| Statement of Sen. Spencer Abraham (R-MI) in
Congressional Record. Re: introduction of S 2028, the Internet Non- Discrimination Act. Date: February 3, 2000. Source: Congressional Record, February 3, 2000. Editor's Notes: |
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Mr. ABRAHAM. Mr. President, I rise today to join my colleague, Senator Wyden, in introducing legislation to extend indefinitely the current moratorium on new and discriminatory Internet taxes. Once again, Senator Wyden has demonstrated his grasp of the crucial issues surrounding electronic commerce and has moved rapidly to assure that potential barriers to the new economy are eliminated before they do any harm. I am pleased to join him in his latest effort.
By now, it is obvious to everyone that e-commerce is the wave of the future. As a matter of fact, it's safe to say that the future is already here. During the week of December 6 alone, Americans bought $1.22 billion of merchandise online. Sales for 1999 should reach $64.8 billion. Beyond shopping, 5.3 million households had access to financial transactions like electronic banking and stock trading by the end of last year.
The rate of growth for Internet commerce has been exponential for the past several years. Unfortunately, it's also a tempting target for taxation by the Federal Government, States and localities. And that could slow the growth of e-commerce and of our entire economy.
We responded to this potential problem by passing Senator Wyden's legislation in 1998, to place a three-year moratorium on new or discriminatory Internet taxes, fees or charges. That legislation also established a Commission to explore the issue of Internet taxation and to submit to Congress a list of recommendations on how the Federal Government should legislate in this area.
We are only halfway through the moratorium, but already it seems there are only two possible conclusions to the Commission. The first is that the wide differences of opinion within the Commission will make it impossible for the members to muster the majority of support necessary to submit a report. This is worrisome, Mr. President, because, unless action is taken by this Congress, the moratorium will expire and the door will be opened to new, discriminatory taxes on the Internet.
The other possibility, more recently offered, is that the Commission may actually recommend an extension of the current moratorium. Whatever the conclusion therefore, the role of Congress is clear; the Internet Tax Moratorium must be extended indefinitely. And because of the limited number of legislative days scheduled in this election year, the process of doing so should begin now.
As everyone knows, the current moratorium only precludes new and discriminatory taxes. It does not address the more difficult question of how to apply existing, State sales taxes to Internet transactions. The Supreme Court has spoken to this issue, ruling that States can indeed impose taxes on transactions much like Internet sales--namely catalog sales. However, States cannot force a business to collect sales taxes on purchases made to States where they have no physical presence or `nexus.' This discrepancy in sales taxation between main street businesses and those that sell goods over the Internet will be difficult to address for the following reasons:
First, very soon every business will be an e-business in the sense that they will be using the Internet for sales, supplies, contracting and other purposes. We couldn't stop this process if we wanted to, and we shouldn't want to. According to one recent survey, 74 percent of brick and mortar, main street businesses have added `click and mortar' Internet services to their business.
Second, the border less nature of the Internet is going to make it difficult--if not impossible--to determine what constitutes `nexus.' For example, what happens when someone in California uses America Online in Virginia to order fudge from the `shopmackinac' website in Michigan, and ships them to a friend in Rhode Island? Which State should claim `nexus?'
Perhaps a `destination-based' Internet sales tax regime would be more effective in terms of collecting State sales taxes. Whatever the eventual outcome, I believe that in light of the present uncertainty it would not be proper for Congress to intervene on this issue. The States must have every opportunity to debate and possibly even initiate a model for addressing the current impasse.
What is necessary is Congressional action to ensure that new, discriminatory taxes are not levied on the Internet by States or localities as a means of substituting perceived lost revenue. Many Governors--including Governor Engler of Michigan--support an extension of the current Internet tax moratorium.
Access fees and similar Internet taxes, whether imposed by the States, localities, or the Federal government, pose a grave threat to the continued evolution of the Internet. America is experiencing a record period of growth and prosperity. In my view, the continued expansion of the economy is due primarily to electronic commerce. The spirit of entrepreneurship which has energized our nation, the adoption of new business models to more fully explore marketing and sales possibilities and the dramatic increase in consumer and business services are all largely the product of our new e-economy. Why on earth would anyone, or any government, want to threaten this dynamic medium when it is still in its infancy by increasing the cost of doing business over the Internet? I certainly do not, and I will continue to work to ensure that neither the Federal government nor other units of government threaten electronic commerce.
If we are able to keep the government focused on removing impediments to electronic commerce rather than interfering in the development and implementation of new technologies then very soon the e-economy will simply be the economy, and our nation will be more prosperous as a result.