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``(ii) Debate on the joint resolution, and on all debatable motions and appeals in connection therewith, shall be limited to not more than 2 hours, which shall be divided equally between those favoring and those opposing the joint resolution. An amendment to the joint resolution is not in order. A motion further to limit debate is in order and not debatable. A motion to postpone, or a motion to proceed to the consideration of other business, or a motion to recommit the joint resolution is not in order. A motion to reconsider the vote by which the joint resolution is agreed to or disagreed to is not in order.
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``(iii) Immediately following the conclusion of the debate on a joint resolution described in subparagraph (B) and a single quorum call at the conclusion of the debate if requested in accordance with the rules of the appropriate House, the vote on final passage of the joint resolution shall occur.
``(iv) Appeals from the decisions of the Chair relating to the application of the rules of the Senate or the House of Representatives, as the case may be, to the procedure relating to a joint resolution described in subparagraph (B) shall be decided without debate.
``(F)(i) If, before the passage by one House of a joint resolution of that House described in subparagraph (B), that House receives from the other House a joint resolution described in subparagraph (B), then the following procedures shall apply:
``(I) The joint resolution of the other House shall not be referred to a committee and may not be considered in the House receiving it except in the case of final passage as provided in subclause (II).
``(II) With respect to a joint resolution described in subparagraph (B) of the House receiving the joint resolution, the procedure in that House shall be the same as if no joint resolution had been received from the other House, but the vote on final passage shall be on the joint resolution of the other House.
``(ii) Upon disposition of the joint resolution received from the other House, it shall no longer be in order to consider the joint resolution that originated in the receiving House.
``(b) If the Board of Trustees of the Federal Hospital Insurance Trust Fund or the Federal Supplementary Medical Insurance Trust Fund determines as any time that the balance ratio of either such Trust Fund.''.
(b) CONFORMING AMENDMENTS.--
(1) Section 709(b) of the Social Security Act (42 U.S.C. 910(b)) (as amended by subsection (a) of this section) is amended by striking ``any such'' and inserting ``either such''.
(2) Section 709(c) of such Act (42 U.S.C. 910(c)) (as redesignated by subsection (a) of this section) is amended by inserting ``or (b)'' after ``subsection (a)''.
By Mr. DORGAN (for himself, Mr. ENZI, MR. VOINOVICH, Mr. BREAUX, Mr. GRAHAM, Mr. HUTCHINSON, Mrs. LINCOLN, Mr. BENNETT, Mr. BRYAN, Mr. CLELAND, and Mr. THOMAS):
S. 2775. To foster innovation and technological advancement in the development of the Internet and electronic commerce, and to assist the States in simplifying their sales and use taxes; to the Committee on Finance.
INTERNET TAX MORATORIUM AND EQUITY ACT
Mr. DORGAN. Mr. President, if the Internet and E-commerce are to continue to grow and flourish then Congress must address the difficult tax issues that these have posed. To that end, Senator VOINOVICH and I, along with Senators GRAHAM, ENZI, BREAUX and six of our distinguished colleagues are introducing the Internet Tax Moratorium and Equity Act.
First and foremost, this legislation extends for four additional years the existing moratorium on punitive and discriminatory Internet taxes, and on access taxes. Internet technology is becoming a real growth engine for our economy. Governments should not be allowed to impose new taxes on access, or to enact discriminatory tax plans that would apply to the Internet and E-commerce but not to other kinds of transactions. I believe that such policies could foolishly hurt the future growth of the Internet industry, and this legislation prevents that from happening anytime soon.
At the same time, however, this legislation moves toward a solution to the growing web of tax compliance problems that faces virtually everyone who would do business across state lines --sellers and customers alike. Our approach also would help to create a climate in which Web-based firms and Main Street businesses can co-exist and compete on fair and even terms.
Any new form of commerce presents a challenge to the rules and structures that have grown up around the old. The Internet is no exception. The Internet has raised vexing questions regarding both privacy and the protection of property rights in writing and music. It has raised similar questions regarding the revenue systems of the states and localities of this nation. Not surprisingly, the Internet simply does not fit neatly into these systems as they have evolved over the last two hundred years.
This disconnect has created tensions on all sides. On one side are the vital new businesses--Internet service providers, Web-based businesses and the rest--worried that they will be singled out as cash cows and subjected to new and unfair taxes. On the other side are state and local governments worried about the erosion of their tax bases and their ability to pay for the schools, police, garbage collection and more that their taxpayers need and expect. In between are Main Street merchants who collect sales taxes from their customers and worry about unfair competition from Web-based business that avoid collecting these taxes. Let us not forget the citizens and taxpayers, who appreciate the convenience and opportunities of the Web but who also care about their Main Street merchants, and about their schools and other local services.
All of these concerns are valid. There are no bad guys in the drama. Rather, it is the kind of conflict that a new technology inevitably poses. The automobile required the reform of traffic-control rules designed for the horse-and-buggy era. So today the rise of E-commerce requires an update of tax compliance rules designed primarily for local commerce. Our job in Congress is not to point fingers but rather to try to address the problem in a fair and constructive way.
The solution must begin by putting the worries of Web-based entrepreneurs to rest. They should not be concerned about new and discriminatory tax burdens, and they should not be singled out as cash cows. Congress should make this clear. We have enacted a moratorium to prohibit state and local governments from enacting tax plans that discriminate against the E-commerce or impose a levy on Internet access. This existing moratorium is set to expire next year. We should extend that moratorium to December 2005. That will help clear the air and also make possible the development of a real solution for the sales and use tax compliance problems now facing many businesses and and their customers.
The solution begins with a recognition of the problem. Collecting a sales tax in a face-to-face transaction on Main Street or at the mall is a relatively simple process. The seller collects the tax and remits it to the state or local government. But with remote sales --such as catalog and Internet sales --it's more difficult. States can not require a seller to collect a sales tax unless the business has an actual location or sales people in the state. So most states, and many localities, have laws that require the local buyer to send an equivalent ``use tax'' to the state or local government when he or she did not pay taxes at the time of purchase.
The reality, of course, is that customers almost never do that. It would be a major inconvenience, and people are not accustomed to paying sales taxes in that way. So, despite the requirement in the law, most simply don't do it. This tax , which is already owed, is not paid. For years, state and local governments could accept this loss because catalog sales were a relatively minor portion of overall commerce. The Internet , however, will change that.
Internet and catalog sellers argue that collecting sales taxes would be a significant burden for them. They contend that they would have to comply with tax laws from thousands of different jurisdictions--46 states and thousands of local governments have sales taxes. They would have to deal with many different tax rates and all of the idiosyncracies regarding what is taxable and what is non-taxable. They have a point.
However, there are some remote sellers who know they enjoy an advantage over Main Street businesses and simply do not want to lose it. They can sell a product without collecting the tax , whereas Main Street businesses must collect the local sales tax . Main Street businesses claim that is unfair, and they have a point, too.
As I said, all sides in this debate have valid points, and that is the premise of the bill we introduce today. There are three basic principles underlying the Internet Tax Moratorium and Equity Act. First, we believe that this new Internet technology is becoming a real growth engine for our economy. Governments should not impose access or discriminatory taxes that might jeopardize its growth. That's why the legislation we are introducing extends the current moratorium on Internet access and multiple and discriminatory taxes on electronic commerce for over four additional years.
Second, state and local governments should be encouraged to simplify their sales tax systems as they apply to remote sellers. And third, once States have done this, then it is only fair that remote sellers do their part and collect any use tax that is owed, just as local merchants collect sales taxes. This simple step would free the consumer from the burden of having to report such taxes individually. It would level the playing field for local retailers and others that already collect and remit such taxes, and it would protect the ability of state and local governments to provide necessary services for their residents in the future.
Specifically, the Internet Tax Moratorium and Equity Act would do the following:
Extend the existing moratorium on Internet access, multiple and discriminatory taxes through December 31, 2005.
Put Congress on record as urging States and localities to develop a streamlined sales and use tax system with the advice of the National Conference of Commissioners on Uniform State Laws. Among other things, such a system would include a single, blended tax rate with which all remote sellers could comply. It should also include within each state a uniform tax base on which remote sellers apply the tax , as well as a uniform list of exempt items.
Authorize States to enter into an Interstate Sales and Use Tax Compact through which member States would adopt the streamlined sales and use tax system. Congressional authority and consent to enter into such a Compact would expire if it has not occurred by January 1, 2006.
Authorize adopting States to require remote sellers with more than $5 million in annual gross sales to collect and remit sales and use taxes on remote sales , once twenty States have adopted such Compact, unless Congress has acted to disapprove the Compact by law within a period of 120 days after the Congress receives it.
Prohibit states that have not adopted the simplified sales and use tax system from gaining benefit from the authority extended in the bill to require sellers to collect and remit sales and use taxes on remote sales .
In my view, it would be a mistake for Congress to adopt a lengthy extension of the current Internet tax moratorium without addressing the underlying problem. If we don't, then the growth of the Internet , which should be a benefit to Americans, will instead mean a major erosion of funds available to build and maintain schools and roads, finance police departments and garbage collection, and all the other services that citizens in this country want and need. One study suggests that states and local governments soon could be losing more than $20 billion annually if the Internet industry continues its rapid growth, and if sales and use tax collection rules are left unchanged.
The competitive crisis facing local retailers is also growing more urgent. Testimony at a recent congressional hearing makes that clear: A representative of Wal-Mart testified recently that that company is incorporating a separate business to put Wal-Mart on the Internet . It will do so in a manner that will enable them to avoid sales and use taxes. The reason? Even though Wal-Mart has locations in every state and therefore would be required to collect such taxes on Internet sales , it recognizes that other large competitors will be making those sales tax -free. The company regards such avoidance as a matter of necessity to remain competitive.
This scenario will play out over and over again. The large retailers like Wal-Mart will survive; the small Main Street businesses will struggle. And, there will be a massive loss of revenues to fund schools and other basic services.
Mr. President, this is an important issue that Congress must address now. We believe that this legislation strikes a balance between the interests of the Internet industry, state and local governments, local retailers and remote sellers. It is workable and fair.
I urge my colleagues to cosponsor this much-needed bipartisan legislation.
Mr. ENZI. Mr. President, I rise in strong support of the Internet Tax Moratorium and Equity Act of 2000 introduced today by Senator DORGAN. I am an original cosponsor and I encourage each of my colleagues to join me as a cosponsor of this bill. We had to take a look at the Internet sales tax issue for people who might be using legislative vehicles to develop huge loopholes in our current system. We are federally mandating states into a sales tax exemption. We need to preserve the system for those cities, towns, counties, and states that rely on the ability to collect the sales tax they are currently getting.
There are some critical issues here that have to be solved to keep the stability of state and local government--just the stability of it--not to increase sales tax , just protect what is there right now. I believe the Internet Tax Moratorium and Equity Act of 2000 is a monumental step forward in protecting, yet enhancing, the current system.
Certainly, no Senator wants to take steps that will unreasonably burden the development and growth of the Internet . At the same time, we must also be sensitive to issues of basic competitive fairness and the negative effect our action or inaction can have on brick-and-mortar retailers, a critical economic sector and employment force in all American society, especially in rural states like Wyoming. In addition, we must consider the legitimate need of state and local governments to have the flexibility they need to generate resources to adequately fund their programs and operations.
If the loophole exists, I can share a method for local retailers to avoid sales tax collection too--but creating this loophole will lead to others--pay attention here. Sales tax collection and federal and state income tax could be in the same boat, if sole tax collection is no longer necessary on Internet sales purely by virtue of the sale over the Internet . Why shouldn't an employee whose check is written on the Internet and transmitted directly to his bank account not owe any income tax ? Both would be Internet tax loopholes--tax collection exemptions forced by an all-knowing Federal Government.
As the only accountant in the Senate, I have a unique perspective on the dozens of tax proposals that are introduced in Congress each year. In addition, my service on the State and local level and my experiences as a small business owner enable me to consider these bills from more than one viewpoint.
I understand the importance of protecting and promoting the growth of Internet commerce because of its potential economic benefits. It is a valuable resource because it provides access on demand. In addition, it is estimated that the growth of online businesses will create millions of new jobs nationwide in the coming years. Therefore, I do not support a tax on the use of Internet itself.
I do, however, have concerns about using the Internet as a sales tax loophole. Sales taxes go directly to state and local governments and I am very leery of any federal legislation that bypasses their traditional ability to raise revenue to perform needed services such as school funding, road repair and law enforcement. I will not force states into a huge new exemption. While those who advocate a permanent loophole on the collection of a sales tax over the Internet claim to represent the principles of tax reduction, they are actually advocating a tax increase. Simply put, if Congress continues to allow sales over the Internet to go untaxed and electronic commerce continues to grow as predicted, revenues to state and local governments will
fall and property taxes will have to be increased to offset lost revenue or States who do not have or believe in State income taxes will be forced to start one.
After months of hard work, negotiations, and compromise, the Internet Tax Moratorium and Equity Act of 2000 has been introduced. I would like to commend Senator DORGAN on his commitment to finding a solution and working all parties to find that solution. The bill extends the existing moratorium on Internet access, multiple, and discriminatory taxes for an additional four years through December 31, 2005.
Throughout the past several years, we have heard that catalog and Internet companies say they are willing to allow and collect sales tax on interstate sales (regardless of traditional or Internet sales ) if States will simplify
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Further, the bill would authorize States to enter into an Interstate Sales and Use Tax Compact through which members would adopt the streamlined sales and use tax system. Congressional authority and consent to enter into such a compact would expire if it has not occurred by January 1, 2006. The bill also authorizes States to require all other sellers to collect and remit sales and use taxes on remote sales unless Congress has acted to disapprove the compact by law within a period of 120 days after the Congress receives it.
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