[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.]

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