Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
April 12, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 1880 words
HEADLINE:
TESTIMONY April 12, 2000 JOHN MCCAIN CHAIRMAN SENATE COMMERCE,
SCIENCE AND TRANSPORTATION INTERNET TAXATION
BODY:
APRIL 12, 2000 STATEMENT OF SENATOR JOHN McCAIN CHAIRMAN, COMMERCE, SCIENCE,
AND TRANSPORTATION FULL COMMITTEE HEARING ON S.2255 EXTENSION OF THE INTERNET
TAX MORATORIUM - I am pleased to welcome all of our witnesses this morning. We
can expect a diversity of views and opinions on one of the most important issues
facing us this session, the future of the Internet and e-commerce transactions.
I believe that we are at a critical juncture 'in determining the future
regulatory scheme under which the new economy will either continue to grow and
prosper, or will be thwarted by government bureaucracy, taxation and
shortsighted greed. - Our Founding Fathers certainly did not have the Internet .
in mind, but nevertheless understood the potential dangers and pitfalls of
states taxing and regulating interstate commerce. That is why our Constitution
reserves the "power ... to regulate Commerce among the several states." The
purpose of federal power over interstate commerce is to ensure that one or more
states do not unduly burden the transaction of interstate transactions. The
Internet is the epitome of interstate commerce. If each state and local
jurisdiction attempts to impose its own business regulations and taxes to it,
the opportunities presented by this new economic engine will be destroyed. - It
is important to look at the full picture of our economy is assessing the impact
of taxation on the Internet and e-commerce. The Internet is filled with web
sites of small businesses, businesses that are expanding in ways which would
never have before been economically feasible. One of our witnesses today, M r.
Morse, will be able to give us a reality check as to how the Internet has
afforded him an opportunity to compete with much larger companies. The Internet
is the last frontier for the small business entrepreneur to develop a business
and compete without massive amounts of investment capital. His small business
which has historically had a limited market for its goods now has a website that
allows him to market and sell to people all over the country - even all over the
world. - Mr. Morse, Eke other small businessmen and women, benefit -from the
freedom of the Internet, and the country benefits from their
success. When a small business increases its sales and
revenues, it needs to hire more employees, and it pays taxes on
the increased revenues, And the newly hired employees pay taxes on their wages.
The state and local governments benefit, not only from the additional taxes paid
on the revenues, but in the economic benefits of additional jobs and a growing
economy. - The potential burden of complying with tax regulations and the
paperwork involved under current law for as many as 7,500 estimated taxing units
in this country would overwhelm many businesses, especially small businesses.
The cost of complying with multiple states' filing and regulatory requirements
would in many instances exceed the amounts collected and transmitted. A
multi-state company currently files many tax returns. AT&T has informed the
Committee staff that last year it completed approximately 99,000 separate tax
filings. - Under current law, a state can require--businesses who have a nexus
with the state to collect sales and use taxes. The moratorium does not disrupt
this existing law, nor would an extension of the moratorium. The Supreme Court
has found that businesses with a physical nexus to a state have created a
relationship with that state sufficient to submit themselves to the regulatory
and taxing authority of that state. In essence, the business becomes a
"citizen7' of the state, and its transactions with other citizens of that state
are intrastate in nature, thus there is no burden on interstate commerce. - By
contrast, the essence of what the tax and spend advocates who oppose this
legislation demand is 50 state jurisdiction over every Internet business - large
and small - regardless of any other connection to each state. They advocate that
a Vermont business man such as Mr. Morse collect sales taxes and comply with the
tax regulations of every state and local jurisdiction in the country. Where does
this expansive jurisdiction lead? - Does such an expansive jurisdiction also
result in potential liability in each state for non-compliance or
mis-compliance, with state regulations? What about business licenses,
occupational fees, occupational or retail licensing regulations, "blue laws? -
How do we ensure that in the zeal to collect more money to permit even more
expansive governments we protect the privacy of the consumers? How does imposing
more regulatory burdens affect competition in the marketplace? What impact does
increasing the regulatory and tax burden on Internet commerce have on rural,
handicapped and low income consumers? How does it affect our trade opportunities
with other countries? - We need to consider whether the macroeconomic benefits
of the new economy will outweigh the potential losses in direct revenues. We
must ensure a level playing field for all venues of commerce, not simply create
a new remote sales tax system. We must simplify the overwhelming morass of tax
rules, regulations and paperwork so that opportunities for new or small
businesses are not lost in complex and archaic bureaucracy. - We need to
reexamine the level of services which the public wants to be provided by
government and determine how to provide necessary revenue to accomplish the
people's will. We need to ensure that taxation is not simply imposed to increase
government bureaucracy. - I am looking forward to hearing from the witnesses on
all of these issues. It is clear that these are complex issues which will
require extensive investigation, analysis and debate. The Commission established
by the Internet Freedom Act did not reach consensus, nor did it resolve the
multitude of issues presented by the new framework of interstate commerce which
the Internet presents. I do not see how we can strive at consensus on these
critical issues between now and October of next year, which is why I have
proposed a five-year simple extension of the current moratorium. The extension
would not affect the current nexus rules. It would not. affect the grandfather
provisions. It is a simple extension of the status quo. - It had been my intent
to include S.2255, the five-year Moratorium extension legislation on the
committee mark-up tomorrow. The advocates of increasing the tax burden on the
public have prevailed in having it removed from tomorrow's agenda so that they
can took into this matter further. However, I want to emphasize, this is
critical legislation; it is in the best interest of our nation's-economic
prosperity to bring it to the full Senate. Therefore, I intend to include it in
a future mark- up, and ensure that the Senate is permitted to debate these
issues fully.
LOAD-DATE: April 24, 2000, Monday
