ought to be explicit--they think it's best
if in fact Internet retail sales are tax free, because that's
what they are now in all practical purpose, and that's what
people hope they should be, and they say, ``Hey, you're better
off that way, and why should the Internet people pay sales tax?
They don't use the roads. They don't have fires. So they
shouldn't really have to contribute to the States.''
On the other hand are those of us who say that the States
do very important work and that we ought to be cooperative with
them in devising a system that will allow taxes to be collected
on retail sales over the Internet. The gentleman from Alabama's
amendment is now the best chance we have to make that matter
point, so I hope it's agreed to.
Ms. Lofgren. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the gentleman
from--gentlewoman from California, Ms. Lofgren, seek
recognition?
Ms. Lofgren. To strike the last word.
Chairman Sensenbrenner. The gentlewoman is recognized for 5
minutes.
Ms. Lofgren. I oppose the amendment and have a couple of
observations that I hope will be useful. First, it is important
for us to eliminate tax on access to the Internet as well as
taxes that burden Internet sales more than brick and mortar
sales, discriminatory taxes, and that's what the underlying
bill does. Every society that has taxed Internet access has
helped to damp down the use of the Internet to the detriment of
economic growth and that is not a place where we should be.
I would not also that whatever you believe about various
projections of financial loss, they are not related to a couple
of grandfathered jurisdictions who had taxes in place on access
prior to the imposition of the moratorium. So I think it is
important that we clear the decks, prevent access taxes and
discriminatory taxes.
I've heard a lot about the need for simplification here
today and to give incentives to the States and the like, and
I'm not sure I agree with some of the comments that have been
made because I think the States are highly incentivized to
agree with each other or to simplify if that's what this
Committee wants, because the real problem for sales tax is
nexus, and the only entity that can solve the nexus problem for
sales tax is the Federal Government. Now, we could do that
without simplifying the sales tax, and as I think Mr. Frank
said, clearly, there are software solutions that would allow
for a multiplicity of tax rates, and that's not a hard thing to
do, or we could try and simplify, but simplification has proven
to be a goal that has not been achieved for a number of
decades. This is not that different than catalog sales, which
we've never managed to completely solve, and so whether or not
we ask the States to come to agreement on whether food and
medicine is taxed, whether services are taxes, I mean, people
are in love with the way they devise their systems. How we deal
with the multiplicity of local jurisdictions, for example, my
own county that has voter approved sales taxes that have been
bonded against for the next three decades, these are difficult
questions. I do know that we don't have to postpone the
elimination of the imposition of access tax while those more
difficult problems get resolved.
So I would hope that we would reject this, note that
whether we look for 5 years or 3 years, whatever solution is
found, it can be brought back before this Congress and we can
act. And I come from Silicon Valley. I hear from high-tech
companies all the time, and very few of them suggest that sales
on the Internet ought to be permanently tax free. In fact, most
of the high-tech companies that I know in California are very
concerned that States be adequately funded. They're very
concerned that our educational systems are not up to snuff,
that there needs to be more resources in education. So I
don't--I think it's incorrect to believe that the high-tech
sector is hostile on some kind of permanent basis about States
getting sales tax.
I think the comment made that the use tax is basically
uncollectible is correct, and so the answer really is, how are
we going to help States establish nexus so that the sales tax
can be the vehicle for collecting whether or not we're going to
force uniformity as a condition for our establishing that
nexus, which is not legally or practically a requirement, but I
know that we cannot probably get all of that done in the next 2
years, and that we should instead at least take the sensible
measure to preclude access taxes permanently and the
discriminatory taxes.
And I see Mr. Berman would like me to yield whatever few
minutes I have, and I'd happily yield to Mr. Berman.
Chairman Sensenbrenner. 5 second, 45 seconds.
Mr. Berman. I think I'll take my own time.
Ms. Lofgren. All right And I yield back. Thank you, Mr.
Chairman.
Chairman Sensenbrenner. For what purpose does the gentleman
from Georgia, Mr. Barr, seek recognition?
Mr. Barr. To strike the last word.
Chairman Sensenbrenner. The gentleman's recognized for 5
minutes.
Mr. Barr. Mr. Chairman, I would urge all Members who are
opposed to taxation to oppose this amendment. This is a pro-tax
amendment. Only Washington, I suppose, Mr. Chairman, could
somebody with a straight face look at a bill that extends a
moratorium on taxation and say, ``Aha, this is a tax bill that
will increase taxes.'' But we're sort of used to that in
Washington. Those arguments are made. This is a bill to simply,
by statute, continue work that this Congress has already begun,
to continue work that the Advisory Commission on Electronic
Commerce has continued, and as the gentleman from Alabama
correctly made my point for me, a majority of members of that
commission have voted in favor of precisely what this
legislation does, a majority of those members.
For those who argue, somehow I think the argument was made
in here that if we pass this bill today it will force States to
increase taxes. This is absolute nonsense, Mr. Chairman, and
the history since 1998, when the initial moratorium was put
into effect, of the States who have considered the matter of
Internet taxation, they too are moving in the direction that
this legislation seeks us to move, and that is to lower and not
continue taxes on the Internet. Texas, Iowa, Washington, North
Dakota, South Carolina, Connecticut, Colorado, Montana,
Arizona, the District of Columbia, all 9 States since 1998,
when the moratorium went into effect, have chosen to back away
from Internet taxes. And there's a simple reason for that, they
don't want to hamper the growth of the Internet and Internet
commerce.
Now, if a majority of Members of this Congress want to do
that, fine, but that is a vote, that is a pro-tax increase
vote. Make no mistake about it. If you vote against this
amendment and vote for the underlying legislation, that is a
vote against additional taxation. It's that simple. And to,
again, raise the specious argument that there is something in
this legislation or any other legislation that prevents the
States tomorrow, if they want to, from getting together,
getting their acts together, and imposing taxes as they see fit
and implementing mechanisms so that they can correctly identify
and assess and collect those taxes. There is nothing in this
legislation that would prevent that, nor is there anything in
this legislation that would prevent the States from proposing
to the Congress a specific piece of legislation that would
provide a compact. But there is a certain amount of important
requisite work that the States themselves have to do, and that
is where we would like to see this go. Let the States get their
act together, if they so choose to do so. Let us not force
something on them. We are simply saying that for the time being
the moratorium on discriminatory and access taxes ought to
continue without this artificially short deadline that the
gentleman from Alabama is pursuing.
So I would urge all Members to go with the original
legislation here and simply provide a reasonable period of time
within which this matter, if it is going to be considered by
the States, can be done, but there is nothing in this
legislation that prevents them from doing that tomorrow if they
so choose. I yield back.
Chairman Sensenbrenner. For what purpose does the gentleman
from New York, Mr. Nadler, seek recognition?
Mr. Nadler. Strike the requisite number of words.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Nadler. Mr. Chairman, I think that we have to be blunt
and direct when we're considering this. The basic underlying
question--there are two separate questions here, which
unfortunately get intermixed. One: should there be
discriminatory taxes with respect to the Internet and direct
access taxes? And I think most of us agree there should not be.
Two, separate question: should the States be able to levy use
taxes not only on brick and mortar transactions but also on
Internet transactions? And I think many of us--I hope it's
most--agree that the answer should be yes, because if the
answer is no then two things happen. One, the Internet would
not be on a level playing field. It would have a tax advantage
over bricks and mortar competition, and I am all for the
Internet expanding, indeed commerce expanding, but it should
expand with exactly the same parameters because of an economic
advantage, not a tax advantage over brick and mortar
competitors, and if it can't expand, then it shouldn't. But of
course, we all believe that it will, but in so doing, if it
expands, and in so doing takes increasing shares of commerce
out of the brick and mortar realm where those transactions are
taxed and into the e-commerce realm, where they are not taxed,
then it progressively destroys the tax base of State and local
governments.
Now, some people may say that they're opposed to taxation.
Well, if you're opposed to all taxation, anything that avoids
taxation I suppose is good, but those of who think, especially
with respect to State and local governments, that we want to
protect our tax bases, those of us who think that the State and
local governments should do as much as possible, the Federal
Government perhaps less. Those people on the other side of the
aisle should also have a concern with that because their
argument is that that's--the government is closer to the
people, is better, and therefore we shouldn't be destroying the
ability of government closer to the people of State and local
government to act at all, and leading to Federal pressure for
Federal takeover later, should not approve that.
Now, we are told that it's up to the States to do this.
Well, the fact is the States can't do this because the Supreme
Court, in its various nexus decisions, made it clear that the
States, as a practical matter, cannot enforce their use taxes.
And we know they haven't. So there are two solutions. One:
Congress could change the nexus provision of the law and I
would support that happening. And as the gentlelady from
California said, there's no reason why, if we were to change
the nexus provision of the law, the Internet companies couldn't
use some very interesting software to be able to meet those
provisions, even if it was 6,400 separate taxing provisions, or
we could allow the States to have a simplification of their tax
systems so that you don't use this fancy software, but with a
simplified taxing system, we then change the nexus provisions
of the law so that they can, using this simplified tax system,
impose their use taxes.
Now, those two things have nothing to do specifically with
the bill before us except for one practical political thing. We
are not going to change the nexus provision of the law, nor are
we going to change the nexus provisions of the law in
connection with a simplification scheme if the e-commerce
companies have gotten a permanent moratorium as they want.
We're only going to do that if we have the political leverage
to do it, and we're only going to have the political leverage
to do it if you can't pass a permanent moratorium till you've
taken care of the tax basis of the States.
And that's what this whole debate is all about, and I don't
think we should beat around the bush. We must not pass too long
a moratorium lest we eliminate the political leverage that will
enable us either to change the nexus laws, or to recognize,
change the nexus laws in combination with a tax simplification
system, in either way to enable State and local governments to
effectively----
Ms. Lofgren. Would the gentleman yield?
Mr. Nadler. Just one moment--no. To effectively collect
their use taxes both on an equal basis from e-commerce and from
brick and mortar commerce. And if we believe in the economy
working itself out and the economic decisions being made on
economic bases and not on tax bases, we should follow that
policy. If we believe in maintaining the State and local tax
bases so that education and everything else that States do
should be able to be done, we should follow that policy. Only
if we have an ideological aversion, if we think no level of
government should tax people, or if we think all these folks
should be transferred to the Federal Government, should we have
a lengthy extension of this moratorium, which is justified, but
not without taking care of the--of the problems that will
otherwise progressively destroy much of the tax bases of the
States.
Chairman Sensenbrenner. The gentleman's time has expired.
For what purposes does the gentleman from Texas seek
recognition?
Mr. Smith. Mr. Chairman, I move to strike the last word.
Chairman Sensenbrenner. The gentleman's recognized for 5
minutes.
Mr. Smith. Mr. Chairman, I oppose this amendment. Someone
once said that the three greatest discoveries of humankind are
fire, the wheel and the integrated circuit. Each of these
discoveries ushered in a new era of human development and
advancement, and although the integrated circuit is only 50
years old, it has changed the world. The integrated circuit and
its offspring, the Internet, have played dominant roles in
transforming our lives for the better. Even though America is
seeing a dramatic increase in the number of homes wired to the
Internet, last month the Commerce Department released a report
showing that e-commerce actually decreased in the last quarter
of this year, the second quarter of this year. If we shorten
the moratorium the e-commerce industry may be irreparably
harmed.
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, would discourage
companies and consumers from using the Internet to conduct
business, and would create regional and international barriers
to global trade.
Mr. Chairman, on the other hand we need to recognize the
legitimate concerns of States that want to have the option of
taxing sales. The solution, however, is not to reduce the
length of the moratorium, but to look for other ways to address
these concerns. Failure to renew an extended moratorium will
tell the high-tech sector of our economy that is open season
for Internet taxes and send a message to State and local tax
authorities that new, multiple and discriminatory Internet
taxes may be imposed. It's vital that Congress act quickly to
ensure Americans that government will not place burdens on the
new fragile high-tech economy.
For that reason, Mr. Chairman, we ought to oppose the
amendment, and I yield back the balance of--and I'll yield the
remaining balance of my time to the gentleman from Virginia,
Mr. Goodlatte.
Mr. Goodlatte. I thank the gentleman for yielding, and I
strongly second the gentleman's remarks. In response to the
comments of the gentleman from Massachusetts earlier regarding
how long this moratorium is going to go on, I hope that
ultimately it goes on forever, because look at what we're
talking about. We're talking about access charges. These are
some of the most regressive types of taxes you can have, a 2 or
$3 a month charge that someone might impose on your Internet
service fees. Well, that keeps lower income people from getting
access to the Internet more than anybody else. And then
discriminatory taxes, taxes that a State or local government
might attempt to apply only to the Internet and not to other
forms of transaction. These are things that I think virtually
everybody in this room agrees should be extended. So let's keep
a focus on what the purpose of this moratorium is. It is to
keep taxes off of the Internet that none of us want to see
imposed there.
Now, the gentleman from New York said, well, the Congress
has to act first on the imposition of sales taxes. I think it's
quite the opposite. The States have got the political burden to
come up with a simplified system. Nobody disagrees with that
either. They have got to come up with a system. Now, do they
need to come to Congress at some point in time and ask for a
change in the nexus rules? Yes, the gentleman is correct about
that. But we don't have to buy a pig in a poke. We don't have
to go ahead and say, yes, we'll change the nexus rules, without
seeing what it is that we're going to be approving.
And the last thing I would say is in response to the
gentleman from Alabama, who apparently was referring to me with
regard to the study that he has produced, yes, I challenge
these figures considerably. I think this study is way off. $260
billion. $13 billion collected is a huge sum of money, and I
think that is--yes, I think that's way off target. This study
assumes, for example, that there are very few business use
taxes collected, and as the Chairman correctly noted earlier,
the States have the opportunity to collect use taxes. When it
comes to businesses I can assure you they do collect those use
taxes, and so I think these figures are vastly overinflated.
Ms. Lofgren. Would the gentleman yield? Would the gentleman
yield?
Mr. Goodlatte. I don't have the time, but let me just close
by saying that $13 billion in sales tax lost assumes about $250
billion a year in sales on the Internet. That works out to
nearly $4,000 for every family of four people in the country.
There's absolutely no way that the average family in this
country is spending $4,000 a year on transactions on the
Internet, and I strongly dispute the merits of this study,
which I believe is bought and paid for by those who support the
gentleman's amendment?
Ms. Lofgren. Would the gentleman yield?
Chairman Sensenbrenner. For what purpose does the gentleman
from California, Mr. Berman, seek recognition?
Mr. Berman. Mr. Chairman, I move to strike the last word.
Chairman Sensenbrenner. The gentleman's recognized for 5
minutes.
Mr. Berman. I'd like to ask the gentleman from Virginia,
his last comments had the opposite effect on me than they
usually have. Usually his comments make me want to tend to
support his position, but here, listening to his comments, I
start going the other way, and so I want to understand. The
base bill and the amendment, as I understand it, protect,
legislate and protect, in the case of the amendment, a
permanent ban on access taxes.
Mr. Goodlatte. No, it's a 5-year.
Mr. Berman. The base bill is a moratorium on access taxes
for 5 years.
Mr. Goodlatte. I believe that's correct.
Mr. Berman. It extends the moratorium for 5 years, not
permanently, all right.
Mr. Goodlatte. That's correct.
Mr. Berman. The amendment takes the moratorium on access
taxes and only extends it for 2 years.
Mr. Goodlatte. That's correct.
Mr. Berman. Here's the bill I would like to support, and
I'd be interested in either you or Ms. Lofgren's position since
you are seeking to leave some things which have real meaning to
me.
A bill which permanently bans the access tax, perhaps
grandfathers the 7 remaining States in that still have it, but
otherwise permanently bans it, extends the moratorium perhaps
for 5 years. But if the States come back with a proposal that
an adequate number of them that we could decide constitute a--
you know, essentially a State position on what should be taxed,
what the nexus is, how that will be worked out, that the
moratorium then moves up to 1 year after the time of that
submission, and that it encourages the States to get with it,
but doesn't create what seems to me--the discrimination seems
to me to be right now that because of the nexus problems,
because of problems of what's covered, and because no one's
going to collect a use tax, that discrimination is in favor of
the----
Chairman Sensenbrenner. Will the gentleman yield?
Mr. Berman. Yes, I'd be happy to yield.
Chairman Sensenbrenner. I favor the bill as it has been
reported from the Subcommittee. But that doesn't mean that
these dates are in stone. One of the problems is that the
States have known when the deadline was of October 21st, 2001,
but they made no movement toward simplification, otherwise we
would have been dealing with simplification here. Now if the
States don't like this bill, if it should become law, you know,
certainly they can come up with a solution on simplification
and present it to us, and we could amend the dates that were in
the law as a part of the simplification package. But, you know,
I think the States, you know, thought that they would be able
to beat an extension of the deadline and didn't do anything,
and as a result we are here where we're at today.
Now, I certainly would be willing, with Mr. Barr and Mr.
Conyers and other Members who are interested, you know, to work
with the governors on this issue. But I think the notice should
be, is that don't come up to the week before the next
moratorium expires and then complain about an extension without
doing anything about the simplification issue.
Mr. Watt. Would Mr. Berman yield?
Mr. Berman. May I just reclaim my time just to make--I
understand the Chair's position, and it makes a lot of sense
except for one thing, and that's the point Mr. Frank made. If
we don't have an opportunity to create a dynamic which says,
``All right, we'll give you 5 years, but if you do get it
together and come forward with a provision--a proposal that
meets all the tests for nexus and what's going to be covered
and this tax simplification, you then can shorten that
moratorium and end that discrimination because it seems to me
the discrimination now exists.''
Mr. Watt. Will the gentleman yield?
Mr. Berman. Well, let me just finish that point. That
proposal's being ruled out of order. It's not in the base bill.
We're not--so that makes me want to say I'm more attracted to
the 3-year moratorium, because if that's the issue, if the
proponents of the 5-year moratorium would provide this safety
mechanism to make it shorter if the States come up with
something, I'd say I'd go with 5 years, but without that
opportunity, I'm more inclined to say 3 years.
Mr. Watt. The gentleman yield?
Mr. Berman. I'd be happy to, to both.
Mr. Watt. Let me say first that all the evidence that we
took at the Subcommittee suggests that our Chairman of the full
Committee is not correct. The States have made significant
progress toward----
Chairman Sensenbrenner. The gentleman's time has expired.
Mr. Watt. I ask unanimous consent for one additional
minute.
Chairman Sensenbrenner. Without objection.
Mr. Watt. And I ask the gentleman to continue to yield.
Mr. Berman. I'd yield, and hopefully get a chance to yield
to Ms. Lofgren afterwards.
Mr. Watt. And so the States have made progress based on the
evidence that we've heard at hearings at the Subcommittee, and
second, exactly what the gentleman has suggested is what I have
been trying to put on the table both at the Subcommittee level
and at this level. And I'm not sure at all that it's going to
be real germane, but we got to keep the pressure on States to
do this, and I think it's in everybody's interest to do exactly
that.
Mr. Berman. Mr. Chairman, I ask unanimous consent to have
one additional minute to yield to Ms. Lofgren.
Chairman Sensenbrenner. Without objection.
Ms. Lofgren. I think we are getting confused here, if I may
say so, because the issue of Internet access tax in a
moratorium is being used as a club for the States, but the
States--it's like the magazine that said, ``Buy this magazine
or we'll shoot this dog.'' We don't want them to tax Internet
access, because when States and when governments did that, it
was a downer for the economy. The States have every incentive
in the world to work something out with us because they can
legally tax sales right now. The problem is they have no nexus,
and so in order for us to give them nexus, we've got to come to
some meeting of the minds with them, and that's not--this
access tax is the wrong stalking horse.
Mr. Berman. Just to reclaim my time, I'm now told that I
was--my hunch was right and the earlier comment was wrong. This
bill permanently bans access taxes.
Ms. Lofgren. Which I think is right.
Mr. Berman. And I'm also told this amendment does not touch
the permanent ban on access taxes. Is that wrong?
Ms. Lofgren. I believe that is incorrect.
Mr. Bachus. I believe that is wrong.
Mr. Berman. Well, half of us said it's wrong, and half of
us said it's right.
Mr. Bachus. No, the----
Mr. Berman. It is a question of facts.
Mr. Bachus. No, it does extend the--it does extend the ban
on access taxes.
Mr. Berman. It doesn't touch the ban on access taxes.
Mr. Bachus. Well, okay, doesn't touch it or doesn't remove
the ban.
Mr. Berman. So the amendment--no, it makes the ban
permanent.
Ms. Lofgren. No, the amendment does not.
Mr. Bachus. It's a 5-year extension right now, and I've
amended to make it a 2-year extension.
Mr. Berman. If I may reclaim my time, on the issue of
access taxes to the Internet, I'm told it is a permanent ban,
it's not a moratorium, it's not 5 years, it's permanent.
Chairman Sensenbrenner. Can the gentleman from Georgia, who
is the Chairman of the Subcommittee answer this question? The
question is: is this a permanent ban on access taxes or not?
Mr. Barr. The bill itself is. The gentleman's amendment
changes that. The gentleman's amendment would ban taxes on
Internet access and multiple or discriminatory taxes only until
November 1, 2003, so it does affect the underlying substantive
legislation which would place a permanent ban.
Chairman Sensenbrenner. The question is on the--the
gentleman from Michigan.
Mr. Conyers. Mr. Chairman, I thank the gentleman. I rise to
support the current amendment that's on the floor.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Conyers. Ladies and gentlemen, let's look at this from
the point of view of the 50 governors. 46 of them have spoken
with unusual clarity, and what the gentlemen from Alabama, from
North Carolina, from Massachusetts, all they were seeking to do
is to get us to do what the overwhelming majority of governors
of the several States want, and what is it that they want? They
want us to approve and bring forward, which is in the
jurisdiction of this Committee, an interstate compact that
would insist that the States would assess one uniform rate and
one uniform taxing authority throughout the State.
Now, is that--is there anything so wrong with that? The
only problem that the gentleman from Alabama experienced was a
parliamentary ruling that prevented us from doing that all at
once here today. Had that been accomplished, we would all be
working off the same sheet of music really. But if this
amendment is supported, I think we could bring a bipartisan--a
group of membership from this Committee to the Rules Committee
to make what the gentleman from Alabaman attempted to do,
perfectly in order, and we could bring a bill to the floor that
everybody would agree upon, mostly the governors from my State,
from former Chairman Hyde's State, from the present Chairman's
State, from most all of our States.
And so I'm asking that you consider that this would be a
very appropriate way for us to begin coming together, and I
urge the careful consideration of this amendment.
Ms. Jackson Lee. Mr. Chairman?
Chairman Sensenbrenner. The question is----
Ms. Jackson Lee. Mr. Chairman?
Chairman Sensenbrenner. The Chair has been recognizing
people who didn't talk on the first Bachus amendment because--
--
Ms. Jackson Lee. And I did not.
Chairman Sensenbrenner. The gentlewoman from Texas is
recognized for 5 minutes.
Ms. Jackson Lee. Thank you very much, Mr. Chairman. There
have been several points made in the ongoing discussion that
I'd like to comment on and ask the gentleman from Alabama a
question.
First of all, we are fortunate in this Committee to have
Members of the Financial Services Committee along with the
expertise in the Judiciary Committee. It is interesting,
however, that we are turning this discussion into a discussion
of economics. We know that preceding or over the last couple of
quarters we have been entering into recession. Whether or not
we can use this debate to talk about what industry is
successful and what isn't, I don't think is appropriate. What I
do think that we should be discussing is the fact that we have
an unfairness here. We have an unfairness between the retail
history and the Internet purchasing industry.
I'd like to associate myself with the remarks of
Congressman Watt from North Carolina, because I think a 2-year
moratorium, which I support--and I support the 8-month--would
put the pressure on the States who well recognize that this is
a resource of dollars that they can effectively utilize with an
effective plan presented to Congress. I completely disagree
with those who say that we will get nothing and they are taking
advantage of the fact that they waited to the last minute.
I believe this 2-year moratorium with the language that
could be added to this legislation of soliciting a plan from
the governors would be an effective approach to what we're
trying to do.
The other point that is disturbing to me is that what you
want to do with the underlying legislation is to quash the
rights of those States already in existence, already having the
ability to do this, and I want to make sure from Mr. Bachus
that this 2-year plan responds to the States and it
grandfathers the other States in, which happens to be one of my
States, the State that I represent, the State of Texas. I don't
think that we can afford to allow this inequity to go forward
any further and that's what the Judiciary Committee deals with,
inequities. We have an inequity. And I happen to be an
optimist. I think the Internet purchasing, the Internet
utilization industry is going to grow. It has to grow. And the
reason it's going to grow is because we're in an information
technology century, and that means that people are going to be
buying the new way, and the new way is to use the Internet. So
I don't think we should be, in essence, predicting the downfall
of the industry because we happen to be in a recession.
Let me say also that if you look at the recent events since
September 11th, everybody is looking for money. This is not the
Financial Services or the Ways and Means Committee, but the
governors have put forward billions of dollars of an economic
stimulus package. Are you now going to cut into resources of
those who already exist? I think that's unfair as well. If you
want to governors, 46, 50, to be able to provide you an
implementation plan, the right thing to do is to require it in
the legislation, but to have a situation where this is either
banned permanently or a short term, where you're not willing to
do the 2-year moratorium so that we can put a fix, I think is
unfair as well. This is a Committee of equity. We need to do
the equitable thing. I'd like to pass a 2-year amendment, and
if we don't pass this, I'm going to offer a grandfather
amendment because I'm unsure whether the States that are
already involved in this are grandfathered by the underlying
legislation.
I'd like to yield to the gentleman from Alabama, to tell me
whether the 2-year amendment that you have on the table now
includes the grandfathered States? The gentleman from Alabama,
does your amendment include the States that are already have
the provisions to do this?
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas
Thank you Chairman Sensenbrenner and Ranking Member Conyers.
The legislation before us today, H.R. 1552, seeks to extend the
current Internet tax moratorium, prohibiting states or political
subdivisions from imposing taxes on transaction conducted over the
Internet, through 2006. I do not support extending the moratorium
through 2006 because it bars states from collecting much needed tax
revenue.
Presently, ten states including Texas have taxes on Internet access
charges. These states should be allowed to continue this practice. To
this end, I do not support any measure which attempts to permanently
bar states from collecting much needed tax revenue.
Under current law, there is a limited moratorium on state and local
Internet access taxes as well as multiple and discriminatory taxes
imposed on Internet transaction, subject to a grandfather on taxes of
this nature imposed prior to 1998. The current moratorium is scheduled
to expire on October 21, 2001, and was merely designed as an interim
device to allow a commission to study the problem of Internet taxation.
There is simply no reason to change the law at this time,
particularly because many states across our nation already rely on
these crucial revenue streams.
State and local government will loss a substantial amount of sales
tax revenue and telecommunication tax revenue if we were to extend the
moratorium on Internet taxation. If e-commerce continues to explode the
high technology market, expert Forrester Research, Inc. projects U.S.
sales over the Internet will be almost $350 billion by 2002. If state
and local governments are prohibited from taxing this segment of their
tax base, financing important state and local programs and services
will become increasingly difficult.
State and local governments use the sales tax as a means to provide
nearly one-quarter of all the tax revenues used to fund vital programs
and services to their communities. It is estimated that state and local
governments are presently losing approximately $5 billion in sales tax
revenues from their inability to tax the majority of mail-order
Internet sales.
According to the Center of Budget and Policy Priorities state and
local governments could be losing an additional $10 billion annually by
2003 if Internet sales continue to be exempt from sales tax imposition.
Loss of revenue of this magnitude will threaten the strong fiscal
position of many states if economic conditions begin to deteriorate.
The additional loss of Internet transaction tax revenues and the
possibility of losing taxes on telephone services due to its
incorporation into the Internet may accelerate depletion of many state
surpluses without increased taxes in some other area or making
significant reduction in expenditures.
The loss of revenue will also curtail the ability of states and
localities to meet the demands for major improvements in education. The
American people know that we need to improve the education in our
primary and secondary schools.
This is vital to the future of our country and our children's
ability to fill the demand for high-skilled, well-educated workers in
the information age. Overhauling our state education systems will
require significant investment. A permanent tax prohibition on Internet
sales will deprive state and local governments of a great resource to
fund desperately needed improvements in their education systems.
Enacting a five-year moratorium on state Internet taxation will
benefit those with wealth and access to the Internet at the expense of
low- and moderate-income individuals. Those who usually make purchases
over the Internet are more affluent than those who do not. Considering
the impact of the digital divide on our society many minorities and
low-income people who do not purchase goods via the cyber world will
pay a disproportionate share of state and local sales taxes.
The majority of low-income households lack the resources to
purchase equipment to access the Internet, train on its usage, or lack
the financial stability to have a credit card. Individuals with access
to a computer and the Internet would avoid taxation on the purchase of
a good or service that would be taxed if a person without this access
purchased the same good or service from their neighborhood stores.
If we allow Internet transaction to be exempt from tax, state and
local governments may likely increase their sales tax rates to make up
for the shortfall in Internet tax revenue. The consequences of this
would be devastating to low- and moderate-income persons who do not
benefit from the tax free Internet environment. Moreover, those with
access to the Internet will be further deterred from purchasing goods
or services from retail establishments, thus increasing the tax burden
of the less affluent.
The current moratorium on Internet taxation is about to expire. I
am confident that states can adapt their sales tax systems to capture
revenue on Internet transactions. Our states are making great strides
to update their systems and equalize the tax burden for all segments of
society.
We should not support a bill that champions the growth of an
industry on the backs of hard working Americans who often do not
directly benefit from the technological revolution. We must first
address the digital divide in our country before we enact another
measure of corporate welfare.
If we extend the present moratorium through 2006 there is a risk
that we may never return to the issue of state taxation of the Internet
again. We can not and must not take this risk. Thank you.
Mr. Watt. Yes, it includes the--it continues to grandfather
them.
Ms. Jackson Lee. Reclaiming my time, simply, Mr. Chairman,
this amendment should pass, and I believe that we can't make
choices that unfairly bias against those who have been trying
to follow the law, and I would ask that we support the
amendment.
Mr. Smith [presiding]. The gentleman from Massachusetts,
Mr. Delahunt, is recognized for 5 minutes.
Mr. Delahunt. I thank the Chairman. I think we've got to be
really clear here. There is not a governor that I'm aware of
that wants to tax access to the Internet. I don't think there's
a governor that I'm aware of that is opposed to e-commerce. I'm
unaware of a Member of Congress that wants to impose a tax on
access to the Internet or does not want to support and
encourage e-commerce, as long as it doesn't disadvantage the
traditional brick and mortar stores that we ship in in our home
communities.
But the gentleman from New York, Mr. Nadler, made the
point. What we hear is all the States have to do is come
together and sit down and they're not doing it. Well, they are
doing it. They are actually investing considerable time and
resources into developing a simplification system. I think it's
referred to as the SST. Twenty States have already taken it
upon themselves to pass enabling legislation which would allow
them to negotiate, come together, and come forward with
legislation that would be uniform in nature. But what they're
looking for is action from us to give them guidelines, to give
them parameters in which designing for them what is acceptable,
what would meet our requirements as far as what would be an
appropriate model legislation, and we refuse to do it.
All we want to do is make it permanent, let it go away
because we don't want to have political accountability. It's
just really unfair. It just doesn't make any sense.
I just ask the gentleman from Virginia--and maybe I'm
wrong--I think there are some Members on the Committee and in
Congress that just because it's a tax bill or could be
interpreted as somehow increasing taxes, they're opposed. Well,
the reality is, this bill, or this situation is shifting taxes
every day.
Mr. Conyers. Would the gentleman yield?
Mr. Delahunt. I'll yield to my friend from Michigan.
Mr. Conyers. Let me point out that he's correct. We're not
doing anything about taxes. The most that we could do here in
Judiciary Committee is to approve an interstate compact that
would allow the States to finally achieve what they're
desperately trying to do, is to come together to determine a
uniform taxing authority for themselves.
Mr. Delahunt. In reclaiming my time, let me point out that
we are drying up the availability of the sales tax as a
potential source of revenue. The States are still going to have
to raise revenue. Now, they can do it with the property tax.
They can do it with the income tax. It's my understanding that
maybe the gentleman from Tennessee wants to comment on this.
Historically, Tennessee has relied substantially on the sales
tax as revenue, and because that source of revenue is drying
up, there is now movement within the State to adopt an income
tax. It's a shifting of taxes. I mean it just--it just doesn't
make any sense for us not to act in terms of including the
criteria and the standards by which Congress would impose upon
the States to achieve--to achieve a simplification system or to
achieve a compact.
And I think we could do--I think, with just some sitting
down, there's opportunities. We hear about 7,500 taxing
jurisdictions. Maybe we could compel the States to make it
easier to impose on local taxing jurisdictions and regional
taxing jurisdictions, a system that would be more acceptable
and encouraging to the e-commerce----
Ms. Lofgren. Would the gentleman yield?
Mr. Delahunt [continuing]. And to the local business
community, simplify it.
Ms. Lofgren. Would the gentleman yield?
Mr. Delahunt. I yield to the gentlelady from California.
Ms. Lofgren. I'd like to just raise a different point of
view on that latter subject, because we've all sort of accepted
that uniformity of sales taxes necessarily are good, and that
may or may not be the case. Let me use my county as an example.
The voters, by a more than two-thirds vote, have on numerous
occasions taxed themselves through a sales tax increase for----
Mr. Smith. The gentleman's time has expired. Are there any
other Members who wish to be heard on this amendment?
Ms. Lofgren. I'd ask unanimous consent that the gentleman
from----
Mr. Smith. Without objection, the gentlewoman from
California is recognized for one additional minute.
Mr. Delahunt. I continue to yield.
Ms. Lofgren. To say that for some reason that we're going
to say every city, every county, every regional transit
authority has to be the same, is not necessarily a goal that's
a valuable one when there's a----
Mr. Delahunt. Reclaiming my time. And I'm sure that there
are exceptions, and I think that the gentlelady points to one
within her own district, but I daresay that if we gave guidance
to the States, that we would be able to reduce the number of
taxing jurisdictions from 7,500 to a reasonable number that the
States, the Federal Government, could reach an agreement, and
we wouldn't be dealing every 2 or 3 years with this moratorium
that is absolutely, in the end, drying up a significant revenue
for the States so that we have some States like Florida now
looking at a shortfall in their budget of $4 billion, 4
billion. I yield back.
Mr. Berman. Would the gentleman yield?
Mr. Delahunt. I yield to Mr. Berman.
Mr. Smith. Actually----
Mr. Delahunt. I ask unanimous consent the gentleman have
one additional minute.
Mr. Smith. The gentleman from California's time has
expired. The gentleman from California, Mr. Berman, is
recognized for 1 minute. Is that what the gentleman requested
or----
Mr. Berman. Well, may be the same. I'll take it.
Mr. Smith. Okay, take your 1 minute.
Mr. Berman. I'd like--I'm wondering if the gentleman from
Alabama, who offered the amendment, Mr. Bachus, just would u be
willing to seek unanimous consent to alter your amendment to
allow the ban on access taxes to the Internet to remain
permanent, and simply make your moratorium on the multiple and
discriminatory taxes?
Mr. Bachus. Mr. Berman, I feel like any pressure that we
take off the urgency in addressing the sales tax issue, we're--
I feel like that any urgency that we take off is just going to
be one more step to delaying this whole process.
Mr. Berman. Unless it mean your amendment pass.
Mr. Bachus. The original moratorium was put in place at the
same time that the Advisory Commission, which Mr. Barr and I
have sort of traded words over, was appointed. And you know
what they were supposed to do? They were supposed to come back
with two things. One was a recommendation on how to handle
taxation of excess taxes. The other thing they were supposed to
do is they were supposed to give us a recommendation on how to
simplify sales tax. It was the commission, which is stacked
with people who represent high-tech companies. There are no
brick and mortar people on it.
Mr. Smith. The gentleman's time from California has
expired.
Mr. Bachus. They didn't do that.
Mr. Smith. Are there any other Members who wish to be heard
on--for what reason does the gentleman from California wish to
be recognized?
Mr. Schiff. Move to strike the last word.
Mr. Smith. The gentleman is recognized for 5 minutes.
Mr. Schiff. Thank you. I won't take that much time. I just
wanted to add on to what my colleague from California said. I'm
inclined to support the amendment as it is. I'd actually be
happier to support it in the form that Congressman Berman
suggested, and I think the likelihood of passage of the
amendment would be significantly enhanced, which would mean
that there would be more pressure placed on the issue with the
passage of this amendment, than with the failure of the
amendment, and I would just encourage the----
Mr. Frank. Would the gentleman yield?
Mr. Schiff. Yes.
Mr. Frank. I would say you're moving to tactics now, and I
agree with that, but on the other hand, we could vote for the
amendment, and then enough of us would be willing to pare it
down later. And I would make this point--the leadership----
Mr. Bachus. I tell you what, I'm going to----
Mr. Frank. I was talking. Excuse me. I think what we need
to do is recognize that the leadership is going to bring this
bill up, probably--if they get it the way they want it, the
amendment comes up on suspension. If in fact though this
amendment is passed, I'm sure they would agree to some further
amendments. So I agree with the goal of having it adopted in
the form that the gentleman from California mentioned. But one
way to do that would be to pass the larger amendment and then
we could work down from there.
Mr. Smith. The gentleman from California has the time.
Mr. Schiff. I would yield to the gentleman from Alabama.
Mr. Bachus. Let me say this. I think what we're doing,
we're extending the ban, and I think that either way it's going
to extend the ban for 2 years, and if we don't address this
sales tax issue within 2 years, the country in a recession,
we're going to have teachers being laid off, we're going to
have firefighters laid off, we're going to have police officers
laid off, we're going to have State and local governments and
county governments unable to function. And that to me--and we
are not--we are extending the ban on access. We're extending it
for 2 years. We're extending it along with everything else. The
problem is that they're defined in here, so I'm going to stick
with my original amendment.
Mr. Schiff. If I can reclaim the balance of my time, I
understand the gentleman's decision, and the only disagreement
I would have with my colleague.
Mr. Bachus. It changes nothing over the next 2 years.
Mr. Schiff. The only disagreement I'd have with my
colleague from Massachusetts--and he's probably a far better
vote counter than I am--I don't think it will pass as it is. I
think it has a greater chance of passing as amended.
Mr. Frank. Would the gentleman yield?
Mr. Schiff. Yes.
Mr. Frank. I agree, but the author doesn't, so we've got to
face reality.
Mr. Schiff. I yield back the balance of my time.
Mr. Smith. The gentleman yields back the balance of his
time. Are there any other Members who wish to be heard on the
amendment?
Mr. Goodlatte. Mr. Chairman?
Mr. Smith. The gentleman from Virginia, Mr. Goodlatte, is
recognized for 5 minutes.
Mr. Goodlatte. Thank you, Mr. Chairman. Mr. Chairman, I
want to say to the gentleman from Alabama that I think that
claim that the failure to act----
Mr. Conyers. Regular order, Mr. Chairman.
Mr. Goodlatte. Mr. Chairman, I was yielded to by the
gentleman from Texas.
Mr. Conyers. My dear from Virginia has spoken on this
already.
Mr. Goodlatte. Mr. Chairman, I was yielded to by you, if
you recall. I have not spoken on this amendment.
Mr. Conyers. I apologize.
Mr. Smith. Virginia still has the time.
Mr. Goodlatte. I thank the Chairman. The gentleman from
Alabama I think is taking an alarmist position here, and I
think in response of that, we have to point out that we're
talking about of the hundreds of billions of dollars of sales
taxes collected collectively by all the States, probably only 1
or 2 or 3 percent of that, even 2 years from now would be lost.
But that issue is irrelevant to the issue of extending the
moratorium because I believe--and in response to the comments
made by the gentleman from Massachusetts, I believe that if 30
or 35 States got together and passed a uniform State law, and
said, ``This is what's subject to the tax and this is what the
tax would be,'' but we can't pull the trigger on that until we
have the nexus laws changed because of the Quill decision. And
I think it's important to stress----
Mr. Nadler. Would the----
Mr. Goodlatte. I will in a minute. I think it's important
to stress to everybody that this moratorium is not a moratorium
on the collection of sales tax because I had that discussion
with the gentleman from California. The sales taxes are not
access fees. They're not multiple or discriminatory fees.
They're not covered by this legislation, and therefore, the
moratorium doesn't apply to them. Many sales taxes are already
collected on the Internet depending upon how the business has a
nexus with the State in which the sales tax is owed.
Mr. Delahunt. Would the gentleman yield?
Mr. Goodlatte. I will in just a minute. So the point is,
that if those things were to talk place, I think the Congress
would have to take a look at that and vote on it at that time,
but at that time, we would then know what we're voting on.
Right now we're not--we don't have a clue what we're voting on
when we change the nexus rules. And so therefore, I would have
the say that to attach any kind of limitation on extending the
moratorium less than 5 years would be a mistake because I don't
think anybody in this room doesn't want to continue the
moratorium on access fees and new and discriminatory tax on the
Internet. Their concerns relate to sales taxes, but they
haven't produced the goods yet.
And I'll be happy to yield to the gentleman from
Massachusetts.
Mr. Delahunt. I don't think anyone's asking Members of the
Committee just simply to pass legislation that would
automatically commit this Congress to a compact that the States
produced. What the States are looking toward are what features,
what aspects of a streamlined sales and use tax system
incorporated in a compact would Congress require? And that in
the bill block. I mean, issues such as a uniform format for tax
returns and remittance, reasonable compensation for tax
collection by sellers----
Mr. Goodlatte. Reclaiming my----
Mr. Delahunt. These are all aspects.
Mr. Goodlatte. Reclaiming my time, I would like to see the
goods before I vote on them.
Mr. Chairman, I yield back the balance of my time.
Mr. Smith. The question occurs on the amendment. All in
favor say aye.
All opposed say nay.
In the opinion of the Chair, the nays have it.
Mr. Bachus. Chairman, request a roll call.
Mr. Smith. A roll call has been requested, and the clerk
will call the role.
The Clerk. Mr. Hyde?
Mr. Hyde. Aye.
The Clerk. Mr. Hyde, aye. Mr. Gekas?
Mr. Gekas. No.
The Clerk. Mr. Gekas, no. Mr. Coble?
Mr. Coble. Aye.
The Clerk. Mr. Coble, aye. Mr. Smith?
Mr. Smith. No.
The Clerk. Mr. Smith, no. Mr. Gallegly?
Mr. Gallegly. No.
The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
Mr. Goodlatte. No.
The Clerk. Mr. Goodlatte, no. Mr. Bryant?
Mr. Bryant. Aye.
The Clerk. Mr. Bryant, aye. Mr. Chabot?
Mr. Chabot. No.
The Clerk. Mr. Chabot, no. Mr. Barr?
Mr. Barr. No.
The Clerk. Mr. Barr, no. Mr. Jenkins?
Mr. Jenkins. Aye.
The Clerk. Mr. Jenkins, aye. Mr. Cannon?
Mr. Cannon. No.
The Clerk. Mr. Cannon, no. Mr. Graham?
Mr. Graham. No.
The Clerk. Mr. Graham, no. Mr. Bachus?
Mr. Bachus. Aye.
The Clerk. Mr. Bachus, aye. Mr. Hostettler?
[No response.]
The Clerk. Mr. Green?
Mr. Green. No.
The Clerk. Mr. Green, no. Mr. Keller?
Mr. Keller. No.
The Clerk. Mr. Keller, no. Mr. Issa?
Mr. Issa. No.
The Clerk. Mr. Issa, no. Ms. Hart?
Ms. Hart. No.
The Clerk. Ms. Hart, no. Mr. Flake?
Mr. Flake. No.
The Clerk. Mr. Flake, no. Mr. Pence?
Mr. Pence. No.
The Clerk. Mr. Pence, no. Mr. Conyers?
Mr. Conyers. Aye.
The Clerk. Mr. Conyers, aye. Mr. Frank?
Mr. Frank. Aye.
The Clerk. Mr. Frank, aye. Mr. Berman.
Mr. Berman. No.
The Clerk. Mr. Berman, no. Mr. Boucher?
[No response.]
The Clerk. Mr. Nadler?
Mr. Nadler. Aye.
The Clerk. Mr. Nadler, aye. Mr. Scott?
[No response.]
The Clerk. Mr. Watt?
Mr. Watt. Aye.
The Clerk. Mr. Watt, aye. Ms. Lofgren?
Ms. Lofgren. No.
The Clerk. Ms. Lofgren, no. Ms. Jackson Lee?
Ms. Jackson Lee. Aye.
The Clerk. Ms. Jackson Lee, aye. Ms. Waters?
Ms. Waters. Aye.
The Clerk. Ms. Waters, aye. Mr. Meehan?
Mr. Meehan. Aye.
The Clerk. Mr. Meehan, aye. Mr. Delahunt?
Mr. Delahunt. Aye.
The Clerk. Mr. Delahunt, aye. Mr. Wexler?
[No response.]
The Clerk. Ms. Baldwin?
Ms. Baldwin. Aye.
The Clerk. Ms. Baldwin, aye. Mr. Weiner?
Mr. Weiner. Aye.
The Clerk. Mr. Weiner, aye. Mr. Schiff?
Mr. Schiff. Aye.
The Clerk. Mr. Schiff, aye.
Mr. Smith. The gentleman from Virginia, Mr. Boucher?
Mr. Boucher. Votes no.
The Clerk. Mr. Boucher, no.
Mr. Smith. The gentleman from California, Mr. Berman?
Mr. Berman. Aye.
Mr. Smith. Mr. Berman votes aye. And the gentleman from
Virginia, Mr. Scott?
Mr. Scott. Aye.
The Clerk. Mr. Scott, aye.
Mr. Smith. The gentlewoman from Pennsylvania, Ms. Hart?
Ms. Hart. I want to vote aye.
The Clerk. Ms. Hart, aye? Ms. Hart? What is she?
Mr. Smith. Are there any other Members who have not voted
or who wish to change their vote?
[No response.]
Mr. Smith. If not, the clerk will report.
The Clerk. Did she switch?
Mr. Smith. She switched and Berman switched.
The Clerk. Mr. Chairman, there are 19 ayes and 15 nays.
Mr. Smith. The amendment is agreed to. Are there any other
amendments?
Mr. Berman. Mr. Chairman?
Mr. Smith. The gentleman from California, Mr. Berman, is
recognized for the purpose of offering an amendment?
Mr. Berman. Yes, I would like orally, by unanimous consent,
to have a chance to have an amendment considered to strike the
2-year provision as it relates to the access moratorium and
maintain the permanence of that ban in the bill. Does everybody
understand? The base bill has a ban on access taxes or charges.
The amendment--no, permanent. The amendment made that permanent
ban a 2-year moratorium, just on access. The effect of my
amendment would make a permanent access ban, permanent access
ban, and a 2-year moratorium on multiple and discriminatory
taxes.
Mr. Nadler. Mr. Chairman? Mr. Chairman, reserving a point
of order.
Mr. Smith. Who raises the point? The gentleman from New
York.
Mr. Nadler. Reserving the right to object. I'm trying to
remember my parliamentary procedure, but isn't it Mr. Berman's
amendment would exactly negate the entire purpose of the
amendment we just passed?
Mr. Berman. No. If I may speak to that.
Mr. Nadler. Well, in that, as you said, the underlying bill
said permanent, the amendment said 2 years, your amendment says
permanent.
Mr. Berman. No. The underlying bill had two provisions
essentially. One was a permanent ban on access taxes and
charges and fees, and the second was a 5-year moratorium on
multiple and discriminatory taxes. My amendment would simply--
the amendment that passed turned both into 2-year moratoriums.
I would maintain the permanent ban on access taxes and leave
the 2-year ban on multiple and discriminatory taxes.
Mr. Nadler. My--I raise the point of order on the grounds
that on one of the two provisions at least, it is exactly the
opposite of the amendment, and perhaps we should have moved to
sever the previous amendment, but I do believe it's out of
order at this point.
Mr. Smith. Does the gentleman object to the unanimous
consent request by the gentleman from California?
Mr. Nadler. I'm sorry?
Mr. Smith. Does the gentleman from New York object to the
unanimous consent request from the gentleman from California?
Mr. Nadler. I thought the unanimous consent request was
simply that it be stated orally, not written. To that I do not
object. I'm raising a point of order to the substance of the
amendment.
Mr. Frank. Parliamentary inquiry?
Mr. Smith. If the gentleman will wait just a minute, I'm
going to confer with the parliamentarian to see what the proper
procedure would be from this point on.
Mr. Berman. Mr. Chairman? Mr. Chairman? Maintaining the
grandfather provision.
I ask unanimous consent to alter my amendment for making it
permanent, to simply making it a moratorium for 99 years, and
we'll deal with it later.
Mr. Nadler. That I'll object to.
Mr. Smith. Objection has been heard by the gentleman from
New York. Objection to the unanimous consent request.
Mr. Nadler. Yes. To 99 years.
Mr. Smith. Objection to the unanimous consent request has
been heard. Are there any other amendments?
Mr. Frank. Parliamentary inquiry, Mr. Chairman.
Mr. Smith. The gentleman from Massachusetts is recognized
for a parliamentary inquiry.
Mr. Frank. Mr. Chairman, as I understand it, we are now in
full Committee, which means that this bill will go to the
floor, so that the amendment of the sort that Mr. Berman wants
or others might want, would be--could be formulated and it
could actually be put in writing, and we could look at it
between now and its going to the floor, because my assumption
is that the leadership of the Committee and the House will be
in no great rush to put the bill as it currently stand on the
suspension calendar, thus giving an opportunity for Mr. Berman
to write down the amendment and deal with it. Would that be
correct, Mr. Chairman?
Mr. Smith. The gentleman makes a good point, would be
correct.
Mr. Nadler. Mr. Chairman?
Mr. Smith. For what purpose does the gentleman from New
York wish to be recognized?
Mr. Nadler. Clarification. I hope the Chair did not--I did
not object to the oral qualify of Mr. Berman's amendment. I
objected to changing to 99 years.
Mr. Smith. That was the understanding of the Chair as well.
Mr. Frank. Mr. Chairman, based on your ruling, I object to
everything. [Laughter.]
Mr. Smith. Are there any other amendments?
Mr. Schiff. Mr. Chairman, parliamentary inquiry?
Mr. Smith. Any other----
Mr. Schiff. Mr. Chairman, parliamentary inquiry?
Mr. Smith. The gentleman from California is recognized for
a parliamentary inquiry.
Mr. Schiff. I was a little unclear by the point raised by
the gentleman from New York. If he is not objecting to the oral
nature of the proposed amendment, and the amendment is in the
99-year form, is it not in order?
Mr. Nadler. No, I objected to the----
Mr. Berman. He did not object to the oral version of my
original amendment, but when I suggested a unanimous consent
request to make an oral amendment that would make it an order,
he objected to that.
Mr. Nadler. That's right.
Mr. Schiff. If the gentleman would yield. So that if I
offered an amendment along the lines of the amended amendment
from Congressman Berman, that would be in order?
Mr. Smith. The gentleman is correct. If the gentleman would
put that in writing, then the Chair could consider it.
Mr. Schiff. Well, I believe that there's no objection to
the amendment being offered orally.
Mr. Frank. Yeah, there is. I would object. Given the fact--
reserving the right to object. Given the fact that we have
every chance to get an amendment carefully considered between
now and final, I mean, I don't always have the highest
standards of the way we should operate, but I think trying to
do something on the fly at this point when there's no
necessity, isn't the best way to go. I think if we wait--you
know that the leadership of the Committee and the House does
not want to rush this bill through now. There is ample
opportunity for people to talk about that amendment, so I would
object the anything that wasn't the regular order now, given
that we're going to have a chance to go to the next stage.
I mean it used to be that around here you would vote in
Subcommittee and then Committee, and you would actually go to
the floor of the House and consider the bill. And while some
people may never have seen that operate and others may have
forgotten how to do it, it's not a bad tradition to revive.
Ms. Jackson Lee. Parliamentary inquiry. Would the gentleman
yield?
Mr. Smith. Does the gentleman from California, Mr. Schiff,
yield back the balance of his time?
Mr. Schiff. Yes, thank you, Mr. Chairman.
Ms. Jackson Lee. Mr. Chairman, I have a parliamentary
inquiry.
Mr. Smith. The gentlewoman from Texas is recognized for her
parliamentary inquiry.
Ms. Jackson Lee. Thank you, Mr. Chairman. Inasmuch as I am
satisfied with the official vote taken in this body that saw
the 2-year amendment prevail, my question is that if other
amendments are proposed on the way to the floor, will all
Members be notified in order to have the opportunity to object
or have the input into that particular amendment?
Mr. Smith. The gentlewoman has not stated a parliamentary
inquiry. Are there any other amendments?
Mr. Barr. Regular order, Mr. Chairman.
Mr. Smith. The gentleman from Alabama, Mr. Bachus, is
recognized for offering an amendment.
Mr. Bachus. Mr. Chairman, I have an amendment at the table.
It's Amendment 105.
Mr. Barr. Reserving a point of order.
Mr. Smith. The gentleman from Georgia reserves a point of
order.
Mr. Bachus. Mr. Chairman, I'm going to ask that this
amendment be read in its entirety, because it will take about 3
minutes, and then I'll comment on it for about 30 seconds.
Mr. Smith. The clerk will report the amendment.
The Clerk. Amendment to H.R. 1552 offered by Mr. Bachus.
Page 2 after line 19, insert the following: section 4,
streamline nonmultiple and nondiscriminatory tax systems.
Paragraph. It is the sense of the Congress that a State tax
relating to electronic commerce, to avoid being multiple or
discriminatory, should include the following.
[The amendment follows:]
Mr. Coble. Mr. Chairman, would the clerk pull the mike a
little closer to her, please.
The Clerk. Sorry. 1. A centralized one-stop multistate
registration system for sellers. 2. Uniform definitions for
goods or services that might be included in the tax base. 3.
Uniform and simple rules for attributing transactions to
particular taxing jurisdictions. 4. Uniform rules for the
designation and identification of purchasers exempt from the
nonmultiple and nondiscriminatory tax system, including a
database of all exempt entities and a rule ensuring that
reliance on such database shall immunize sellers from
liability. 5. Uniform procedure----
Mr. Bachus. Mr. Chairman, I'll ask unanimous consent to
withdraw my amendment.
Mr. Smith. Without objection, the gentleman withdraws his
amendment. Are there any other amendments? If not----
Ms. Jackson Lee. Mr. Chairman, I ask to strike the last
word.
Mr. Smith. Who wished to be recognized? The gentlewoman
from Texas is recognized for 5 minutes.
Ms. Jackson Lee. Mr. Chairman, I'm trying to find out--
since I wasn't a parliamentary inquiry before--we will have an
opportunity to look at any amendments going to the floor, I
would take it?
Mr. Smith. That's my understanding.
Ms. Jackson Lee. Thank you, Mr. Chairman.
Mr. Bachus. Chairman, I move the previous question.
Mr. Smith. If there are no further amendments and the
previous question has been moved, the question occurs on the
motion to report H.R. 1552 favorably as amended. All in favor
say aye.
All opposed, say no.
The ayes have it and the motion to report favorably is
adopted.
Without objection the bill will be reported favorably to
the House in the form of a single amendment in the nature of a
substitute, incorporating the amendments adopted here today.
Without objection, the Chairman is authorized to move to go
to conference pursuant to the House rules. Without objection,
the staff is directed to make any technical and conforming
changes. All Members will be given 2 days as provided by the
House rules in which to submit additional dissenting,
supplementary or minority views.
And the Committee stands adjourned.
[Whereupon, at 5:12 p.m., the Committee was adjourned.]
-