S 328 IS (106th Congress).
Re: making permanent the moratorium on new Internet taxes.
Sponsor: Sen. Bob Smith (R-NH).
Date introduced: January 28, 1999.
Source: Library of Congress.
| 106th CONGRESS 1st Session |
S. 328 |
To make permanent the moratorium on the imposition of taxes on the Internet.
IN THE SENATE OF THE UNITED STATES
January 28, 1999
Mr. SMITH of New Hampshire introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation
A BILL
To make permanent the moratorium on the imposition of taxes on the Internet.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
Section 1101(a) of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 is amended by striking `during the period beginning on October 1, 1998, and ending 3 years after the date of the enactment of this Act' and inserting `after September 30, 1998'.
Statement by Sen.
Bob Smith.
Re: Introduction of S 328.
Date: January 28, 1999.
Source: Congressional Record.
Mr. SMITH of New Hampshire. Mr. President, last year, we enacted a three-year moratorium on new Internet sales taxes. Today, I am introducing a bill that would make this moratorium permanent.
Internet commerce has exploded in recent years. For example, U.S. sales on the Internet last year totaled $8 billion. This last Christmas season was about three times as busy as the previous one, with consumers spending about $3 billion on goods purchased over the Internet. A recent survey of American adults by the Pew Research Center suggests that 41% of American adults now uses the Internet.
For Americans who live in remote areas, such as residents of New Hampshire's North Country, the Internet offers major advantages. They now can shop by computer instead of driving several hours to the urban shopping malls or Main Street businesses. As noted by economist Larry Kudlow, other potential Internet shoppers include the elderly, busy executives, stay-at-home parents, the disabled and others.
Despite all of its benefits for our economy and American consumers, Internet commerce is at risk from state and local politicians seeking ever more tax revenues. Already, a number of states have imposed taxes on Internet sales. But there are several reasons why we should refuse to transform the Internet into a pot of gold for state and local tax collectors.
First, not only do all states and localities have other options for raising revenue--such as income taxes, use taxes and property taxes--but most are running budget surpluses. I asked the Congressional Research Service to analyze what has happened to traditional sales tax revenues over the past five years, when Internet use exploded. CRS reported that the growth in sales tax revenues has outpaced inflation in this period.
Second, a tax on Internet shopping is really just another tax on the American consumer. American consumers already pay taxes on their salaries, taxes on their capital gains, property taxes on their homes, taxes on the goods they purchase from instate vendors, and estate taxes on any property they have managed to save by the time of their death. Imposing yet another layer of taxes in cyberspace is simply unfair, especially because many Internet shoppers already pay shipping or handling costs in addition to the purchase price of the goods they buy.
Furthermore, imposing new taxes on Internet-related revenues could stifle the development of Internet commerce in the U.S. As reported in yesterday's Wall Street Journal, a University of Chicago economist who studied the buying decisions of 25,000 Internet shoppers found that applying sales taxes to Internet commerce `would reduce the number of online buyers by 25% and spending by more than 30%.'
Some politicians would like to make each online business be a sales tax collector for every tax jurisdiction in the United States. Doing so simply would give Internet businesses--especially those whose profit margins are slim--a good incentive to move offshore. Geography is not important on the Internet, and many Internet vendors can relocate without disruption to their customers.
Finally, many Internet transactions are really interstate commerce. The Founding Fathers recognized the danger that each state might impose taxes or tariffs on goods produced in other states, so they authorized the Federal government to prevent interstate trade wars. In interpreting the Commerce Clause of the U.S. Constitution, the Supreme Court has held that commerce which crosses state boundaries should be subject to state sales taxes only when both seller and buyer are in the same state, or when the seller has a presence in the buyer's state.
There is little reason to fear, as some have claimed, that Main Street businesses are at risk from Internet vendors. I can think of nothing that would prevent these businesses from offering their own on-line shopping services. Some already have done so with great success. Moreover, the Internet likely will attract entirely new customers whose purchases will only increase total retail sales.