Senate Debates Net Taxes Bill

(October 6, 1998 10:00 PM EDT)  The Senate continued its debate of S 442, the "Internet Tax Freedom Act," late today, rejecting two hostile amendments, and postponing further consideration until Wednesday morning.  The fate of other tech bills which are attached to S 442 also rest on its passage before the Congress adjourns at the end of the week.

The Senate rejected by lopsided majorities two amendments offered by Sen. Bob Graham (D-FL), the leading opponent of S 442.  One would have required that any future vote to extend the moratorium on Internet taxes obtain a three-fifths vote for passage. The other would have required Internet sellers to post notices that sales are subject to sales taxes, and failure to pay could result in civil or criminal penalties.

The Senate debated S 442 last Friday morning, when it defeated by a vote of 66 to 29 an amendment offered by Sen. Dale Bumpers (D-AR) that would have required mail order catalogue retailers to collect state and local taxes on the merchandise they sell to out of state purchases.  The Senate then amended the bill by voice vote by adding to it Sen. Abraham's "Government Paperwork Reduction Act" (digital signatures bill), and Sen. Bryan's "Children's Online Privacy Protection Act."

S 442 would establish a moratorium on new discriminatory taxes on the Internet.  The length of the moratorium is yet be determined by votes on upcoming amendments.   The House version of the bill, HR 4105 EH, which passed on June 23, has a three year ban.  It would also establish a commission to study the issue and report to Congress.  The Senate may also vote on amendments that would affect the scope of the study to be conducted by the advisory commission.  At issue is whether the study should also examine taxation of mail order businesses.  Finally, the Senate is likely to vote also on grandfathering of existing state and local Internet taxes.

Negotiations are still under way.  Proponents of the state and local governments that want to increase their sales tax revenues from all forms of commerce, including both mail order and e-commerce companies, continue to try to delay, dilute, and defeat S 422.   The Senate may begin Wednesday morning with a cloture vote to cut off debate.

There are likely enough votes to stop any filibuster. Sen. John McCain (R-AZ), floor manager of the bill, stated during the debate that: "This bill is before us today because a filibuster would have been defeated."

When the Senate resumes consideration of S 442, Sen. Dan Coats (R-IN) may offer as an amendment his bill to limit children's access to Internet porn.  A similar bill in the House sponsored by Rep. Mick Oxley (D-OH) is scheduled for a House vote tomorrow also.

The Senate first debated and rejected an amendment (No. 3729) offered by Sen. Bob Graham (D-FL) that would have required that any future votes to extend the moratorium would require a three-fifths vote.  Sen. Graham stated that his concern was the "moratorium becoming a permanent prohibition."

He also discussed Internet protocol telephony, and argued that it is important to make sure that it gets taxed like phone and cable services.

He also argued that if the bill is passed, it should not have a moratorium of any longer than the two year ban contained in the Senate Finance Committee's version of the bill.  The Senate Commerce Committee passed a version with a six year ban.

Sen. McCain opposed the amendment.  "It would just serve to bind the hands of future Senates, and set a dangerous precedent."  He added that the Senate already has a super majority rule: it takes a three fifths vote to stop a filibuster.

Sen. Ron Wyden (D-OR), the sponsor of the bill in the Senate, also spoke in favor of the bill, and against the Graham amendment.   He also referenced the overwhelming support for the bill.  "The President of the United States is for this legislation," he said.

Sen. Judd Gregg (R-NH), who represents a state with no sales tax, and many mail order catalogue companies, also rose to oppose this Graham amendment.

Sen. Byron Dorgan (D-ND) spoke in support of the Graham amendment, citing his "fear that the moratorium will become forever."

Sen. McCain moved to table (i.e., defeat) this Graham amendment.  His motion to table was carried on a roll call vote of 83 to 15.

The Senate then considered and held a roll call vote on a second hostile amendment offered by Sen. Graham.  This amendment (No. 3742) that would have required all businesses that sell over the Internet to post a sales tax notice.  He described his amendment as follows:

"All my amendment does is say on Internet sales, if you sell into a state, you must notify people with a short notice that simply says: 'This merchandise may be subject to a sales or use tax in your state.  You could be subject to a civil penalty, or a criminal penalty -- something like a hundred bucks -- whatever it is.  And you should check, if you want to check.  You should check with your local revenue department to see if there is a tax.'"

Sen. Wyden rose to vigorously denounced this amendment.

"I strongly oppose this amendment.  This amendment specifically singles out those who sell goods over the Internet for discrimination.  It applies to one class of people, and that is people who sell goods on the Internet.  And the amendment would impose on those sellers of goods on the Internet a new requirement that would not be imposed on someone who sells goods over the phone or someone who mails goods when they get a check. ... This amendment seeks to do what the Internet Tax Freedom bill Act seeks to prevent.  Our legislation is about technological neutrality."

Sen. Gregg then made a motion to table, which won by a vote of 71 to 27.

The Senate then went on to consider other matters.