VoIP Regulatory Freedom Act of 2004

Mr. Speaker, I yield myself such time as I may consume, which will be a very short amount of time, just to make two points.

Number one, the chairman of my committee and I have served so long together that he did not even flinch when I was debating a bill that I thought was all part of one big parcel, because he has seen me many times debate something that we were not discussing in committee, so it did not come as any surprise to him at all. He did not even flinch.

So I think on that what I will do is roll the statement that I read on S. 150 into this debate. That was the discussion on the last bill. I thought we were doing this, all this part and parcel of one big bill here, rather than in two stages. So I hope I can just roll that last statement on to this debate and save myself from having to read it again.

Second, I would just say to the gentleman on his ``do not surprise us in the next Congress'' that I think there has been a long-term agreement and commitment to making the Internet exempt from taxation a permanent moratorium. The thing that has held that up is that, at the same time, States and local governments have wanted to work out a national uniform system for taxing remote sales that take place over the Internet so that they do not lose substantial revenues from that source. So I think if we could come up with a system to put into place some uniform standards for taxation of remote sales over the Internet, making the moratorium on Internet access would be a no-brainer and a very noncontroversial step.

So I would hope that I would be able to join the chairman of the full committee in supporting a permanent moratorium on Internet access taxes, but I would be able to do that only if we can work out this other deal having to do

with putting in place a taxation system for taxation of remote sales that are taking place over the Internet.

Because what is happening now is that brick and mortar retailers in all of our communities are collecting sales taxes on sales that are taking place in those brick and mortar stores and, at the same time, people are able to buy over the Internet the same product and be exempt from paying taxes on it because there is no uniform way for collecting those taxes at remote locations. That is costing local governments and State governments in some cases enormous amounts of tax revenues, because most of them are supported by sales taxes or local property taxes, and this is eroding a primary base of tax income for local communities and State communities.

So if we can get that part of this equation worked out, I think the chairman would see a virtual landslide of support for making the moratorium on Internet access a permanent moratorium, and I would be right in the lead of the march with my chairman, and I hope he will join us in trying to make that happen in the next term of Congress.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of S. 150, the Internet Tax Nondiscrimination Act, and urge my colleagues to support its passage. It has been a long journey to get here, but I believe that the compromise forged in the Senate preserves the goals we sought here in the House both at the subcommittee and full committee levels.

Specifically, S. 150 extends the existing moratorium against taxes on Internet access by all State and local governments, including those that were previously grandfathered by the Internet Tax Freedom Act, and there is a new grandfather for States that imposed taxes on access to the Internet until November 1, 2005. Although this bill will necessarily result in the potential loss of some revenue to some States, it will promote the continued development, emergence, and widespread access to the Internet; and it will do so in a fair and technologically neutral manner.

During the proceedings on this bill in the House, I, together with the gentleman from Utah (Mr. Cannon), the chairman of the Subcommittee on Commercial and Administrative Law, on which I am the ranking member, offered an amendment to help clarify the meaning of Internet access and to put an end to the current confusion that has led to discriminatory and inconsistent State taxation on Internet access. The bill before us today represents a compromise on that amendment which is supported by the relevant stakeholders, including the industry and the State and local government representatives.

The principle I pursued in offering the amendment was simple: If we are to prohibit taxes on Internet access, we must do so regardless of how that access is provided. Otherwise, we would give a competitive advantage to those providers covered by the moratorium over those providers that remain subject to taxation. This would limit the choices of consumers and raise the cost of alternative means of accessing the Internet such as DSL. By making the moratorium applicable to all Internet service providers, we have created a level playing field for the consumer. In the process, we have had no intention to otherwise undermine State and local telecommunications tax bases.

With this issue now behind us if we pass this bill, this Congress must turn to the issue of State sales and use taxes. I, along with the gentleman from Massachusetts (Mr. Delahunt) and other colleagues on our subcommittee, have insisted throughout our deliberations to ban Internet access taxes that we remain mindful of the fiscal crisis currently confronting many of our States. Toward that end, the States' attempt to establish a unified tax system that would enable them to impose and collect sales taxes on transactions over the Internet in a manner that is fair and manageable has progressed; and I believe that during the next term of Congress we will be able to work toward a sensible solution to solve the remote sales tax issue when remote sales are taking place over the Internet.

In closing, I believe that S. 150 will ensure that the ban on Internet access taxes is neutral as to technology, speed, and provider. I urge my colleagues to vote in favor of this bill.

I thank the gentleman for his hard work on this and certainly thank the gentleman from Utah (Mr. Cannon), my subcommittee Chair, in his absence, for the tremendous amount of work he has put into this issue.

Mr. Speaker, I have no further requests for time either on S. Con. Res. 146, which I thought I was debating the last time, or on S. 150, which I understand we are debating now, so I will be happy, unless the chairman wants to promise me he is going to work with me on this remote sales tax issue and wants to have a dialogue about that, I am happy to yield back the balance of my time, or yield to the chairman if he wants to comment on it.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I would just like to assure the gentleman from California (Mr. Cox) that he did not really say anything that I disagree with. Neither did the chairman say anything that I disagree with.

I agree that taxation of Internet access and taxation of remote sales are like apples and oranges. But both of them have economic impact on State and local communities, and just because they are apples and oranges does not mean that they do not have an economic impact. So what has been keeping this from moving forward is that if you take away the Internet access issue and you do not resolve the remote sales issue, then local and State communities are being doubly impacted in some cases, and they would like us to resolve both of those issues. They do not necessarily want us to mix orange juice and apple juice together, but they do want us to be able to drink apple juice at one point and drink orange juice at the other point, and they are not mutually exclusive, and they have a similar impact in local communities.

So I am in full agreement that we ought to make this moratorium permanent on Internet access. I am supporting both of these bills, and I do not think there is any controversy about that.

My only point is we also need to now roll up our sleeves in this next term of Congress and resolve the remote sales tax issue so that we can put all of this to rest, and then we can drink both apple juice and orange juice and enjoy both of them in due course.

Mr. Speaker, I have no other speakers, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the Senate bill (S. 150) to make permanent the moratorium on taxes on Internet access and multiple and discriminatory taxes on electronic commerce imposed by the Internet Tax Freedom Act.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on S. 150, the Senate bill currently under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today in support of S. 150, the Internet Tax Nondiscrimination Act.

In 1998, Congress passed the Internet Tax Freedom Act to protect the Internet from crippling taxation and piecemeal regulation. The act prohibited States from imposing multiple and discriminatory taxes on electronic commerce and shielded consumers from new Internet access taxes. However, some States that had already begun taxing on Internet access by 1998 were allowed to continue such taxation temporarily.

During the 107th Congress, we extended the moratorium until November 1, 2003. On July 24, 2003, well before the November expiration deadline, the House Committee on the Judiciary reported H.R. 49, the Internet Tax Nondiscrimination Act. Introduced by the gentleman from California (Mr. Cox), H.R. 49 made permanent the ban on taxes that targeted the Internet for discriminatory treatment and immediately ended all taxes on Internet access by all States and localities.

Unlike the Senate bill, H.R. 49 also eliminated the so-called grandfather clause for States that taxed Internet access prior to October 1, 1998; and through a bipartisan amendment offered in subcommittee by the gentleman from Utah (Mr. Cannon) and the gentleman from North Carolina (Mr. Watt), the House bill preserved the original intent of the law by not punishing broadband users, then providing tax freedom for all forms of Internet access, whether by dial-up, cable, or DSL line. H.R. 49 passed the House by voice vote on September 17, 2003. Unfortunately, the other body was unable to pass legislation extending the moratorium until April 29, 2004, 6 months after the moratorium expires.

The Senate bill differs from H.R. 49 in several ways. First, rather than a permanent moratorium, it creates a temporary 4-year moratorium on Internet access taxes running retroactively from November 1, 2003, until November 1, 2007. Secondly, it extends the 1998 grandfather clause for the life of the moratorium so that all those States currently taxing Internet access will continue to do so with the one notable exception of Wisconsin, which I already addressed fully when we considered the related enrolling resolution.

Third, it creates a new, 2-year grandfather clause for States that tax Internet access after the expiration of the moratorium.

Despite these weaknesses which I believe to be substantial, passing the Senate bill extending the Internet tax moratorium is still a big win for the vast majority of American Internet users. Without any action by this Congress, Internet commerce would still be subject to State and local taxes in thousands of jurisdictions. The digital economy and its participants are more vulnerable if we do not act, even if we must act on a weaker bill.

For those reasons I support passage of S. 150, which will extend the benefits of the moratorium until 2007.

At this time, let me put everyone on notice that in the next Congress, even though the moratorium does not expire during the life of the 109th Congress, I will attempt, once again, to make this moratorium permanent so that no State, when it puts together its budget in January of 2007, will fall into the trap of counting Internet access taxes as revenue.

The bill, together with the enrolling resolution just passed, will at least temporarily protect against those States and localities taxing our e-mail and taxing Web service. The extension of the moratorium will help vitalize the Internet economy, provide tax relief to consumers no matter how they get their Internet access, and will stimulate equal access to this increasingly important medium. I will continue to assess future avenues that will promote greater Internet access at higher speeds and at less cost for all Americans. Let everybody be on notice that that is going to happen sooner rather than later.

For now, I urge my colleagues to join me in supporting S. 150 and making the Internet a less taxing and more productive experience.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 15 seconds to say that access taxes and remote sales tax collections are two separate issues. It is like apples and oranges, and when you mix apple juice and orange juice in the same concoction, frequently it is not very tasty. But we will deal with both of those issues and consider them in the next Congress.

Mr. Speaker, I yield such time as he may consume to the gentleman from California (Mr. Cox), the author of H.R. 49.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I thank the gentleman from Wisconsin (Chairman Sensenbrenner) and thanks also to the gentleman from Michigan (Ranking Member Conyers) for the Committee on the Judiciary's staunch leadership on this issue. Special thanks also to the chairman of the Subcommittee on Commercial and Administrative Law of the Committee on the Judiciary, the gentleman from Utah (Mr. Cannon), and, of course, to the Ranking Member, the gentleman from North Carolina (Mr. Watt), the author of a critical amendment to this bill which makes it explicit that the Internet tax moratorium provides consumers with tax freedom from all forms of Internet access, regardless of the technology, wired or wireless, broadband or dial-up, or any pathway yet to be invented.

While I am proud to be the author of the Internet Tax Freedom Act, which created the Internet tax moratorium in 1998, and the Internet Tax Nondiscrimination Act, which passed this Congress unanimously last year, this is the work of a great bipartisan team led on the Senate side by George Allen of Virginia and my original moratorium coauthor, who was then a member of the House, Ron Wyden of Oregon, and by President Bush who urged this Congress to extend this most valuable of consumer protections from taxation.

Republicans and Democrats have come together to say that, no matter how we might choose to fund government services, we all agree that the worst way to do it would be to create new taxes on the Internet. That would be harmful to consumers, destructive to technological innovation, and bad for our economy.

The case for allowing Internet access to remain tax-free has never been stronger. With 200 million Americans now online, a new tax on access would be a tax on working families. Our citizens recognize the danger. Eighty-eight percent of Americans oppose new Internet access taxes. So one might say that this legislation, the Internet Tax Freedom Act and the Internet Nondiscrimination Act, this moratorium, are the most popular tax issues in America.

New Internet taxes would also be highly destructive to the American economy. Studies from the Brookings Institution, the University of California, Harvard, Stanford, MIT, the Congressional Budget Office, the Department of Commerce, and the Federal Reserve all confirm the positive role of the Internet in making Americans more productive. New taxes can only slow this valuable and powerful engine of our economy and job growth, productivity and prosperity in America.

Finally, Mr. Speaker, the United States of America needs to regain world leadership in encouraging other countries around the world to keep taxes off of the World Wide Web. The Internet is truly global commerce. The original Internet Tax Freedom Act instructed the executive branch to negotiate bilateral understandings with

other countries, and our executive branch has done so. During the period of time when this moratorium was expired, America could hardly lead when our own policy was not clear that we forbid taxation of the Internet. Now we are back where we belong in our role of world leadership, and the Bush administration can once again resume with confidence negotiations with other countries to make sure that when we go online it is not just other foreign states that will not be taxing you, your Internet activities will not be prey to predatory tax policies from other countries as well.

Mr. Speaker, I urge all Members to vote yes on this excellent legislation, S. 150, and yes on the enrolling resolution. I thank the chairman for this great success for consumers.

Mr. Speaker, I rise today for two reasons: First, to support S. 150, ``The Internet Tax Nondiscrimination Act,'' and, second, to clarify a mischaracterization of a provision of S. 150 that has appeared in the media and perhaps in the minds of some of my colleagues concerning the affect of S. 150 on Voice over Internet Protocol or VoIP.

First, I support passage of S. 150 and commend my colleagues in both the House and the Senate for working vigorously to forge a compromise that addresses, albeit in a temporary fashion, the most important issue we face today concerning what's been termed the ``digital divide''-- bridging the gap between those who have Internet access and those who do not by protecting such access for all Americans from overburdensome taxation by a multiplicity of State and local governments that would directly and substantially inhibit the growth and expansion of this still relatively young technology. This bill extends until November 2007 the current moratorium that prohibits States, or their political subdivisions, from taxing Internet access or imposing multiple or discriminatory taxes on electronic commerce. Both houses of Congress also compromised on the treatment of States who had been taxing Internet access even before 1998 when Congress passed the Internet Tax Freedom Act. The grandfathered status of those States to continue taxation of Internet access will be extended for 3 more years under S. 150. While I support the compromise we are voting on today because it accomplishes our intent to prohibit State and local taxation of Internet access in the interim, I still firmly believe that we should permanently prohibit State taxation of Internet access in the future. However, I do look forward to working with our State, county, and city leaders in the future to address the broader issue of taxation of goods and services over the Internet. Everyone recognizes that the Internet knows no borders, domestically or globally, and we should treat it as such by permanently prohibiting an estimated 30,000 different jurisdictions nationwide from imposing taxes on Internet access and stifling this innovative technology that has become not only a useful informational, educational, and recreational technology for most Americans but also an economical necessity for our business community.

Second, and more importantly for my purposes as the lead sponsor in the House of H.R. 4129, the ``VoIP Regulatory Freedom Act of 2004,'' S. 150 as passed by the Senate contains a provision specifying that Voice- over-Internet-Protocol (``VoIP'') services are not covered by the moratorium. That provision states:

Mr. Speaker, I support S. 150, the Internet Tax and Nondiscrimination Act.

This legislation would reinstate the moratorium on Internet access taxation and multiple or discriminatory taxes on electronic commerce for three years.

Internet commerce is still relatively new and has yet to reach its full potential. The imposition of taxes would threaten the future growth of e-commerce and would discourage companies from using the Internet to conduct business. Internet taxation would create regional and international barriers to global trade.

The Internet is also a major source of information and resources for many individuals and families. Taxes could make Internet access unaffordable for some Americans. Our goal should be to encourage and promote Internet access.

Americans should be able to access the Internet without being subject to state and local taxes.