9 October 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[Congressional Record: October 7, 1998 (Senate)]
[Page S11651-S11670]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr07oc98-134]


                        INTERNET TAX FREEDOM ACT

  The Senate continued with the consideration of the bill.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the pending
Coats amendment be 20 minutes in length, 10 minutes on either side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. I yield the floor.
  Mr. COATS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Indiana.

                           Amendment No. 3695

   (Purpose: To exempt from the moratorium on Internet taxation any
persons engaged in the business of selling or transferring by means of
   the World Wide Web material that is harmful to minors who do not
              restrict access to such material by minors)

  Mr. COATS. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Indiana (Mr. Coats) proposes an amendment
     numbered 3695.

  Mr. COATS. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 17, between lines 15 and 16, insert the following:
       (c) Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply in the
     case of any person or entity who in interstate or foreign
     commerce is knowingly engaged in the business of selling or
     transferring, by means of the World Wide Web, material that
     is harmful to minors unless such person or entity requires
     the use of a verified credit card, debit account, adult
     access code, or adult personal identification number, or such
     other procedures as the Federal Communications Commission may
     prescribe, in order to restrict access to such material by
     persons under 17 years of age.
       (2) Scope of exception.--For purposes of paragraph (1), a
     person shall not be considered to engaged in the business of
     selling or transferring material by means of the World Wide
     Web to the extent that the person is--
       (A) telecommunications carrier engaged in the provision of
     a telecommunications service;
       (B) a person engaged in the business of providing an
     Internet access service;
       (C) a person engaged in the business of providing an
     Internet information location tool; or
       (D) similarly engaged in the transmission, storage,
     retrieval, hosting, formatting, or translation (or any
     combination thereof) of a communication made by another
     person, without selection or alteration of the communication.
       (3) Definitions.--In this subsection:
       (A) By means of the world wide web.--The term ``by means of
     the World Wide Web'' means by placement of material in a
     computer server-based file archive so that it is publicly
     accessible, over the Internet, using hypertext transfer
     protocol, file transfer protocol, or other similar protocols.
       (B) Engaged in the business.--The term ``engaged in the
     business'' means that the person who sells or transfers or
     offers to sell or transfer, by means of the World Wide Web,
     material that is harmful to minors devotes time, attention,
     or labor to such activities, as a regular course of trade or
     business, with the objective of earning a profit, although it
     is not necessary that the person make a profit or that the
     selling or transferring or offering to sell or transfer such
     material be the person's sole or principal business or source
     of income.
       (C) Internet.--The term ``Internet'' means the combination
     of computer facilities and electromagnetic transmission
     media, and related equipment and software, comprising the
     interconnected worldwide network of computer networks that
     employ the Transmission Control Protocol/Internet Protocol,
     or any predecessor or successor protocol, to transmit
     information.
       (D) Internet access service.--The term ``Internet access
     service'' means a service that enables users to access
     content, information, electronic mail, or other services
     offered over the Internet and may also include access to
     proprietary content, information, and other services as part
     of a package of services offered to consumers. Such term does
     not include telecommunications services.

[[Page S11652]]

       (E) Internet information location tool.--The term
     ``Internet information location tool'' means a service that
     refers or links users to an online location on the World Wide
     Web. Such term includes directories, indices, references,
     pointers, and hypertext links.
       (F) Material that is harmful to minors.--The term
     ``material that is harmful to minors'' means any
     communication, picture, image, graphic image file, article,
     recording, writing, or other matter of any kind that--
       (i) taken as a whole and with respect to minors, appeals to
     a prurient interest in nudity, sex, or excretion;
       (ii) depicts, describes, or represents, in a patently
     offensive way with respect to what is suitable for minors, an
     actual or simulated sexual act or sexual contact, actual or
     simulated normal or perverted sexual acts, or a lewd
     exhibition of the genitals; and
       (iii) taken as a whole, lacks serious literary, artistic,
     political, or scientific value for minors.
       (G) Sexual act; sexual contact.--The terms ``sexual act''
     and ``sexual contact'' have the meanings given such terms in
     section 2246 of title 18, United States Code.
       (H) Telecommunications carrier; telecommunications
     service.--The terms ``telecommunications carrier'' and
     ``telecommunications service'' have the meanings given such
     terms in section 3 of the Communications Act of 1934 (47
     U.S.C. 153).

  Mr. McCAIN. Mr. President, I ask unanimous consent to vitiate the
unanimous consent agreement.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                    Amendment No. 3695, As Modified

  Mr. COATS. Mr. President, I also send a modification to this
amendment to the desk and ask unanimous consent that my amendment No.
3695 be considered as modified.
  I might just explain the amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The amendment (No. 3695), as modified, is as follows:

       On page 17, between lines 15 and 16, insert the following:
       (c) Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply in the
     case of any person or entity who in interstate or foreign
     commerce is knowingly engaged in the business of selling or
     transferring, by means of the World Wide Web, material that
     is harmful to minors unless such person or entity requires
     the use of a verified credit card, debit account, adult
     access code, or adult personal identification number, or such
     other procedures as the Federal Communications Commission may
     prescribe, in order to restrict access to such material by
     persons under 17 years of age.
       (2) Scope of exception.--For purposes of paragraph (1), a
     person shall not be considered to engaged in the business of
     selling or transferring material by means of the World Wide
     Web to the extent that the person is--
       (A) a telecommunications carrier engaged in the provision
     of a telecomunications service;
       (B) a person engaged in the business of providing an
     Internet access service;
       (C) a person engaged in the business of providing an
     Internet information location tool; or
       (D) similarly engaged in the transmission, storage,
     retrieval, hosting, formatting, or translation (or any
     combination thereof) of a communication made by another
     person, without selection or alteration of the communication.
       (3) Definitions.--In this subsection:
       (A) By means of the world wide web.--The term ``by means of
     the World Wide Web'' means by placement of material in a
     computer server-based file archive so that it is publicly
     accessible, over the Internet, using hypertext transfer
     protocol, file transfer protocol, or other similar protocols.
       (B) Engaged in the business.--The term ``engaged in the
     business'' means that the person who sells or transfers or
     offers to sell or transfer, by means of the World Wide Web,
     material that is harmful to minors devotes time, attention,
     or labor to such activities, as a regular course of trade or
     business, with the objective of earning a profit, although it
     is not necessary that the person make a profit or that the
     selling or transferring or offering to sell or transfer such
     material be the person's sole or principal business or source
     of income.
       (C) Internet.--The term ``Internet'' means collectively the
     myriad of computer and telecommunications facilities,
     including equipment and operating software, which comprise
     the interconnected world-wide network of networks that employ
     the Transmission Control Protocol/Internet Protocol, or any
     predecessor or successor protocols to such protocol, to
     communicate information of all kinds by wire or radio.
       (D) Internet access service.--The term ``Internet access
     service'' means a service that enables users to access
     content, information, electronic mail, or other services
     offered over the Internet and may also include access to
     proprietary content, information, and other services as part
     of a package of services offered to consumers. Such term does
     not include telecommunications services.
       (E) Internet information location tool.--The term
     ``Internet information location tool'' means a service that
     refers or links users to an online location on the World Wide
     Web. Such term includes directories, indices, references,
     pointers, and hypertext links.
       (F) Material that is harmful to minors.--The term
     ``material that is harmful to minors'' means any
     communication, picture, image, graphic image file, article,
     recording, writing, or other matter of any kind that--
       (i) taken as a whole and with respect to minors, appeals to
     a prurient interest in nudity, sex, or excretion;
       (ii) depicts, describes, or represents, in a patently
     offensive way with respect to what is suitable for minors, an
     actual or simulated sexual act or sexual contact, actual or
     simulated normal or perverted sexual acts, or a lewd
     exhibition of the genitals; and
       (iii) taken as a whole, lacks serious literary, artistic,
     political, or scientific value for minors.
       (G) Sexual act; sexual contact.--The terms ``sexual act''
     and ``sexual contact'' have the meanings given such terms in
     section 2246 of title 18, United States Code.
       (H) Telecommunications carrier; telecommunications carrier
     service.--The terms ``telecommunications carrier'' and
     ``telecommunications service'' have the meanings given such
     terms in Section 3 of the Communications Act of 1934 (47
     U.S.C. 153).

  Mr. COATS. The modification is a technical amendment.
  The underlying Finance Committee substitute was previously modified
changing the definition of ``Internet,'' and the modification that I am
sending to the desk simply brings my definition in my amendment in line
with the underlying amendment now as modified by the underlying
amendment.
  Mr. President, I also ask for the yeas and nays on this amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. COATS. Thank you, Mr. President.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I send an amendment in the second degree to
the desk.
  The PRESIDING OFFICER. Is there objection to the consideration of the
second-degree amendment?
  Without objection, it is so ordered.
  Mr. McCAIN. Mr. President, did the Senator from Connecticut need
unanimous consent in order for this amendment to be considered?
  The PRESIDING OFFICER. The Senator may call up a previously filed
amendment. He needs consent to modify it.
  Mr. McCAIN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. Mr. President, I also ask unanimous consent that the
amendment be considered as read and, further, that my colleague from
Indiana proceed to speak on his amendment. Then when he completes his
discussion, I will make some comments on the amendment that I am
offering.

         Amendment No. 3780 to Amendment No. 3695, as modified

  (Purpose: To provide an exception to the moratorium with respect to
    Internet access providers who do not offer customers screening
                               software)

  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Connecticut (Mr. Dodd) proposes an
     amendment numbered 3780 to amendment No. 3695, as modified.

  Mr. DODD. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the amendment, add:
       (d) Additional Exception to Moratorium.--
       (1) In general.--Subsection (a) shall also not apply with
     respect to an Internet access provider, unless, at the time
     of entering into an agreement with a customer for the
     provision of Internet access services, such provider offers
     such customer (either for a fee or at no charge) screening
     software that is designed to permit the customer to limit
     access to material on the Internet that is harmful to minors.
       (2) Definitions.--In this subsection:

[[Page S11653]]

       (A) Internet access provider.--The term `Internet access
     provider' means a person engaged in the business of providing
     a computer and communications facility through which a
     customer may obtain access to the Internet, but does not
     include a common carrier to the extent that it provides only
     telecommunications services.
       (B) Internet access services.--The term `Internet access
     services' means the provision of computer and communications
     services through which a customer using a computer and a
     modem or other communications device may obtain access to the
     Internet, but does not include telecommunications services
     provided by a common carrier.
       (C) Screening software.--The term ``screening software''
     means software that is designed to permit a person to limit
     access to material on the Internet that is harmful to minors.
       (3) Applicability.--Paragraph (1) shall apply to agreements
     for the provision of Internet access services entered into on
     or after the date that is 6 months after the date of
     enactment of this Act.

  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. Mr. President, I don't believe we will need all 20
minutes. There may be other Members who want to speak on this. But I
will summarize this in the interest of time, because essentially what
we are doing here is something that has already been done in the
Senate. It has been passed unanimously by the Senate. But it is not
attached to legislation that has as much chance of succeeding, or at
least, if that legislation succeeds, we are not sure what the Senate
has passed is going to survive the process. It might be dropped from
that.
  Let me begin by summarizing this just to refresh my colleagues'
memory of what we have done before.
  This amendment exempts from the moratorium which, if this bill
passes--and I believe it will--will be applied to any kind of a
taxation on the World Wide Web--my amendment simply exempts from that
moratorium any commercial porn site on the World Wide Web that does not
comply with the reasonable requirements that are incorporated in this
amendment to restrict access by children to sexually explicit material
on the site.
  The amendment establishes specific measures that porn site
operators--commercial porn site operators--must take to restrict
access. These restrictions represent standard technology already on the
web, and they reflect the technology and the requirements acknowledged
by the Court as both technically and economically feasible.
  In the Reno v. ACLU case--that is, the Court's decision that struck
down the indecency provisions of the Communications Decency Act--the
Court said there were two problems with that act.
  That act, by the way, is the one that was passed by the Senate in I
think a nearly unanimous vote. It was labeled the Exon-Coats amendment,
offered in the last Congress by the Senator from Nebraska, the Democrat
Senator from Nebraska, Senator Exon, and myself. We included in that
amendment--which passed both the House and the Senate and was endorsed
wholeheartedly by the President and the administration but did not
survive a Court challenge for two reasons:
  One, the Court said that the restrictions had to apply only to those
engaged in the business; that is, those commercial providers.
  Second, it said that our standard of indecency as described in the
material not suitable for children was not acceptable, violated first
amendment concerns, and they proscribed then a standard as harmful to
minors, or suggested that.
  We went back and adjusted that Communications Decency Act which was
passed by the Congress, signed into law, but rejected by the Court. We
revised it to comply with the Court's concerns, so that now it, we
believe, will meet the constitutional standard. We have applied it
strictly to commercial sites. We have adopted the requirements for
establishing the types of technology that the commercial porn providers
and the net can require that one will have to comply with and the other
require, and we have adopted the definition of ``harmful to minors'' as
outlined in the famous case on this issue, the Ginsberg, New York
Ginsberg case. That defined ``harmful to minors'' in a way that means
you have to be under 17, it has to be patently offensive as to what is
suitable for minors, taken as a whole lacking serious literary,
artistic, political, and scientific value for minors and appealing to
prurient interests.
  This is a standard that we are all familiar with. It has been the
standard applied in obscenity cases now for several decades, and it is
the generally accepted standard. That is the standard we have put into
this bill.
  So to summarize, what we are doing here is attaching to this
legislation, which provides a tax moratorium for users of the World
Wide Web, we are saying that that moratorium does not exist, will not
be available to those who use the World Wide Web for the purpose of
providing sexually explicit material to minors and have not put in
place in terms of their provision to all other users restrictions which
are technically feasible and already used, which are economically
feasible, but restrictions which allow them to certify that the person
requesting the material is, in fact, an adult; that is, 17 years and
older.
  This is exactly the language which was adopted unanimously by this
Senate in this Congress. And so everyone here has already read it,
understood it, voted for it, supported it. We are simply transferring
it now over to this particular bill and applying it in a somewhat
different way by denying the tax exemption.
  It is inconceivable that we would grant a massive tax perk to
commercial porn sites that make their smut available to children. We
are going to give a golden egg to commercial entities on the Internet,
or giving them a tax shelter, at least a moratorium for a tax shelter
for a period of time, but to think that we would give that same tax
break to those who are providing obscene material to minors without
requiring any good-faith effort on their part to make sure that minors
do not have free access to this material is unthinkable. That is the
bottom line.
  S. 442, the underlying bill that we are talking about, holds out a
massive tax shelter to on-line businesses. The question is, Is the
Senate going to extend this tax shelter to pornographers who are making
their material available to every child in America.
  People say, well, look, I mean, this is a proactive thing. Why don't
the parents take control and control what their child clicks into and
orders up.
  Mr. President, I will not display this on the Senate floor because I
think it is obscene, and whether or not you agree it is obscene for
adults, I think it is absolutely not only obscene but totally
inappropriate for minors. This is material that is available free. This
is before you click in and say I want to purchase your material or send
me more. These are the teasers. The teasers are almost beyond
description, and it is something we don't want to talk about here.
  There is no excuse in saying, well, an 11-year-old, if he clicks in
to find out about a school project and uses the wrong word, all it is
is a verbal version; he has to take a proactive effort to obtain the
material. That is not true. That youngster, that child, whether they
are in the library, whether they are in their school classroom, whether
they are at home, is immediately given the most graphic of images and
the most graphic of language as a teaser for them to go forward and
obtain the material. We are saying that there has to be a provision
whereby the provider of this material puts in place reasonable
restrictions to assure that the person asking for the material is
someone who is 17 years old or older.
  We have complied with the Court requirements. This is language that
has already been adopted by the Senate, and I hope my colleagues will
see it in that light and support this vote that is coming up in the
next few moments.
  Mr. President, I do not see any other Members on our side who are
wishing to speak at this particular time. And I am asking how much time
is remaining of the Senator's time and I would reserve that time.
  The PRESIDING OFFICER. The Senator has 52 minutes left under cloture.
  Mr. DODD. Parliamentary inquiry, Mr. President.
  There was no unanimous consent time agreement on this amendment?
  The PRESIDING OFFICER. That is correct.
  Mr. COATS. That is correct. It was asked, agreed to and vitiated.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. DODD addressed the Chair.

[[Page S11654]]

  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. I commend my colleague from Indiana who is in his closing
days in this body, having made the decision not to seek reelection. A
lot of Members, as they wind down, spend their last few days winding up
work and not being actively involved in the legislative process. It is
a tribute to Senator Coats that in his remaining days in this body, he
is still very active and involved in issues he has cared deeply about.
This is one such issue. I commend him for this amendment. I think it is
a very creative way to advance this issue and provide some safety for
young people who are being exposed today to an alarming amount of
pornography on the Internet.
  I strongly support his amendment. Now, let me put my amendment in a
framework for some people. My amendment is a second degree amendment,
and really complements the Coats amendment. My amendment requires that
Internet access providers either provide free of charge, or for a fee,
screening software at the time they make sales to customers. Internet
access providers that don't do this, as with the Coats amendment, would
be denied the benefits of the tax breaks in the underlying bill. This
amendment also relies on the Ginsberg definition that has been used in
the Coats amendment.
  How big is this problem, people say? Let me just put it in
perspective for you. According to Wired Magazine, there are 28,000 web
sites worldwide that have soft- or hard-core pornography on them. And,
fifty new web sites with such material are added to the Internet every
single day--50 a day.
  My colleague from Indiana has some material he wisely decided not to
show on the floor, but suffice to say, most Americans would find it
highly offensive, to put it mildly. The idea that this material is
available to children is something that ought to be a cause of alarm to
all of us. Sadly, many of our children are unwittingly and accidentally
exposed to such sites while surfing the web. They type in search terms
as innocuous as ``toys''--pretty innocuous--only to find graphic images
and language on their display terminals.
  Mr. President, the Internet is profoundly changing the way we learn
and communicate with people. Today our children have unprecedented
access to educational material through the Internet. It provides
children with vast opportunities to learn about art and culture and
history. The possibilities are endless. It is an incredibly valuable
technology for children all across this country and across the globe.
  But as with any technology, Mr. President, this advanced technology
also brings with it a dark side for our children. Many of these young
people are browsing the net, often unaccompanied by an adult, and come
across material that is unsuitable, to put it mildly. It is oftentimes
very sexually explicit.
  Every parent worries about strangers approaching their children in
their neighborhood or on a playground at school.
  And they teach their children how to avoid these strangers. But
today, these strangers can literally enter our homes via the Internet.
They are only a mouse click away from our children. In our libraries
and bookstores, we store reading material that is harmful to minors in
areas accessible only to adults. Yet, in cyberspace, these same
materials are as accessible to a child as his or her favorite bedtime
story. Pornographic images and sexual predators are now reaching our
children, via the Internet, in the privacy and safety of their own
homes and classrooms. This kind of access to our children is alarming,
and this invasion of our children's privacy and innocence is
unconscionable.
  Just a few weeks ago, law enforcement agents in a sting operation
apprehended 200 members of an Internet pornography ring that possessed
and distributed sexually explicit images of children. Members of this
ring traded inappropriate images of children on the Internet. One of
the sites raided was in my own State of Connecticut. As I noted a
moment ago, there are 50 new sites a day added to the Web that contain
pornography, these sites are added to the 28,000 that already exist.
Despite this successful operation by law enforcement agents, their raid
only represents the elimination of approximately four days of new
sites.
  We, as a nation, have an obligation to ensure that surfing the web
remains a safe and viable option for our children. We have a
responsibility to make sure that they are able to learn and grow in an
environment free of sexual predators and pornographic images. Clearly,
there is no substitute for parental supervision; yet, I think we can
all agree that many parents know less about the Internet than their
children do. Parents are convinced of the Internet's educational value,
but they also feel anxious about their ability to supervise their
children while they use it. In my view, it is important that we
encourage parents and children to use the Internet together. But
clearly, it is difficult for any adult to monitor children on line all
the time.
  Therefore, I believe we need to provide our parents with tools that
will help them to protect and to guide their children on the Internet.
The amendment I have offered here is a modest measure. It is not a
cure-all by any stretch of the imagination. It is a modest idea and
just requires that Internet access providers make screening software
available to customers purchasing Internet access services.
  The amendment would allow customers to have the opportunity, as I
said, to either buy or obtain free of charge, as determined by the
provider, screening software that permits customers to limit access to
material on the Internet that is harmful to minors. Like going to a
pharmacy and being asked if you want to buy a childproof lid for
prescription medication, my bill will require that Internet access
providers ask parents whether they would like to obtain screening
software to protect them from the very kind of dangers that we see on
the 28,000 existing web sites and the 50 new ones that are added each
day. This is a serious problem, and providing this kind of tool to
parents is one way we can begin to combat the problem.
  At any rate, I hope my colleagues will see fit to support this
amendment. It has been offered once before on the floor and passed the
Senate overwhelmingly and, not unlike the Coats amendment, we need to
have it included in this bill today.
  Again, I commend my colleague from Indiana for his fine work on many
issues, but once again on this particular issue, and hope as well this
second-degree amendment will be adopted.
  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. I am more than happy to accept the amendment offered by
the Senator from Connecticut. I thank him for his tireless work on
behalf of children. It has been my pleasure to serve with him on both
sides, the majority and minority, of the Children and the Families
Committee; under his chairmanship as ranking member, and now as
chairman, with Senator Dodd as ranking member. He has been a tireless
advocate of children and addressing the particular concerns that
children have to deal with, the problems they have to deal with growing
up, and his support for this legislation and the amendment to my
amendment, which I think strengthens what we are attempting to do and
is very reasonable, earlier offered by Senator McCain, to utilize the
advantages of software that allows for blocking.
  We see this as, certainly, a useful tool. It is not a totally useful
tool because there are a myriad of ways of defeating it. As we speak,
there are undoubtedly computer people far more savvy than this Senator,
looking for ways to bypass this and looking for ways to defeat it. But
it is a helpful tool, and it should be available to parents to help
them in their efforts to protect their children from material that they
do not deem appropriate and that certainly is not appropriate.
  I will be more than happy to accept the amendment. I do not know that
we need a rollcall vote on both. We can combine the two and I think we
will have a very worthwhile amendment.
  The PRESIDING OFFICER. Is there further debate on the Dodd amendment,
No. 3780? The Senator from Montana.
  Mr. BURNS. Mr. President, if my friend from Indiana and my friend
from Connecticut will yield, I am not going to oppose this amendment. I
congratulate both of them, as they have been dedicated to raising the
awareness of the garbage that we have on the Internet. No technology
that we can devise,

[[Page S11655]]

that stays in place very long, is going to actually protect our young
children from the pitfalls of the stuff that we find on there. The only
thing that we can do, and I think both of them have done this very
well, is to raise the awareness of the need for adult supervision
whenever young people go on the Internet. That is the only way. That is
the only way we are going to get protection and also a public awareness
and a public feeling that we are not going to do business with Internet
providers who offer this stuff.
  We cannot protect and use this great tool called the glass highway
and bring any integrity to it unless, No. 1, we secure it when I send a
message to you. Of course, that is the encryption issue, and that is an
issue we have to fight another day, as far as law enforcement
surveillance and this type of thing is concerned. But we cannot be
lulled or rocked into a position of where we are in a basket of
comfort, thinking we have done the job and protected our children from
the pedophiles and the garbage that we find on the Internet, because
the Internet is going to reflect what we have in society. No matter
where you go, you will find what you are looking for. It is going to be
there, too, just like it is downtown or any place in America.
  So, I am not going to oppose this amendment. I do have some
reservations about it because, No. 1, I think it is overreaching a
little bit into industrial policy, as far as what we should be doing.
But I tell Americans, don't get comfortable in this basket of security
because we have this amendment or that we have this legislation, that
we are still going to be susceptible to the people who prey on the
Internet with garbage. We will never solve that problem. The only place
it will be solved is through parents and us talking about it and
raising the awareness that it is there. Parental supervision,
supervision in our schools and our libraries, that is the only way we
defeat this. Because basically we are decent people, that is what will
defeat it. That is what will finally crowd it off of there, and also
secure it, so maybe there will not be any room for it. I hope that
would be the case, also.
  I congratulate the Senator from Indiana. I will miss him and his
service in the next U.S. Senate. But nobody has a more stellar record
than Senator Coats on these issues of family and decency in the public
place. I appreciate that.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, first, before my friend from Montana
leaves the floor, I want to tell him how much I appreciate his work as
chairman of the telecommunications subcommittee on the Commerce
Committee. My friend from Montana and I have had spirited discussions
and debates on this overall issue. I understand his deeply held views,
and I appreciate them. There is great attraction to his argument. There
is a fine line in America between the prevention of material which is
offensive being forced on our young people and censorship. So I
understand the arguments that the Senator from Montana has made. But
let me say that it is a huge problem, and the Senator from Montana
knows it as well as I do. It is a huge problem.
  Anyone who operates the Internet today sees this proliferation of
incredible trash that occurs, which is terribly, terribly disturbing to
all of us--all of us on both sides of the aisle--because of the
influence that it has on young Americans, not to mention older
Americans.
  We had a hearing in the Commerce Committee. There was testimony that
there is a direct relation between pedophilia and the Internet. There
are documented cases where pedophiles have corresponded with young
people on the Internet and enticed them into meeting. These stories are
so terrible and graphic that I am reluctant to discuss them on the
floor of the U.S. Senate.
  It is a problem in American society when you look at the growth of
the Internet in America. All of us, especially those of us who serve on
the Commerce Committee, are aware of the incredible potential of the
Internet, the unbelievable effects it is going to have on the Nation
and the world. With the wiring of schools and libraries in America, for
the first time, every child in America, no matter whether they come
from the Navajo Reservation and Chinlee High School or whether they
attend Beverly Hills High School, are going to have access to knowledge
and information like never before.
  When you dial in the word ``teen'' on the Internet, or when you dial
in the word ``nurse'' and the search engine comes up with a
proliferation of pornography and advertisements for it, we have to try
to address this problem.
  The Senator from North Dakota has discussed this issue in committee
hearings, the Senator from Oregon--all of us who are familiar with it.
I will tell you right now, Mr. President, one of the problems is that a
lot of us don't use the Internet like the now tens of millions of
Americans do, so we are not aware of this problem. And, no, none of us
would support censorship. No one is in favor of censorship.
  I will tell you that when we have actual testimony before our
committee by detectives who say that they go out and they find people
who entice young children through the Internet to meet with them and
then terrible things ensue, then obviously we have a problem. Recently
in Phoenix, AZ, a young boy who was on the Internet viewing pornography
walked out and molested a 4-year-old child. It is a fact. It is a
documented fact. Or parents in the library see pornography as they walk
by and their children are in the library and see this.
  I am not sure I know the answers. I don't know the answers, but I
firmly believe that we at least ought to make an effort to provide
parents with the tools and institutions with the tools at least to
filter out some of this garbage, which brings me to the Senator from
Indiana.
  I know of no one who is more involved in the issues of families and
morals and decency in America than is Senator Coats. I miss many of my
colleagues when they leave; some of them I don't miss. But the fact is,
the majority of them I do. I will miss Senator Coats because I view him
as a moral compass around here.
  When Senator Coats speaks on these issues, we all listen because he
is a living example of what we want families in America to be about.
Senator Coats has been involved in this particular effort on this piece
of legislation for a long, long time.
  I believe there may be some question about the bill's
constitutionality. Fine, we will let the courts decide that. I have
some questions myself. But it is a sad, but inescapable fact that
material harmful to children is pervasive on the Internet in America
today. It is an indisputable fact. There is no Member of the Senate who
is more qualified and has more credibility to address this issue than
the Senator from Indiana.
  It is my understanding that the Senator from Montana is not going to
seek a recorded vote on the second-degree amendment of the Senator from
Connecticut. Fairly shortly, if there is no other debate on this
amendment, we will move to a vote around noon.
  Mr. President, I ask unanimous consent that after adoption of the
Dodd second-degree amendment that the Senate vote at 12 noon on the
Coats amendment.
  Mr. COATS. Reserving the right to object, I would like to reserve 1
minute for summation on the amendment that is being offered before the
vote. Hopefully, I can do that before 12 o'clock. In case I can't, I
would like that 1 minute.
  Mr. McCAIN. I amend my unanimous consent request that the Senator
from Indiana have 2 minutes prior to the vote.
  The PRESIDING OFFICER (Mr. Burns). Without objection, it is so
ordered.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I will take 1 minute. I want to use this
unique opportunity to add my comments about the Senator from Indiana. I
have told people that I am enormously proud to serve in this body. One
of the major reasons for that is the men and women with whom I serve,
both Republicans and Democrats, liberals and conservatives, I think are
the best men and women I have been associated with in my entire life.
  One of those is the Senator from Indiana. We became acquainted in
1981 when we both were elected to the House of Representatives in the
same election, and although we perhaps have

[[Page S11656]]

agreed and disagreed many times on many issues throughout the years, I
have deep admiration for Senator Coats and his family.
  When he leaves the Senate, as is the case with so many of our
colleagues, the Senate will have lost a very important contributor on a
good many issues, this one most notable. He has been persistent on this
issue and, as the Senator from Arizona just described, we have had
hearings in the Commerce Committee about this issue. It desperately
needs attention, desperately needs a solution, and the Senator from
Indiana has been a significant contributor in that effort. I did not
want to let this moment pass without sharing my respect for Senator
Coats. I yield the floor.
  Mr. COATS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Indiana.
  Mr. COATS. Mr. President, I appreciate the kind words from my
colleagues--the Senator from Connecticut, the Senator from North Dakota
and the Senator from Arizona. I am also appreciative of their support
for this effort.
  I don't know if any of us has a perfect answer to this. We do see the
Internet, the World Wide Web, as one of the most extraordinary
invasions in the history of mankind. It can provide access to
information that can revolutionize our world and provide opportunities
for people who heretofore have not had those opportunities for
knowledge and for learning that are extraordinary.
  At the same time, there is a dark side to the Internet. As with most
new technology, it can be used for good; it can be used for evil.
Unfortunately, the Internet is no exception. None of us want to put
ourselves in the position of being a censor. We decry that material. We
don't think it sends the right kind of moral message. We wish we didn't
have it.
  Yet, as a country dedicated to the freedom of speech, enshrined in
its Constitution, we have to accept certain types of material that some
of us consider offensive, but doesn't necessarily meet the obscenity
test that the Court has laid out, which is a pretty stringent test.
  By the same token, surely--surely--we as a society can address the
issue of how we protect the innocence of our children and whether we
can use reasonable means to give parents tools to protect that
innocence. That is what this amendment is about.
  Software is an attempt to do that. We know from documented evidence
that software is only a partial solution, that it can be defeated, but
I think it is helpful and we ought to utilize that and encourage it.
  Beyond that, however, we need a sanction, a sanction that imposes
some requirements--technologically feasible requirements and
economically feasible requirements--on those who seek to bypass the
effort to put any kind of restrictions on the availability of this
material to children.
  We passed legislation earlier, the Communications Decency Act. Even
though the Congress and the people of America and the President
supported it, the Court did not support it. It struck it down. We have
carefully modified and changed this language in this bill that I
offered earlier that the Senate passed to comply with those Court
restrictions.
  We have made sure that it applies to minors; that the requirements
put in place meet the Court's standard; that the language harmful to
minors meets the Court-ordered test that was given to us years ago in
the Ginsberg case. We believe we have something here that not only is
acceptable to the American people and to the Congress of the United
States and to the administration, but hopefully acceptable to the
standards imposed by the Supreme Court. So I thank my colleagues for
their generous words. I thank them for their support.

  The hour of 12 noon having approached, if there is any time left, I
yield it back and hope we can go to a vote and pass this unanimously
and send the kind of signal that we need to send, and that is that this
country and this Congress is not going to stand for obscene material to
be pushed into children's minds through the Internet without reasonable
restrictions on that material.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The question now occurs on agreeing to the
Dodd amendment No. 3780 to the Coats amendment, as modified.
  The amendment (No. 3780) was agreed to.
  Mr. DODD. I move to reconsider the vote.
  Mr. McCAIN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

          Vote on Amendment No. 3695, As Modified, As Amended

  The PRESIDING OFFICER. The question now occurs on agreeing to the
Coats amendment No. 3695, as modified and as amended. The yeas and nays
have been ordered. The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is
necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
  The result was announced--yeas 98, nays 1, as follows:

                      [Rollcall Vote No. 303 Leg.]

                                YEAS--98

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Coats
     Cochran
     Collins
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Enzi
     Faircloth
     Feingold
     Feinstein
     Ford
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Helms
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                                NAYS--1


     Leahy


                             NOT VOTING--1


     Glenn

  The amendment (No. 3695), as modified, as amended, was agreed to.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mrs. HUTCHISON. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mrs. HUTCHISON. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

 Amendments Numbered 3734; 3723, as modified, 3717, 3713, 3710, 3712,
                      3735; and 3721, as Modified

  Mr. McCAIN. Mr. President, I understand the following amendments
which were filed earlier are acceptable to both sides.
  Therefore, I ask unanimous consent that the following amendments be
considered en bloc, and agreed to:
  Amendments numbered 3734, 3723, as modified, 3717, 3713, 3710, 3712,
3735, and 3721, as modified.
  The PRESIDING OFFICER. Is there objection?
  Mr. DORGAN. Mr. President, reserving the right to object, I shall not
object, the amendments have been cleared on our side. We have no
objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 3734; 3723, as modified, 3717, 3713, 3710, 3712,
3735; and 3721, as modified) were agreed to, as follows:

                           amendment no. 3734

             (Purpose: To modify the Commission membership)

       Beginning on page 18, line 17, strike all through page 19,
     line 21, and insert:
       (B) Eight representatives from State and local governments
     (1 of whom shall be from a State or local government that
     does not impose a sales tax) and 8 representatives of the
     electronic commerce industry, telecommunications carriers,
     local retail businesses, and consumer groups, comprised of--

[[Page S11657]]

       (i) five representatives appointed by the Majority Leader
     of the Senate;
       (ii) three representatives appointed by the Minority Leader
     of the Senate;
       (iii) five representatives appointed by the Speaker of the
     House of Representatives; and
       (iv) three representatives appointed by the Minority Leader
     of the House of Representatives.

                    amendment no. 3723, as modified

 (Purpose: To establish the relationship between the bill and certain
  other provisions of existing law, and to set forth the role of the
           National Commission on Uniform State Legislation)

       On page 25, between lines 6 and 7, insert the following:
       (3) Effect on the Communications Act of 1934.--Nothing in
     this section shall include an examination of any fees or
     charges imposed by the Federal Communications Commission or
     States related to--
       (A) obligations under the Communications Act of 1934 (47
     U.S.C. 151 et seq.); or
       (B) the implementation of the Telecommunications Act of
     1996 (or of amendments made by that Act).
       (h) National Tax Association Communications and Electronic
     Commerce Tax Project.--The Commission shall, to the extent
     possible, ensure that its work does not undermine the efforts
     of the National Tax Association Communications and Electronic
     Commerce Tax Project.

                           amendment no. 3717

     (Purpose: To add a severability provision for the entire bill)

       At the end of the bill, add the following:

     SEC.  . SEVERABILITY.

       If any provision of this Act, or any amendment made by this
     Act, or the application of that provision to any person or
     circumstance, is held by a court of competent jurisdiction to
     violate any provision of the Constitution of the United
     States, then the other provisions of that section, and the
     application of that provision to other persons and
     circumstances, shall not be affected.

                           amendment no. 3713

    (Purpose: To correct a reference to ``interstate'', rather than
                        ``electronic'' commerce)

       On page 22, line 25, strike ``interstate'' and insert
     ``electronic''.

                           amendment no. 3710

     (Purpose: To correct a reference to ``consumers'' to refer to
                               ``users'')

       On page 28, line 6, strike ``consumers.'' and insert
     ``users.''.

                           amendment no. 3712

               (Purpose: To define the term ``Internet'')

       On page 27, strike lines 14 through 23, and insert the
     following:
       (4) Internet.--The term ``Internet'' means collectively the
     myriad of computer and telecommunications facilities,
     including equipment and operating software, which comprise
     the interconnected world-wide network of networks that employ
     the Transmission Control Protocol/Internet Protocol, or any
     predecessor or successor protocols to such protocol, to
     communicate information of all kinds by wire or radio.

                           amendment no. 3735

  (Purpose: To make it clear that the delayed effective date for the
   Children's Online Privacy Act is keyed to the filing date of the
                              application)

       In section 208(2) of title II of the bill, as added by
     amendment, insert ``filed'' after ``application'' the first
     place it appears.
  Mr. BRYAN. Mr. President, this bill was reported out of Committee
last week by voice vote. Because of time constraints at the end of the
session, we have been unable to file a committee report before offering
it as an amendment on the Senate floor. Accordingly, I wish to take
this opportunity to explain the purpose and some of the important
features of the amendment.
  In a matter of only a few months since Chairman McCain and I
introduced this bill last summer, we have been able to achieve a
remarkable consensus. This is due in large part to the recognition by a
wide range of constituencies that the issue is an important one that
requires prompt attention by Congress. It is due to revisions to our
original bill that were worked out carefully with the participation of
the marketing and online industries, the Federal Trade Commission,
privacy groups, and first amendment organizations.
  The goals of this legislation are: (1) to enhance parental
involvement in a child's online activities in order to protect the
privacy of children in the online environment; (2) to enhance parental
involvement to help protect the safety of children in online fora such
as chatrooms, home pages, and pen-pal services in which children may
make public postings of identifying information; (3) to maintain the
security of personally identifiable information of children collected
online; and (4) to protect children's privacy by limiting the
collection of personal information from children without parental
consent. The legislation accomplishes these goals in a manner that
preserves the interactivity of children's experience on the Internet
and preserves children's access to information in this rich and
valuable medium.
  I ask unanimous consent that a section-by-section summary be printed
in the Record.
  There being no objection, the material was ordered to be printed in
the Record, as follows:

                       Section-by-Section Summary

     Section 1. Short title
       This Act may be cited as the ``Children's Online Privacy
     Protection Act of 1998.''
     Section 202. Definitions
       (1) Child: The amendment applies to information collected
     from children under the age of 13.
       (2) Operator: The amendment applies to ``operators.'' This
     term is defined as the person or entity who both operates an
     Internet website or online service and collects information
     on that site either directly or through a subcontractor. This
     definition is intended to hold responsible the entity that
     collects the information, as well as the entity on whose
     behalf the information is collected. This definition,
     however, would not apply to an online service to the extent
     that it does not collect or use the information.
       The amendment exempts nonprofit entities that would not be
     subject to the FTC Act. The exception for a non-profit entity
     set forth in Section 202(2)(B) applies only to a true not-
     for-profit and would not apply to an entity that operates for
     its own profit or that operates in substantial part to
     provide profits to or enhance the profitability of its
     members.
       (7) Parent: The term ``parent'' includes ``legal
     guardian.''
       (8) Personal Information: This is an online children's
     privacy bill, and its reach is limited to information
     collected online from a child.
       The amendment applies to individually identifying
     information collected online from a child. The definition
     covers the online collection of a first and last name,
     address including both street and city/town (unless the
     street address alone is provided in a forum, such as a city-
     specific site, from which the city or town is obvious), e-
     mail address or other online contact information, phone
     number, Social Security number, and other information that
     the website collects online from a child and combines with
     one of these identifiers that the website has also collected
     online. Thus, for example, the information ``Andy from Las
     Vegas'' would not fall within the amendment's definition of
     personal information. In addition, the amendment authorizes
     the FTC to determine through rulemaking whether this
     definition should include any other identifier that permits
     the physical or online contacting of a specific individual.
       It is my understanding that ``contact'' of an individual
     online is not limited to e-mail, but also includes any other
     attempts to communicate directly with a specific,
     identifiable individual. Anonymous, aggregate information--
     information that cannot be linked by the operator to a
     specific individual--is not covered by this definition.
       (9) Verifiable Parental Consent: The amendment establishes
     a general rule that ``verifiable parental consent'' is
     required before a web site or online service may collect
     information online from children, or use or disclose
     information that it has collected online from children. The
     amendment makes clear that parental consent need not be
     obtained for each instance of information collection, but
     may, with proper notice, be obtained by the operator for
     future information collection, use and disclosure. Where
     parental consent is required under the amendment, it means
     any reasonable effort, taking into consideration available
     technology, to provide the parent of a child with notice of
     the website's information practices and to ensure that the
     parent authorizes collection, use and disclosure, as
     applicable, of the personal information collected from that
     child.
       The FTC will specify through rulemaking what is required
     for the notice and consent to be considered adequate in light
     of available technology. The term should be interpreted
     flexibly, encompassing ``reasonable effort'' and ``taking
     into consideration available technology.'' Obtaining written
     parental consent is only one type of reasonable effort
     authorized by this legislation. ``Available technology'' can
     encompass other online and electronic methods of obtaining
     parental consent. Reasonable efforts other than obtaining
     written parental consent can satisfy the standard. For
     example, digital signatures hold significant promise for
     securing consent in the future, as does the World Wide Web
     Consortium's Platform for Privacy Preferences. In
     addition, I understand that the FTC will consider how
     schools, libraries and other public institutions that
     provide Internet access to children may accomplish the
     goals of this Act.
       As the term ``reasonable efforts'' indicates, this is not a
     strict liability standard and looks to the reasonableness of
     the efforts made by the operator to contact the parent.
       (10) Website Directed to Children: This definition
     encompasses a site, or that portion of a site or service,
     which is targeted to children under age 13. The subject
     matter, visual content, age of models, language or other
     characteristics of the site or service, as well

[[Page S11658]]

     as off-line advertising promoting the website, are all
     relevant to this determination. For example, an online
     general interest bookstore or compact disc store will not be
     considered to be directed to children, even though children
     visit the site. However, if the operator knows that a
     particular visitor from whom it is collecting information is
     a child, then it must comply with the provisions of this
     amendment. In addition, if that site has a special area for
     children, then that portion of the site will be considered to
     be directed to children.
       The amendment provides that sites or services that are not
     otherwise directed to children should not be considered
     directed to children solely because they refer or link users
     to different sites that are directed to children. Thus a site
     that is directed to a general audience, but that includes
     hyperlinks to different sites that are directed to children,
     would not be included in this definition but the child
     oriented linked sites would be. By contrast, a site that is a
     child-oriented director would be considered directed to
     children under this standard. However, it would be
     responsible for its own information practices, not those of
     the sites or services to which it offers hyperlinks or
     references.
       (12) Online Contact Information: This term means an e-mail
     address and other substantially similar identifiers enabling
     direct online contact with a person.
     Section 203. Regulation of unfair and deceptive acts and
         practices
       This subsection directs the FTC to promulgate regulations
     within one year of the date of enactment prohibiting website
     or online service operators or any person acting on their
     behalf from violating the prohibitions of subsection (b). The
     regulations shall apply to any operator of a website or
     online service that collects personal information from
     children and is directed to children, or to any operator
     where that operator has actual knowledge that it is
     collecting personal information from a child.
       The regulations shall require that these operators adhere
     to the statutory requirements set forth in Section 203(b)(1):
       1. Notice--Operators must provide notice on their sites of
     what personal information they are collecting online from
     children, how they are using that information, and their
     disclosure practices with regard to that information. Such
     notice should be clear, prominent and understandable.
     However, providing notice on the site alone is not sufficient
     to comply with the other provisions of Section 202 that
     require the operator to make reasonable efforts to provide
     notice in obtaining verifiable parental consent, or the
     provisions of Section 203 that require reasonable efforts to
     give parents notice and an opportunity to refuse further use
     or maintenance of the personal information collected from
     their child. These provisions require that the operator make
     reasonable efforts to ensure that a parent receives notice,
     taking into consideration available technology.
       2. Prior Parental Consent--As a general rule, operators
     must obtain verifiable parental consent for the collection,
     use or disclosure of personal information collected online
     from a child.
       3. Disclosure and Opt Out for a Parent Who Has Provided
     Consent: Subsection 203(b)(1)(B) creates a mechanism for a
     parent, upon supplying proper identification, to obtain: (1)
     disclosure of the specific types of personal information
     collected from the child by the operator; and (2) disclosure
     through a ``means that is reasonable under the
     circumstances'' of the actual personal information the
     operator has collected from that child. It would be
     inappropriate for operators to be liable under another source
     of law for disclosures made in a good faith effort to fulfill
     the disclosure obligation under this subsection. Accordingly,
     subsection 203(a)(2) provides that operators are immune from
     liability under either federal or state law for any
     disclosure made in good faith and following procedures that
     are reasonable. If the FTC has not issued regulations, I
     expect that such procedures would be judged by a court based
     upon their reasonableness.
       Subsection 203(b)(1)(B) also gives that parent the ability
     to opt out of the operator's further use or maintenance in
     retrievable form, or future online collection of information
     from that child. The opt out of future collection operates as
     a revocation of consent that the parent has previously given.
     It does not prohibit the child from seeking to provide
     information to the operator in the future, nor the operator
     from responding to such a request by seeking (and obtaining)
     parental consent. In addition, the opt out requirement
     relates only to the online site or sites for which the
     information was collected and maintained, and does not apply
     to different sites which the operator separately maintains.
       Subsection 203(b)(3) provides that if a parent opts out of
     use or maintenance in retrievable form, or future online
     collection of personal information, the operator of the site
     or service in question may terminate the service provided to
     that child.
       4. Curbing Inducements to Disclose Personal Information:
     Subsection 203(b)(1)(C) prohibits operators from inducing a
     child to disclose more personal information than reasonably
     necessary in order to participate in a game, win a prize, or
     engage in another activity.
       5. Security Procedures: Subsection 203(b)(1)(D) requires
     that an operator establish and maintain reasonable procedures
     to protect the confidentiality, security, and integrity of
     personal information collected online from children by that
     operator.
       Exceptions to Parental Consent: Subsection 203(b)(2) is
     intended to ensure that children can obtain information they
     specifically request on the Internet but only if the operator
     follows certain specified steps to protect the child's
     privacy. This subsection permits an operator to collect
     online contact information from a child without prior
     parental consent in the following circumstances: (A)
     collecting a child's online contact information to respond on
     a one-time basis to a specific request of the child; (B)
     collecting a parent's or child's name and online contact
     information to seek parental consent or to provide parental
     notice; (C) collecting online contact information to respond
     directly more than once to a specific request of the child
     (e.g., subscription to an online magazine), when such
     information is not used to contact the child beyond the scope
     of that request; (D) the name and online contact information
     of the child to the extent reasonably necessary to protect
     the safety of a child participant in the site; and (E)
     collection, use, or dissemination of such information as
     necessary to protect the security or integrity of the site or
     service, to take precautions against liability, to respond to
     judicial process, or, to the extent permitted under other
     provisions of law, to provide information to law enforcement
     agencies or for an investigation related to public safety.
       For each of these exceptions the amendment provides
     additional protections to ensure the privacy of the child.
     For a one-time contact, the online contact information
     collected may be used only to respond to the child and then
     must not be maintained in retrievable form. In cases where
     the site has collected the parents' online contact
     information in order to obtain parental consent, it must not
     maintain that information in retrievable form if the parent
     does not respond in a reasonable period of time. Finally, if
     the child's online contact information will be used, at the
     child's request, to contact the child more than once, the
     site must use reasonable means to notify parents and give
     them the opportunity to opt out.
       In addition, subsection (C)(ii) also allows the FTC the
     flexibility to permit the site to recontact the child without
     notice to the parents, but only after the FTC takes into
     consideration the benefits to the child of access to online
     information and services and the risks to the security and
     privacy of the child associated with such access.
       Paragraph (D) clarifies that websites and online services
     offering interactive services directed to children, such as
     monitored chatrooms and bulletin boards, that require
     registration but do not allow the child to post personally
     identifiable information, may request and retain the names
     and online contact information of children participating
     in such activities to the extent necessary to protect the
     safety of the child. However, the company may not use such
     information except in circumstances where the company
     believes that the safety of a child participating on that
     site is threatened, and the company must provide direct
     parental notification with the opportunity for the parent
     to opt out of retention of the information. For example,
     there have been instances in which children have
     threatened suicide or discussed family abuse in such fora.
     Under these circumstances, an operator may use the name
     and online contact information of the child in order to be
     able to get help for the child.
       Throughout this section, the amendment uses the term ``not
     maintained in retrievable form.'' It is my intent in using
     this language that information that is ``not maintained in
     retrievable form'' be deleted from the operator's database.
     This language simply recognizes the technical reality that
     some information that is ``deleted'' from a database may
     linger there in non-retrievable form.
       Enforcement.--Subsection 203(c) provides that violations of
     the FTC's regulations issued under this amendment shall be
     treated as unfair or deceptive trade practices under the FTC
     Act. As discussed below, State Attorneys General may enforce
     violations of the FTC's rules. Under subsection 203(d), state
     and local governments may not, however, impose liability for
     activities or actions covered by the amendment if such
     requirements would be inconsistent with the requirements
     under this amendment or Commission regulations implementing
     this amendment.
     Section 204. Safe harbors
       This section requires the FTC to provide incentives for
     industry self-regulation to implement the requirements of
     Section 203(b). Among these incentives is a safe harbor
     through which operators may satisfy the requirements of
     Section 203 by complying with self-regulatory guidelines that
     are approved by the Commission under this section.
       This section requires the Commission to make a
     determination as to whether self-regulatory guidelines
     submitted to it for approval meet the requirements of
     Commission regulations issued under Section 203. The
     Commission will issue, through rulemaking, regulations
     setting forth procedures for the submission of self-
     regulatory guidelines for Commission approval. The
     regulations will require that such guidelines provide the
     privacy protections set forth in Section 203. The Commission
     will assess all elements of proposed self-regulatory
     guidelines, including

[[Page S11659]]

     enforcement mechanisms, in light of the circumstances
     attendant to the industry or sector that the guidelines are
     intended to govern.
       The amendment provides that, once guidelines are approved
     by the Commission, compliance with such guidelines shall be
     deemed compliance with Section 203 and the regulations issued
     thereunder.
       The amendment requires the Commission to act upon requests
     for approval of guidelines for safe harbor treatment within
     180 days of the filing of such requests, including a period
     for public notice and comment, and to set forth its
     conclusions in writing. If the Commission denies a request
     for safe harbor treatment or fails to act on a request within
     180 days, the amendment provides that the party that sought
     Commission approval may appeal to a United States district
     court as provided for in the Administrative Procedure Act, 5
     U.S.C. Sec. 706.
     Section 205. Actions by States
       State Attorneys General may file suit on behalf of the
     citizens of their state in any U.S. district court of
     jurisdiction with regard to a practice that violates the
     FTC's regulations regarding online children's privacy
     practices. Relief may include enjoining the practice,
     enforcing compliance, obtaining compensation on behalf of
     residents of the state, and other relief that the court
     considers appropriate.
       Before filing such an action, an attorney general must
     provide the FTC with written notice of the action and a copy
     of the complaint. However, if the attorney general determines
     that prior notice is not feasible, it shall provide notice
     and a copy of the complaint simultaneous to filing the
     action. In these actions, state attorneys general may
     exercise their power under state law to conduct
     investigations, take evidence, and compel the production of
     evidence or the appearance of witnesses.
       After receiving notice, the FTC may intervene in the
     action, in which case it has the right to be heard and to
     file an appeal. Industry associations whose guidelines are
     relied upon as a defense by any defendant to the action may
     file as amicus curiae in proceedings under this section.
       If the FTC has filed a pending action for violation of a
     regulation prescribed under Section 3, no state attorney
     general may file an action.
     Section 206. Administration and applicability
       FTC Enforcement: Except as otherwise provided in the
     amendment, the FTC shall conduct enforcement proceedings. The
     FTC shall have the same jurisdiction and enforcement
     authority with respect to its rules under this amendment as
     in the case of a violation of the Federal Trade Commission
     Act, and the amendment shall not be construed to limit the
     authority of the Commission under any other provisions of
     law.
       Enforcement by Other Agencies: In the case of certain
     categories of banks, enforcement shall be carried out by the
     Office of the Controller of the Currency; the Federal
     Reserve Board, the Board of Directors of the Federal
     Deposit Insurance Corporation, the National Credit Union
     Administration Board, and the Farm Credit Administration.
     The Secretary of Transportation shall have enforcement
     authority with regard to any domestic or foreign air
     carrier, and the Secretary of Agriculture where certain
     aspects of the Packers and Stockyards Act apply.
     Section 207. Review
       Within 5 years of the effective date for this amendment,
     the Commission shall conduct a review of the implementation
     of this amendment, and shall report to Congress.
     Section 208. Effective date
       The enforcement provisions of this amendment shall take
     effect 18 months after the date of enactment, or the date on
     which the FTC rules on the first safe harbor application
     under section 204 if the FTC does not rule on the first such
     application filed within one year after the date of
     enactment, whichever is later. However, in no case shall the
     effective date be later than 30 months after the date of
     enactment of this Act.

       list of supporters of children's internet privacy language

       The Federal Trade Commission.
       The Direct Marketing Association (representing 3,500
     domestic members).
       GeoCities.
       Time Warner.
       Commercial Internet eXchange Association.
       Disney.
       AOL.
       Highlights for Children.
       American Academy of Pediatrics.
       American Advertising Federation.
       American Association of Advertising Agencies.
       Center for Democracy & Technology.
       Center for Media Education.
       Viacom.

                    amendment no. 3721, as modified

 (Purpose: To make minor changes in the commission established by the
                                 bill)

       On page 17, beginning with line 18, strike through line 21
     on page 19 and insert the following:
       (a) Establishment of Commission.--There is established a
     commission to be known as the Advisory Commission on
     Electronic Commerce (in this title referred to as the
     ``Commission''). The Commission shall--
       (1) be composed of 19 members appointed in accordance with
     subsection (b), including the chairperson who shall be
     selected by the members of the Commission from among
     themselves; and
       (2) conduct its business in accordance with the provisions
     of this title.
       (b) Membership.--
       (1) In general.--The Commissioners shall serve for the life
     of the Commission. The membership of the Commission shall be
     as follows:
       (A) 3 representatives from the Federal Government,
     comprised of the Secretary of Commerce, the Secretary of the
     Treasury, and the United States Trade Representative (or
     their respective delegates).
       (B) 8 representatives from State and local governments (one
     such representative shall be from a State or local government
     that does not impose a sales tax * * *) and one
     representative shall be from a state that does not impose an
     income tax.
       (C) 8 representatives of the electronic commerce industry,
     telecommunications carriers, local retail businesses, and
     consumer groups, comprised of--
       (i) 5 individuals appointed by the Majority Leader of the
     Senate;
       (ii) 3 individuals appointed by the Minority Leader of the
     Senate;
       (iii) 5 individuals appointed by the Speaker of the House
     of Representatives; and
       (iv) 3 individuals appointed by the Minority Leader of the
     House of Representatives.

                           Amendment No. 3722

 (Purpose: To direct the Commission to examine model State legislation)

  Mr. McCAIN. Mr. President, I ask unanimous consent that amendment
numbered 3722 be the pending business.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arizona (Mr. McCain), for himself, Mr.
     Gregg, and Mr. Lieberman, proposes an amendment numbered
     3722.

  Mr. McCAIN. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 23, beginning with line 14, strike through line 2
     on page 25 and insert the following:
       ``(D) an examination of model State legislation that--
       ``(i) would provide uniform definitions of categories of
     property, goods, service, or information subject to or exempt
     from sales and use taxes; and
       ``(ii) would ensure that Internet access services, online
     services, and communications and transactions using the
     Internet, Internet access service, or online services would
     be treated in a tax and technologically neutral manner
     relative to other forms of remote sales; and''.

  Mr. McCAIN. Mr. President, this amendment is simple. It is offered by
myself for Senators Gregg and Lieberman. The amendment instructs the
commission created in this bill to examine model state legislation and
provide definitions of what should be subject to or exempt from
taxation. Additionally, the Commission would be instructed to look
specifically at Internet transactions.
  Some would like to see the scope of the commission expanded. This is
not necessary. The Commission may look at any form of remote sales, but
it is not forced to.
  This bill is about the Internet, and its potential as a new
technology--but more importantly, as a medium for electronic commerce.
The Internet is not like the mail. It is not a monopoly. It is unlike
anything that we have seen to date. For that reason we believe that it
should be protected from discriminatory taxation.
  Mr. President, there will be some who seek to defeat this amendment
or will offer second degree amendments to it regarding remote sales,
specifically mail order sales. We dealt with that subject specifically
the other day. My good friend from Arkansas offered an amendment to
overturn the Quill decision regarding mail order sales. Senator Graham
of Florida spoke in favor of the amendment. And then the Senate voted
on the matter. The amendment was defeated handily: 65-30. We don't need
to revisit this issue again. If we do, I would hope the vote to table
would be the same.
  We should let this commission do its work. We should not prejudge
what they will decide or attempt to force them to examine certain
subjects or come to certain conclusions. That would be wrong and would
undermine the mission of the Commission. The bi-partisan amendment
before the Senate gives the commission free reign to decide what it
believes is best and report such findings to the Congress. I urge my
colleagues to support the McCain/Gregg/Lieberman amendment and defeat
any second degree amendments that may be offered.
  Mr. President, I yield the floor.
  Mr. HUTCHINSON addressed the Chair.

[[Page S11660]]

  The PRESIDING OFFICER. The Senator from Arkansas.

                Amendment No. 3760 to Amendment No. 3722

    (Purpose: Relating to the duties of the Advisory Commission on
                          Electronic Commerce)

  Mr. HUTCHINSON. Mr. President, I call up second-degree amendment
3760.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Arkansas (Mr. Hutchinson), for himself,
     Mr. Enzi, and Mr. Graham, proposes an amendment numbered 3760
     to amendment No. 3722.

  Mr. HUTCHINSON. Mr. President, I ask unanimous consent that reading
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the McCain amendment, add the following:
       (F) an examination of the effects of taxation, including
     the absence of taxation, on all interstate sales
     transactions, including transactions using the Internet, on
     local retail businesses and on State and local governments,
     which examination may include a review of the efforts of
     State and local governments to collect sales and use taxes
     owed on in-State purchases from out-of-State sellers.

  Mr. HUTCHINSON. I ask unanimous consent that Senator Enzi be added as
cosponsor to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HUTCHINSON. Mr. President, I ask unanimous consent that the
amendment be modified by deleting the word ``local'' on line 6 of page
1 of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The modification is accepted.
  Mr. HUTCHINSON. Mr. President, this amendment amends the McCain
first-degree underlying amendment to allow the commission to establish
by the Internet Tax Freedom Act a study of the effects of taxation on
interstate sales, or the lack thereof on retail businesses and State
and local governments.
  I can think of nothing more reasonable and nothing more common sense
than saying that the commission that we are creating should conduct a
study to look at and examine the implications upon retail businesses
and the implications upon local and State governments that this
moratorium and this bill would have.
  The Senate rejected an amendment last week which would have
immediately authorized States to require out-of-State sellers to
collect sales taxes and remit them to the State in which the purchase
was made. My colleague from Arkansas, Senator Bumpers, offered that
amendment. I think that many of my colleagues who joined me in voting
against this amendment would agree that this issue warrants further
study.
  Why not have the commission establish by this bill conduct a study
and examine the issue that is so important to State and local
governments and which is so important to local businesses that are
trying to survive and who are remitting those sales taxes. This issue,
which is so critical, ought to be, I believe, examined and studied. For
the sake of small mom-and-pop businesses who find themselves in
competition with Internet entities and other out-of-State sellers who
do not have to collect State sales taxes from out-of-State buyers, we
should allow the commission to study the impact that the lack of
taxation on these transactions has on small businesses.
  For the sake of out-of-State sellers who do collect and remit sales
taxes while their competitors do not, let's allow the commission to
study this issue. This is, in fact, a commission study.
  It should be noted that Congress and Congress alone can either accept
or eject the recommendations that the commission might make. The
Supreme Court decided in the case of Quill v. North Dakota that States
cannot require out-of-State sellers to collect and remit sales taxes on
goods purchased for use in a particular State, unless Congress
authorizes them to do so.
  My amendment does not overturn Quill. I want to emphasize that. This
amendment does not overturn the Quill decision. It simply allows the
commission to study the implications, to study the ramifications of
Quill on small businesses and State and local governments.
  Electronic commerce is estimated to reach $8 billion in 1998. And by
the year 2002, electronic commerce is expected to reach $300 billion.
  Let me say that the Internet is an incredible tool both for education
purposes and business promotion. My amendment in no way is intended to
thwart the growth of the Internet. Again, it merely says that in light
of the incredible growth in electronic commerce that we have witnessed
over the last 5 years and that we anticipate in the next 5 years that
this commission that we are about to create should have the right to
examine its impact on businesses serving local markets.
  We will have an argument that my good friend from Arizona has
argued--that this Internet Tax Freedom Act should focus solely on the
Internet. But I argue that the Internet is a form of interstate
commerce just like mail order, just like catalog sales. And when we
talk about the impact of such interstate sales on local businesses,
there is no distinction between the three. We should not address this
issue in a vacuum.
  So the commission that is created ought to have the right to examine
all of the implications of what we are doing and its impact upon that
small businessman, that small businesswoman, that city, that county,
that State government, and the effect upon their revenue stream.
  So the amendment I propose is a compromise. It is, I believe, one
that is worthy of support.
  I ask my colleagues to support this second-degree amendment.
  Mr. WYDEN. Mr. President, first, let me say that I strongly support
the Gregg amendment. Let me say to the Senator from Arkansas, I think
his amendment is in the wrong place. I think it is supposed to go at
page 25. But if we could work with him, we want to make sure that there
is fair consideration of his amendment.
  Mr. President, let me also say that the whole point of the Internet
Tax Freedom Act is to focus on electronic commerce. We have had, since
the beginning of this discussion, efforts to bring into this debate a
variety of other kinds of subjects, but it seems to me at a time when
we have 30,000 taxing jurisdictions, many of which have varied and
sundry ideas with respect to electronic commerce and the Internet, what
we ought to do is stick to the subject at hand, and that is calling a
brief time-out to look at these issues, a time-out in which the
Internet would be treated like everything else, by the way.
  At various points in this debate we have heard about how we are
establishing a tax haven for the Internet. That is simply wrong. During
the moratorium, sales on the Internet would get treated just like other
sales. It is very important now, with the extraordinary growth of the
Internet, as our colleagues have noted, that we do this job right,
which requires that we go forward with language such as that offered by
the Senator from New Hampshire to ensure that we focus on electronic
commerce.
  By doing that, we also increase the prospects for making sure that at
the end of our work we have a policy that guarantees technological
neutrality. We don't have that today in America. We have parts of the
country, for example, where you get the newspaper through traditional
mail, and you pay no tax on it. But if you read that very same
newspaper on line, you pay a tax. That is not technologically neutral.
That is what our legislation is all about. The Internet should not get
a preference, nor should the Internet be discriminated against. It
seems to me that by adopting the Gregg amendment we will ensure that
the focus is on electronic commerce, No. 1; No. 2, we will have a
chance to look at the very complicated and technical questions dealing
with what is close to 30,000 taxing jurisdictions, and I urge my
colleagues to support the original Gregg amendment.
  I yield the floor.
  Mr. GREGG addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. GREGG. Mr. President, I rise in opposition to the amendment
offered by the Senator from Arkansas as a second degree to the
amendment offered by myself, Senator McCain, and Senator Lieberman,
which is the underlying amendment here. I think the Senator from
Oregon, who has certainly

[[Page S11661]]

been a core player in bringing this matter to the Senate, outlined the
issue rather well by pointing out that the purpose of this moratorium
and the commission that is created under the moratorium should be to
review the electronic commerce under the Internet and to pursue a path
which will make that commerce more efficient.
  This bill, this attempt to protect the Internet from arbitrary
taxation across the country with the 30,000 potential municipalities
that could assess against the Internet and thus create chaos in what is
truly one of the great engines of prosperity and economic
entrepreneurship which has occurred within this century, and may be the
economic engine for the next century--this bill, which is an attempt to
put a hold on that sort of tax policy which might undermine,
fundamentally harm, the expansion of the Internet during this formative
period is a good bill, but it should not be used to bootstrap other
issues onto the question.
  What is being attempted here is a backdoor bootstrapping of the whole
issue of tax policy as it relates to the question of sales at distant
points, whether it happens to be under the Internet, cable, catalogs or
by telephone. And another study in this area, which is the proposal
that is put forward by the Senator from Arkansas, is simply an attempt
to broaden the scope of the underlying effort, which is to protect and
address the issues that evolve around the Internet. It is totally
inappropriate. There is no reason we should go down that road.
  There have been enumerable studies of this issue already. In fact, I
have two right here, one done by the League of Cities and the other
done by the Center for Budget and Policy Priorities. I also understand
there has been one done by the Governors' Association, I believe. The
fact is, the issues which are being raised by the Senator from Arkansas
have been studied and studied extensively. Putting another study into
this bill is not going to in any way change the tenor of the debate. It
is simply going to attempt to expand the debate into a whole separate
arena, which is inappropriate to this moratorium.
  The bottom line of this moratorium--and I will come to that after we
have disposed of the amendment of the Senator from Arkansas, but the
bottom line issue here is whether or not by voting to expand the
moratorium and to get into areas such as the Senator from Arkansas has
proposed we wish to dramatically expand the taxing authority of States
and local jurisdictions and basically use this bill to become a huge
vehicle for expansion in tax policy and expansion of taxes.
  I do not think that most Members of this body want to do that, and we
already voted on this issue once with the Bumpers amendment. The vote
was overwhelming. This body said no, it did not want to use this
vehicle for the purposes of creating an explosion in new taxes. And yet
there is another attempt being made now to do that, this time through a
study. We will hear another attempt, I suspect, from the Senator from
Florida who will do that with his amendment to this bill and this
underlying amendment.
  So I guess what it comes down to is that this body has to make a
policy decision: Does it want to use the Internet bill and the
protection of the Internet, which has been proposed through the
moratorium, which has been energized in large part by the Senator from
Oregon, and obviously the Senator from Arizona, and which I have
strongly supported, does it want to use that effort to try to protect
the Internet to also be an effort to grossly expand the tax laws of
this country and the tax policy of this country and the tax activity of
municipalities and States, or do we want to stay focused on the subject
at hand, which is how to make the Internet an efficient and effective
place to do business, how to keep it as a dynamic engine for
entrepreneurship and prosperity that it has become through a moratorium
on taxes which might be assessed at the local community level?
  Although this amendment is couched in the terms of a study, it really
gets back to that core issue of whether or not we want to have a
moratorium which addresses the Internet or whether we want to use this
moratorium as a bootstrapping event for purposes of dramatically
increasing taxes and the tax collection capacity of local communities
and States across the country.
  I oppose this study. I think it is misdirected to be attached to this
bill, and I would say that if you really are interested in such a
study, here is one you can read. Here is another one you can read. And
the Governors' Association has one you can read. You don't have to pay
for a new one.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Florida.
  Mr. GRAHAM. Mr. President, parliamentary inquiry. Is there a time
limit on this amendment?
  The PRESIDING OFFICER. No time limit has been agreed to.
  Mr. GRAHAM. Mr. President, first let us come back to what we are
fundamentally about. What the Internet Tax Freedom Act says is that
there shall be a moratorium, a pause, in the State and local
governments' exercise of their otherwise legal authority to impose a
tax on access to or transactions consummated over the Internet.
  That is an unusual action. For the Congress of the United States to
preempt State and local governments from their otherwise lawful
responsibilities to establish what they feel to be appropriate policy
for their citizens is an unusual act for the Congress and one which we
should only take after careful consideration.
  Why should we exercise such care? Because the consequences of this
action, of establishing a moratorium on the taxation of one form of
commerce as opposed to all forms of commerce, is to create or to
continue a competitive disparity. In this case, it is the comparative
disparity between the Main Street retailer, the person who is selling
hardware on Main Street and is legally responsible for collecting a
sales tax from those who purchase hammers and saws, and those who buy
the same hammers and saws over the Internet where they are not subject
to the requirement to pay, and the seller to collect, that same sales
tax. That is a level of obvious inequity that we would, only under
exception circumstances, impose.
  Second, at a time when we are underscoring our commitment to
fundamental activities such as law enforcement and education, we are
about to drive a major hole in the ability to do so of those levels of
government which have the primary responsibility for law enforcement
and education, which are our colleagues at the State and local level. I
will be giving some current examples, as recently as today's newspaper,
of the potential that we are about to open up.
  So it would only take an extremely persuasive argument to convince
the Congress of the United States that it ought to inflict that
inequality in the marketplace and the threat to the ability to deliver
fundamental police, fire, and educational services at the local level
as this legislation does.
  What is that rationale? The rationale: This is a new, rapidly
evolving technology and we need to have this pause so we can assure
that whatever tax policies are developed are developed with uniformity,
with nondiscrimination, with predictability, so as not to interfere
with the natural growth and evolution of this very important part of
our commerce at the end of the 20th century that no doubt will play
even a larger role as we go into the 21st. That is the argument for the
discrimination and threat to State and local governments for which we
are about to be asked to vote.
  I will personally support the basic proposition of a pause. But I
will only do so if that pause is for a reasonable period of time, that
period of time that we would consider necessary to carry out this
review and recommendation as to uniform, nondiscriminatory, predictable
tax policy, and, second, that we have a commission, which is going to
be making this study, which will represent all of the diversity of
interests on this matter and will have a charter broad enough to look
at all the questions that are relevant to establishing proper policy
for the Internet.
  The argument here is a direct clash between what the Senate Finance
Committee found and what the authors of this amendment support. The
language which I support is the language which is in the bill that was
reported by the Senate Finance Committee with 19 favorable votes.

[[Page S11662]]

  If you will look in the bill that appears on our desk, starting on
page 22, which is the beginning of the issues to be studied, as stated
by the Senate Finance Committee, on page 23, under paragraph (d), the
Finance Committee, under the leadership of Senator Roth, who advocated
this language, states that:

       . . . there will be an examination of the efforts of State
     and local governments to collect sales and use taxes owed on
     purchases from interstate sellers, the advantages and
     disadvantages of authorizing State and local governments to
     require such sellers to collect and remit such taxes,
     particularly with respect to electronic commerce, and the
     level of contact sufficient to permit a State or local
     government to impose such taxes on such interstate commerce.

  That is the essence of the language that the McCain-Gregg-Lieberman
amendment is going to strike.
  Mr. President, I ask my fellow colleagues, is that unreasonable for a
commission we are going to set up to study the effects of Internet
taxation on State and local governments and on fairness in the
marketplace? Is that language unfair? I do not believe it is. The
McCain amendment would strike that language.
  Senator Hutchinson of Arkansas, who has worked very diligently on
this issue--and I commend him for his leadership on this matter and his
deep understanding of the implications of this issue--has offered a
second-degree amendment to the McCain amendment which essentially
inserts the same concept of Senator Roth's language that was in the
Finance Committee. His amendment would provide for ``an examination of
the effects of taxation, including the absence of taxation on all
interstate sales transactions, including transactions using the
Internet, on local retail businesses and on State and local
governments, which examination may include a review of the efforts of
State and local governments to collect sales and use taxes owed on in-
State purchases from out-of-State sellers.''
  That is the amendment that Senator Hutchinson has offered which I
think is as eminently reasonable as the language which was offered by
Senator Roth in the Finance Committee. So I strongly support Senator
Hutchinson's very thoughtful and significant amendment and would go on
to say that current events are underscoring the urgency of this look at
all forms of remote sales.
  One of the purposes of the underlying bill is to eliminate
discrimination. That raises the question, Discrimination in
relationship to what? If we end up with a bill that says that the
commission cannot even look at the taxation and the effect of that
taxation on fairness in the marketplace and on the ability of State and
local governments to support their police and fire and schools, we are
already guaranteeing that the commission will give us a report that, in
order to be nondiscriminatory, the Internet should not be subject to
taxation. That would make it the same as catalog sales. That would be a
result with very serious long-term implications.
  If, on the other hand, we are able to adopt the language that either
was in the underlying bill or the language that Senator Hutchinson has
offered, then the commission is going to look at the taxation of all
forms of remote sales and will be able to come back with a set of
policy regulations that will in fact meet the test of uniformity,
nondiscrimination, and predictability, which is the whole purpose of
this exercise.
  I said the issue is one that is as topical as today's paper. I refer
you to the Washington Post of October 7, on page C-10, which carries a
story, ``Publisher, Bookseller Join Forces.''
  I will not read the whole article but let me just give you a flavor
of what it says:

       Taking direct aim at Amazon.com, publishing conglomerate
     Bertelsmann AG said [yesterday] it will spend $200 million to
     buy half of the online book service of Barnes & Noble.

  So, what we have is a major bookseller which already has an on-line
service, where they are selling through the Internet as well as through
their Barnes & Noble megabookstores; now they have sold half of their
on-line service to yet another publisher, the publisher who has well
known book houses such as Random House, Doubleday, and Bantam
Publishing. They now together own an on-line bookselling firm which is
going to try to compete with Amazon.com.
  Why are they doing this? While still a tiny segment of the book
retailing marketplace, on-line sales are exploding in popularity. I
underscore ``exploding in popularity.''

       Seattle-based Amazon.com, founded three years ago, had
     revenues of $204 million in the first six months of 1998.
  The implications of this to the independent bookstores in Helena, MT,
or in Concord, NH, are obvious. In addition to the other benefits of
convenience of the Internet, we are now going to have a situation
where, if you buy a copy of your book at the Main Street independent
bookstore, you are going to be paying the State and local sales tax,
but if you buy it over the Internet, you will not be paying the sales
tax, and, thus, we are institutionalizing a significant competitive
disadvantage.
  Why we would want to adopt the policy that puts the Main Street
seller at a disadvantage to cyberspace is beyond me. It also happens to
be beyond a number of important organizations, whose letters I will ask
unanimous consent be printed in the Record immediately after my
remarks, beginning with the National Home Furnishings Association,
which states:

       The home furnishing industry has struggled with the issue
     of whether there is an obligation for remote sellers to
     collect and remit sales/use taxes to the state in which the
     purchaser resides on sales of furniture, long before the
     first sale was made on the Internet.

  It goes on to say:

       In addition to the lost revenue to the state, the in-state
     retailer is placed at a distinct disadvantage. There is, of
     course, the differential in the customer's total cost
     reflecting the sales/use tax. . . . Indeed, many times they
     serve as the unwilling ``showroom'' and sales adviser for the
     remote seller, as customers visit their store, discuss a
     purchase with the sales staff, scribble down model numbers
     and then call the remote seller.

  That is an example of the kind of institutionalization of competitive
disadvantage we are about to enact.
  I also ask to have printed immediately after my remarks a letter from
the Newspaper Association of America representing 1,700 newspaper
members. This organization has supported the Internet Tax Freedom Act,
but they state:

       . . . I am writing to express support for your efforts to
     amend the Internet Tax Freedom Act to ensure that the
     advisory commission examines the tax treatment of all remote
     sales. . . . The major thrust behind the Internet Tax Freedom
     Act is to ensure that the Internet is not subjected to
     unfair, discriminatory and inconsistent taxes at the state
     and local level. Proponents of the legislation--including
     NAA--have argued that business transactions and services
     should be treated similarly regardless of whether they are
     offered through electronic means or through existing channels
     of commerce. However, if the commission is not directed in
     the legislation to examine all remote sales, a discriminatory
     tax structure could be established that treats one form of
     remote sales--the Internet--differently from other forms of
     remote sales. Therefore, we believe a comprehensive approach
     works best.

  Mr. President, I ask unanimous consent that the letter from the
National Home Furnishings Association and the Newspaper Association of
America be printed in the Record immediately after my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. GRAHAM. Mr. President, the second issue which is directly related
to the first, the first being the discrimination against the local Main
Street sale, is the impact on the ability of local governments and
State governments to carry out their fundamental educational, health,
and other responsibilities. I will be a Floridian for a moment and cite
some of the statistics about the potential impact that an out-of-
control moratorium leading to permanent exemption from taxation of the
Internet could have on a State such as mine.
  In 1996, the State of Florida collected a total of $11.4 billion in
general sales tax revenue. This represented 77.3 percent of Florida's
tax revenue generated from sales and excise taxes, excise taxes
representing $3.8 billion of that total.
  Florida is not unique in having a high percentage of its tax revenue
generated by sales and excise taxes. For instance, Nevada gets 84.3
percent of its total revenue from these two

[[Page S11663]]

sources; Texas, 81 percent; South Dakota, 78.4 percent; Tennessee, 76.7
percent; Washington, 74.3 percent; Mississippi, 67.3 percent; Hawaii,
61.7 percent; Arizona, 57 percent; North Dakota, 56.8 percent; and New
Mexico, 56.7 percent. They are examples of States which are heavily
dependent on sales and excise taxes, the kind of taxes that are
generated by Main Street activity.
  Currently, mail order nationwide has sales of $100 billion to $120
billion a year. That is the catalog of remote selling. This results in
an estimated $3.5 billion to $4 billion in lost sales tax. It is
estimated, for instance, in the State of Florida that that would
represent something in excess of $200 million a year in lost sales.
That is, if the same sale had taken place at the local shopping mall
that took place over the remote sales catalog process, it would have
been an additional $200 million of sales tax collected.
  Internet sales are expected to grow by the year 2004, not to the $100
billion to $120 billion of current catalog sales, but rather to $400
billion to $500 billion. So Internet sales, by the year 2004, are
expected to be four to five times what current catalog sales are. If
$100 billion in sales loses $3.5 billion, then the $500 billion would
represent a loss of $17.5 billion. For Florida, this means there could
be an estimated loss of $875 million in sales tax per year as a result
of this removing of the responsibility of the Internet seller to
collect the taxes on those transactions.
  Florida's Department of Revenue states that the cost of exempted
Internet taxation costs the State $60 million in sales tax revenue and
$18 million for the gross receipts tax. This gross receipts tax is what
is used to fund our school construction costs.
  Mr. President, the impact of this on State and local governments in
their ability to put an adequate number of police on the streets and an
adequate fire defense, and particularly an adequate number of schools
and teachers and the other support personnel necessary for their
educational system, will be extremely vulnerable if this legislation
gets out of control.
  This is the amendment which I believe begins to break the dam of
reasonability. It is reasonable to have a brief pause to look at all of
the implications of Internet taxation. I support that brief pause. It
is also reasonable to look at one that is conducted by people who
represent all the interests that will be affected by these decisions
and that those persons have a charter broad enough to give us wise,
comprehensive policy.
  To adopt the McCain-Gregg-Lieberman amendment, which would
essentially say we are going to put a blindfold over our eyes and we
will not be able to look at those remote sales activities which are the
most analogous to what the potential for Internet sales would be, is,
in my opinion, to render this legislation ineffective in terms of its
purpose and to strengthen the doubts that some of us have that its real
purpose is, not to have a thoughtful examination, but rather to have
this as the beginning of what will be a permanent bar to State and
local governments' ability to manage their fiscal affairs and that the
principal loser of this will be the shuttered stores along Main Street
of the traditional seller, like the bookstore unable to compete when he
or she has to collect the local sales tax but its competitor thousands
of miles away does not, and will also be seen in the diminishment of
vital public services, especially the education of our children.

  So, Mr. President, for those reasons, I strongly support the
amendment offered by the Senator from Arkansas as eminently reasonable
and consistent with the stated purpose of this legislation, and I urge
its adoption.

                               Exhibit 1

                                                     National Home

                                      Furnishings Association,

                                                   Washington, DC.

NHFA Concerns With Proposed Manager's Amendment to S. 442, the Internet
                            Tax Freedom Act

       The home furnishings industry has struggled with the issue
     of whether there is an obligation for remote sellers to
     collect and remit sales/use taxes to the state in which the
     purchaser resides on sales of furniture, long before the
     first sale was made on the Internet. Sales are frequently
     made over the telephone or through the mails.
       In addition to the lost revenue to the state, the in-state
     retailer is placed at a distinct disadvantage. There is, of
     course, the differential in the customer's total cost
     reflecting the sales/use tax. However, the in-state retailer
     also makes a significant investment in the community. Indeed,
     many times they serve as the unwilling ``showroom'' and sales
     adviser for the remote seller, as customers visit their
     store, discuss a purchase with the sales staff, scribble down
     model numbers and then call a remote seller.
       NHFA has long sought a consistent, realistic definition of
     what constitutes nexus for the purpose of determining the
     sales/use tax obligation of a remote seller.
       S. 442 imposes a moratorium on so-called telecommunication
     taxes, and establishes a commission to examine a variety of
     issues. Both the Senate Finance and Commerce Committees'
     versions of the bill, as does the House bill, include
     language authorizing the commission to examine the issue of
     the obligation of remote sellers to collect and remit a
     variety of taxes includes sales and use taxes. For example,
     the Senate Finance Committee bill states: ``an examination of
     the efforts of State and local governments to collect sales
     and use taxes owed on purchases from interstate sellers, the
     advantages and disadvantages of authorizing State and local
     governments to require such sellers to collect and remit such
     taxes, particularly with respect to electronic commerce, and
     the level of contracts sufficient to permit a State or local
     government to impose such taxes on such interstate
     commerce.''
       We have learned that a proposed manager's amendment would
     severely limit the scope of the commission's mission and
     strike the language allowing an examination of the broader
     sales/use tax issue.
       If a moratorium on telecommunication taxes is enacted, even
     though it does not technically apply to sales/use taxes on
     the purchase of the goods themselves, the moratorium will
     still have a chilling impact on the collection of those
     taxes. We thought we could live with that moratorium, in the
     belief we would gain more in the long run, if the commission
     could resolve once and for all, the broader issue of
     jurisdiction over remote sellers for all tax purposes
     including sales and use taxes. It would seem to us, if the
     manager's amendment strips the commission of the authority to
     examine the nexus issue, we get the worst of both worlds.
                                  ____

                                             Newspaper Association

                                                   of America,

                                      Vienna, VA, October 6, 1998.
     Hon. Robert Graham,
     U.S. Senate,
     Washington, DC.
       Dear Senator Graham: On behalf of the more than 1,700
     newspaper members of the Newspaper Association of America
     (NAA), I am writing to express support for your efforts to
     amend the Internet Tax Freedom Act to ensure that the
     advisory commission examines the tax treatment of all remote
     sales. As you are aware, we have supported and continue to
     support enactment of the Internet Tax Freedom Act.
       The major thrust behind the Internet Tax Freedom Act is to
     ensure that the Internet is not subjected to unfair,
     discriminatory and inconsistent taxes at the state and local
     level. Proponents of the legislation--including NAA--have
     argued that business transactions and services should be
     treated similarly regardless of whether they are offered
     through electronic means or through existing channels of
     commerce. However, if the commission is not directed in the
     legislation to examine all remote sales, a discriminatory tax
     structure could be established that treats one form of remote
     sales--the Internet--differently from other forms of remote
     sales. Therefore, we believe a comprehensive approach works
     best.
       We believe the Internet Tax Freedom Act provides a unique
     opportunity for a thoughtful and deliberative examination of
     a uniform tax structure for goods and services. By including
     all remote sales in the scope of the advisory commission's
     work, the Congress is encouraging the development of tax
     policies that present one set of rules that will be applied
     to all businesses. A uniform approach not only promotes
     fairness and consistency--it's sound public policy.
           Sincerely,
                                                    John F. Sturm,
                                                President and CEO.

  Mr. WYDEN addressed the Chair.
  The PRESIDING OFFICER (Mr. SANTORUM). The Senator from Oregon.
  Mr. WYDEN. Thank you, Mr. President.
  Mr. President, I urge adoption of the Gregg amendment and the
rejection of the Hutchinson amendment. First, it is quite clear that
this legislation is going to, in fact, study all of the questions
related to the subject this bill deals with thoroughly. Let me just
read into the Record exactly what it says with respect to what will be
studied. It says:

       The Commission shall conduct a thorough study of Federal,
     State and local, and international taxation and tariff
     treatment of transactions using the Internet and Internet
     access and other comparable interstate or international sales
     activities.

  So it is right there at pages 21 and 22.
  Mr. HUTCHINSON. Will the Senator yield?
  Mr. WYDEN. In just 1 minute I will be happy to yield.

[[Page S11664]]

  It is quite clear, at page 21 and page 22, that there will be ``a
thorough study'' of the issues and that the commission will look at
``comparable interstate or international sales activities.''
  The question, Mr. President, and colleagues, is whether or not we are
going to focus on yesterday's concerns, which are the mail-order or
catalog issues--and they are important ones--or are we going to look at
trying to come up with some sensible policies with respect to
tomorrow's issues which essentially involve the ground rules for the
digital economy.
  Somehow, those that want to look at mail-order and catalog sales feel
that they can resolve all of their concerns on this legislation. We
feel otherwise. The reason that it is so important to have the Gregg
language is that it does put the focus on electronic commerce. I and
others believe that if we do look at electronic commerce, and look at
it thoughtfully, that it may, in fact, come up with some answers to
these other issues--mail-order and catalog questions, which are
important--but if we change the focus of this bill, which is
essentially what the Senator from Arkansas wants to do, I believe what
is going to happen is, A, we will not get any sensible ground rules for
electronic commerce, nor will we deal with the issues with respect to
mail orders.
  The fact of the matter is that Main Street America overwhelmingly has
endorsed this bill. We have entered into the Record the list of the
groups that are for it. And the reason that Main Street has endorsed
this legislation is that if you are a small business on a main street
in rural Arkansas or rural Oregon, or any other part of the country
that is essentially rural, right now you are having a lot of difficulty
competing against the Wal-Marts and the economic giants in our country.
  The Internet is a great equalizer. By having a web page, by having
the ability to do business on line, that Main Street business in rural
Oregon or rural America, for the first time, has the ability, in an
inexpensive way, to market and look at lucrative markets around the
world.
  Picture, if we will, what will happen to a home-based business in
Wyoming or Arkansas or Oregon if we do nothing. There are 100,000 of
these home-based businesses in my State alone. They are the fastest
growing part of our economy, and if we do not come up with some uniform
tax treatment for these home-based businesses, what is going to happen
is they will be subject to scores of different taxes all over America.
  How is a home-based business in the State of Oregon or the State of
Arkansas going to go out and hire a battery of accountants and lawyers
and experts to help them sort this out? They are not going to be able
to do it. And that is why, when we had the hearings on this legislation
in the Senate Commerce Committee, we heard from a small Tennessee
business that tried to operate through this thicket of different kinds
of State and local rules and ended up going out of business.
  These home-based businesses are simply not going to be able to hire
the battery of experts and accountants and lawyers that some of those
who have opposed this legislation are going to mandate on these small
businesses. So I hope that we can stick to the issue in front of us.
That would mean going forward with the Gregg amendment and rejecting
the amendment of the Senator from Arkansas.
  The Senator from Arkansas did ask me to yield, and I am happy to do
so.
  Mr. HUTCHINSON. I thank the Senator for yielding.
  In the early part of your remarks, you emphasized and read from the
bill that the commission would be authorized to conduct a thorough
study. You emphasized the word ``thorough.'' I think you found a couple
places where the term is used. It seems you are implying they will look
at all issues affected by this legislation and by Internet sales.
  My question is, why, if in fact it is to be a thorough study looking
at all issues and all the implications and ramifications of Internet
sales on retailers and on government, why then would the Gregg
amendment exclude, in effect, say this is off the table, this is one
area of issues you cannot look at? When the Finance Committee, by a
vote of 19-1, said this should be included, this should be an area that
should be examined, this should be the purview of the commission, why
then, if it is to be a thorough study, would this amendment, the Gregg
amendment, exclude this particular area from study?
  Mr. WYDEN. Reclaiming my time, as I said, the debate here is over, Do
you want to focus on the subject of this bill, which is electronic
commerce--that is what the legislation does; that is what the Gregg
amendment seeks to do--or are we going to go back and study in this
legislation essentially yesterday's economy?
  We believe that if you put the focus on electronic commerce--that is
what the Gregg amendment does--we are going to be able to deal with the
digital economic issues; and we may well, in fact, come up with some
ideas and some innovative approaches that may well resolve the mail-
order and catalog question as well.
  My concern, and the concern of the Senator from New Hampshire, is
that essentially this is going to change the focus of this legislation
to put it on the mail-order and catalog issues. There are Members of
the U.S. Senate who feel that mail-order and catalog sales are
insufficiently taxed. I am not one of them. I am one who believes that
we all ought to work together, on a bipartisan basis, to deal with
tomorrow's set of economic concerns, which involves the digital
economy.
  I tell the Senator from Arkansas that as the original sponsor of this
legislation, I have made more than 30 separate changes to this
legislation in an effort to accommodate what I think are valid concerns
which come from States and municipalities and others who are advocating
the viewpoint of the Senator from Arkansas.
  But what I am not willing to support is essentially changing the
focus of this legislation. If we do that, I believe that the 100,000
home-based businesses in my State, and the hundreds of thousands across
this country, are not going to see their concerns addressed; I think we
will not be taking advantage of the opportunity to look at the Internet
issues objectively, and we will lose that focus and take it off into
another area which is, in my view, likely to not produce consensus with
respect to the mail-order or catalog issue, nor make the progress we
need to with respect to the Internet.
  Mr. President, I yield back the time.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I rise in strong support of the amendment
offered by my friend from Arkansas. This amendment addresses the issue
that is being changed by the Senator from New Hampshire. The second-
degree amendment would change things back to the way that they were.
  We have to take a look at the Internet sales tax issue for people who
might be using this piece of legislation to develop huge loopholes in
our current system. I am not talking about changing the system. I am
talking about preserving for those cities, towns, counties, and States
that rely on sales tax the ability to collect the tax they are
currently getting.
  We are talking about a 2-year moratorium. Do you know how much the
Internet will change in a 2-year period? Right now, with the current
technology in the Internet, there are ways I could eliminate every
single bit of retail sales tax in the United States, every day, if this
bill passes. And I don't think that is our intent.
  I don't care if we have 30 amendments; if it needs 40 amendments, we
will have to have 40 amendments. The number of amendments has nothing
to do with the issue that we are addressing. 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 increase sales tax,
just protect what is there right now.
  We introduce these amendments because we don't think there is
adequate protection now. An increase in catalog sales, I agree, is a
topic for another time. It is very important we don't build electronic
loopholes on the Internet, an ever-changing Internet, one that is
growing by leaps and bounds, one that is finding new technology
virtually every day. What we know as the Internet today is not what we
will be using by the time this report comes

[[Page S11665]]

out. More people are using it every day.
  It is fascinating to me that one of the biggest areas of increased
use of the Internet is by senior citizens. It probably has something to
do with the quality of entertainment. If they do use computers, they
are spending an average of 6 hours a day on the Internet. Part of that
is purchasing; part of that is learning.
  The stated purpose of this bill is:

       To establish a national policy against state and local
     government interference with interstate commerce on the
     Internet or interactive computer services, and for other
     purposes.

  Let me repeat that:

       To establish a national policy against State and local
     government interference. . . .

  Mr. President, I recognize this body has a constitutional
responsibility to regulate interstate commerce. Furthermore, I
understand the desire of the bill's sponsors to protect and promote the
growth of Internet commerce. Internet commerce is an exciting field. It
has a lot of growth potential. The new business will create millions of
new jobs in the coming years.
  The exciting thing about that for Wyomingites is that our merchants
don't have to go where the people are. For people in my State, that
means their products are no longer confined to a local market. They
don't have to rely on expensive catalogs to sell merchandise to the big
city folks. They don't have to travel all the way to Asia to display
their goods. The customer can come to us on the Internet. It is a
remarkable development, and it will push more growth for small
manufacturers in rural America, especially in my State. We are just
beginning to see some of the economic potential in the Internet. It is
a valuable resource because it provides access on demand. It brings
information to your fingertips when you want it and how you want it.
  We should probably take another look at using it on the Senate floor,
but we need laptops for that; I will save that issue for another day.
  Having said that, I do have concerns about the bill before the Senate
today. I come to this debate having been the mayor of a small town,
Gillette, WY, for 8 years. I later served in the State house for 5
years and the State senate for 5 years. Throughout my public life I
have always worked to reduce taxes, to return more of people's hard-
earned wages to them.
  I am not here to argue in favor of taxes. There were times in
Gillette when we had to make tough decisions. I was mayor during the
boom time when the size of our town doubled in just a few years. We had
to be very creative to be sure that our revenue sources would cover the
necessary public services--important services like sewer, water, curb
and gutter, filling in potholes, shoveling snow, collecting garbage,
mostly water. It is a tough job because the impact of your decision is
felt by all of your neighbors. They can look you in the eye. One of the
biggest problems with local government is the ``Oh, by the ways.'' You
go to dinner and somebody says, ``By the way, I have a little problem.
Don't get up and solve it. Tomorrow morning will be fine.'' And
tomorrow morning they know if you solved that problem.
  Hardly any of those problems is solved without money. When you are
the mayor of a small town, you are on call 24 hours a day. You are in
the phone book. People can call you at night and tell you that the city
sewer is backing up into their house. I was fascinated how they were
always sure that it was the city's sewer that was doing it. When they
call to say that the power is out, they don't want a delay before it is
fixed. When they call to tell you a neighbor has stolen a D-8 Cat and
is tearing up the street and driving over sports cars and mailboxes and
ripping up sprinkler systems, you have to go to work. Those are
exciting things that happen from time to time in cities.

  The point is that the government that is closest to the people is
also on the shortest time line to get results. I think it is the
hardest work. I am very concerned with any piece of legislation that
mandates or restricts local government's ability to meet the needs of
its citizens. This has the potential to provide electronic loopholes
that will take away all of their revenue. It may not seem like a big
restriction, it may not exceed the $50 million limit that Congress set
in the Unfunded Mandates Reform Act, but it does establish a national
policy against State and local government. It does take an affirmative
step to tie the hands of local government.
  Congress has to be very careful when we pass a law like this. We have
to realize the effect of all of those people living at the local
level--not the Federal level. I have not met anybody who lives on the
Federal level; they all live at the local level.
  I am also concerned about the bill's impact on small businesses. My
wife Diana and I owned a shoestore on Main Street, Gillette, for 28
years. My wife did most of the managing on that. She greeted the
people, she sold the shoes, ran the cash register, swept the floor, all
the things that have to be done by a small business.
  We recognize the advantage of the Internet for these small
businesses, these home-based businesses that were mentioned earlier.
Yes, we understand the complications of trying to keep track of every
kind of sales tax that is levied across the whole United States
regardless of what kind of jurisdiction it is in. That is current law.
That is current collection, to some degree, particularly if you have a
presence in the State where the product is being sold.
  What is a ``presence'' in the State? Internet goes into absolutely
every State. There is now the easy capability to set up another
corporation in another State that does not have sales tax and still
make the sale local, with immediate delivery, and avoid all sales tax
through the Internet. That is going to be a problem.
  The problem with small business is, we talk about whether a business
is 500 employees or just 150 employees. That is not the kind of small
business I am talking about. I am talking about sweeping the sidewalk,
carrying out the trash, filling out the myriad reams of required
Federal paperwork. It really doesn't have much application to your
business--probably five employees or less. These are the people who
sponsor Little League, the basketball camps, the yearbooks, and all of
the other things that happen in municipalities. They donate the raffle
prizes and uniforms and they support all kinds of community activity.
Every kid in town comes to the local small business and asks for help.
Fortunately for America, they donate, and they donate gladly. They
serve on the parade committees. They serve on the fair committees. They
are the volunteers in the church and in the school and in local
government. They are not only the neighbors, they are the customers for
a small town for any retailer.
  We buy mail-order goods often because they are cheaper; there is no
sales tax. That is a part of the pitch that is used. That is like a 5-
to 7- to 9-percent reduction.
  Congress is now going to decide to prohibit local governments from
taxing certain businesses--easy businesses to set up, easy businesses
to locate in a State that has no sales tax whatever. We haven't seen
anything like this before in the history of the United States, but we
are about to see the biggest boom in the Internet that we have ever
seen. We need a few amendments to this bill to provide some protection
for the current system. I am not talking about expanding, I am talking
about the current system.
  Are we going to be in the business of picking the tax winners and the
tax losers? I am talking about the towns where the people of America
live. We know who the losers will be. It will be the small retailer in
your town, the one that you rely on to run down and pick up the
emergency item.
  I do support this amendment. The commission should be allowed to
study all of the issues with the Internet, all of the issues related to
taxation. They definitely ought to be able to look at those that change
with the technology so that the current system of collecting revenues
for those towns and States can be preserved. I don't think we have all
the answers, or we wouldn't be asking for this bill.
  I don't think we are going to have all the answers on the technology
that is going to transpire in the next 2 years. So whatever we do, we
have to have some amendments that will preserve the way that small
business and small towns function at the present time. This amendment
will help Congress to

[[Page S11666]]

make a decision in the future. It restores language that would be taken
out with the Gregg amendment. It is critical for towns, small
businesses, and you and me. I urge my colleagues to support it.
  I yield the floor.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.
  Mr. DORGAN. Mr. President, I rise in support of the second-degree
amendment for all of the reasons previously stated by the Senator from
Wyoming, the Senator from Arkansas and the Senator from Florida. I
have, beginning with the origin of this bill in the Senate Commerce
Committee, been very concerned about exactly what the language in this
legislation will mean to this country, to our Main Streets, to our
States and local governments.
  The issue here is a relatively simple one, and I don't need to
restate all of the reasons that were offered by the Senator from
Wyoming for being concerned about it. But the genesis of this bill was
to be concerned about State and local governments applying ``punitive''
tax programs against Internet commerce. They were worried that this
growth of the Internet and the expansion of commerce on the Internet
would be retarded by local governments or State governments, seeing
that as a big, juicy target, and apply some kind of new discriminatory
or punitive tax regime upon it. Therefore, they said, let us at least
have a time-out until we understand how to impose some sort of tax
system that is fair to the Internet sellers and that does not
discriminate against the Internet sellers.
  Well, the question here, then, is, if in this legislation where you
have a time-out, or a moratorium, and you create a commission during
that moratorium to investigate or evaluate all of these issues, why
then would you say to that commission that you can take a look at all
of this, you can take a look at what this means with respect to
Internet commerce, but you cannot look at the other issues; you cannot
look at how it relates, Internet commerce versus mail-order firms; you
cannot look at how it relates to Internet commerce versus Main Street
sellers? What kind of logic is that? If you are going to have a
commission to try to figure out how this piece fits in the puzzle, then
make sure all the pieces are there. That is all this second degree
says--make sure all the pieces are there.
  The people who are here saying we don't want to solve this puzzle are
people who have a vested interest. They are here, frankly, because of
mail-order firms and the Internet. They are saying we don't want
anybody to look at all of this. We want a moratorium for the Internet
over here, and over here we don't want anybody discussing mail-order
issues.
  The Senator from Wyoming said he and his wife had a shoestore. I
didn't know that. I have never been to their shoestore. I have never
shopped in Gillette, WY, and I probably never will shop there. But the
issue he raises is essential to this point. When he and his wife opened
the door in the morning and displayed shoes for sale in that store,
they knew a couple of things: They rented the building, they hired the
employees, and they bought an inventory. They opened their door and
said: We are in business on Main Street in Gillette, WY. They knew that
when somebody came through the door and took their shoes off and got
fitted up and bought a brand new shiny pair of shoes, when they paid
for it, they had to apply the local sales tax. That is what you have to
do on Main Street. You are a tax collector for the local consumption
tax in the State of Wyoming. I didn't hear him complain about that.
That is what they do on Main Streets all across this country. I believe
45 States have a sales tax.
  Another thing he and his wife knew, I am sure, and he is not here to
answer the question, but I am sure they knew that if someone three
blocks away decided they were not going to go to Main Street to buy
shoes today, they were going to buy them through a mail-order catalog,
in most cases they will buy those through the catalog without paying a
local sales tax or a State sales tax, which means that his local
business ended up being undersold by someone, perhaps by 4 percent,
maybe 6, or maybe even 7 or 8 percent, because the catalog seller, in
most cases, didn't charge the State sales tax.
  Is that discriminatory vis-a-vis the Main Street businessperson? I
think it is. Of course, it is. Does it mean there is not a tax on the
transaction? No, there is a tax. When they mail that pair of shoes from
the mail-order catalog house to the person in Gillette, WY, or Fargo,
or Bismarck, ND, the person who receives that pair of shoes has a
responsibility in most every State to pay a use tax. Of course, they
don't know that and they won't ever pay that, but that is the
responsibility.
  The net result of all of this is that the Main Street folks will end
up always being at a disadvantage with respect to taxation versus those
who are doing business elsewhere, those who have constructed a catalog
and haven't hired the employees, haven't rented a place to do business,
and they haven't hired local folks; they have just operated through a
catalog.

  I happen to think catalog sellers are very important to this country.
Frankly, they are wonderful marketers. I think it is wonderful for a
lot of people in this country to be able to shop that way. There is no
question about that. I think when you look at the tax issue here--
whether it is buying it through a catalog or going through a computer
and getting on the Internet and buying it through a seller on the
Internet or buying it on Main Street--there ought to be some symmetry
here in the tax treatment to make sure the tax treatment is not going
to retard the growth of the business on Main Street, it is not going to
retard the business growth of people who have catalogs and the business
opportunities of the people on the Internet.
  But what is being said in the underlying amendment is, let's take a
look at this only with respect to how it relates to the Internet, and
you must ignore everything else. My friend, the Senator from Oregon,
says, well, we want to explore everything. But, of course, this says
you cannot, you must not; in fact, we are going to fight to the end
here to see that you are unable to explore everything. That doesn't
make any sense to me. That is what the second-degree amendment is
about.
  The Senate Finance Committee got this right. It passed a bill, came
to the floor, created a commission and said, take a look at all of
this. We will have a commission that evaluates and studies all of this
with respect to the tax neutrality, with respect to the opportunities
in growth, and the impact of these taxes on a wide range of commerce--
not just Internet commerce, but a wide range of commerce.
  The Senate Finance Committee got it right. The underlying amendment
now offered by a couple of good legislators, I think for understandable
reasons, would say that the Finance Committee is wrong; this commission
must not, cannot, and will not be able to study the whole range of
circumstances. The second degree says, no, we don't accept that; we
want to insert language that is effectively the language coming out of
the Senate Finance Committee.
  I say again, as I did yesterday when the Senator from Florida was on
the floor, and I say it now to the Senator from Arkansas, who along
with the Senator from Florida and the Senator from Wyoming were primary
sponsors of the second degree, in my judgment, they are dead right.
They are absolutely right on target. I hope that the Senate,
notwithstanding whatever curves and straightaways we find with this
legislation--I assume this legislation will be worked out in the coming
hours and days and, perhaps, be passed tomorrow, and I hope it will be
passed in a satisfactory form.
  But one of the ways that this legislation will be made a better piece
of legislation is to pass this second-degree amendment and restore it
to the condition it was in when it came out of the Senate Finance
Committee. These folks spent a lot of time on tax issues in the Finance
Committee. I used to be on the House Ways and Means Committee in the
other body for 10 years, and I spent a lot of time on tax issues. I
think the Senate Finance Committee got it right. They said, study these
issues, evaluate them all, understand the consequences of them all, and
then, with that knowledge, let's make some judgments. That is the
purpose of the time-out; that is the purpose of the moratorium.
  I have, as the Senator from Oregon stated, spent a fair amount of
time

[[Page S11667]]

with him, and I think we have made a lot of progress on these issues.
  My expectation is we will pass a piece of legislation that is an
acceptable piece of legislation that has a timeout moratorium. But it
must, in my judgment, include this in order to really give us the
assurance that that moratorium is used effectively by a commission that
has divisions to look at all of these issues.
  I yield the floor.
  Mr. LIEBERMAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. LIEBERMAN. I thank the Chair.
  Mr. President, I rise to oppose the amendment offered by the Senator
from Arkansas and others and to express my support of the underlying
amendment offered in the first instance by the Senator from Arizona,
the chairman of the committee. I am proud to be a cosponsor of that
one.
  I was a cosponsor of the initial legislation, one of the pieces of
legislation earlier in the session, along with my colleague from New
Hampshire, Senator Gregg, which had the intention of trying to create
some order and predictability and a little space for this extraordinary
new area of economic activity, activity which has benefited so many
people around our country, which is to say, e-commerce over the
Internet.
  The aim was to say to the taxing jurisdictions, of which there are
thousands and thousands and thousands--30,000, as a matter of fact--
potential taxing jurisdictions which exist in the United States, catch
your breath, sit back, and let this new sector of our economy--Internet
commerce, e-commerce, which the United States is heading and which has
benefited so many people, which has created so many jobs--let it grow
out of its infancy before we begin to put the teeth of the taxman into
various parts of its anatomy; and let's let this commission begin to
grow some ground rules for the consistent and fair handling of this new
area of economic activity.
  The fact is today that an Internet service provider, or a merchant
selling goods or services over the Internet, has no way of knowing in
advance whether a State decides to tax them. As an example, in New
Mexico, Internet access charges are subject to New Mexico gross
receipts taxes. In Ohio, their sales are taxed as an electronic
information service; in Tennessee, it is a telecommunications service;
in my own State of Connecticut, as a computer and data processing
services. Texas officials, I gather, have threatened to tax
transactions that go through Internet servers in its State, even if the
buyer and seller, in conventional terms, are not located in the State
of Texas.
  The uncertainty of this tax liability is real and is having what you
would expect--a negative, destabilizing effect on this business. Peat
Marwick, a respected, recognized firm, just released a survey of
industry executives of companies that sell over the Internet. Fifty
percent of the executives said that the current State tax ambiguities
and conflicting tax treatment of electronic commerce among the States
are inhibiting their companies' involvement in electronic commerce.
Ninety percent describe the current State sales tax procedures with
regard to electronic commerce as ``overly burdensome,'' and 75 percent
expressed their concern that State and local tax laws will place their
companies at a disadvantage. It is because the industry is in its
infancy.
  A predictable legal environment is exactly what the President's
Report on Electronic Commerce recommended that we promote
internationally. In fact, the administration has been sending out
emissaries over the last year to persuade international organizations
and individual countries to agree to create a predictable legal
environment for the spread of electronic commerce. That is not only
fair, it is good for American business, which happens to have a lead
over business in any other countries in the effective use of the
Internet.
  What the underlying bill, the underlying amendment, is saying is that
it is time that we create the same sense of predictability here in the
United States that our Government is urging on countries around the
world. That is what this commission would do.
  The commission is asked to draft model State legislation that creates
uniform definitions and categories of commercial transactions on the
Internet so that States will be using the same vocabulary when it comes
to categorizing the tax liabilities of an Internet company, or
transaction--not unifying a tax rate among States, but creating a legal
environment in which companies can do business.
  The National Commission on Uniform State Legislation has been working
for the past 2 years on updating the treatment of Internet transactions
according to various State laws. But it has not looked directly at
taxes. This commission that would be created by this legislation would
work with the national commission and other groups that have already
been active in trying to update laws to be certain that Internet
commerce is treated fairly. We would extend their work through this
commission in the tax arena.
  I want to stress that the measure introduced by the distinguished
chairman of committee, the Senator from Arizona--Senator Gregg, I, and
others are proud to be cosponsors--does not preclude the commission
created by this legislation from considering the question of nexus or
taxation of remote sales. The danger in this amendment before us, the
second-degree amendment, is that it singles these particular questions
out as a requirement and thereby, I think, puts the commission in
danger of falling into a very dense thicket.
  A battle has been waging for more than three decades, and taken right
to the Supreme Court at one point, as to how remote sales by catalog-
telephone sales would be taxed by the 30,000 taxing jurisdictions in
the States in the country. In so doing, I think the amendment threatens
what is and should be the focus of the commission, which is to direct
its attention on this extraordinary new sector of commerce, Internet
commerce, and it runs the risk really of getting the commission so tied
up in the thicket of remote sales that it will never really contribute
what we hope it will to creating some order and predictability in e-
commerce.
  Mr. President, the fact is that this commission that is created by
the underlying legislation may well--I think we who are its sponsors
hope it will--create some language to reach some judgments that may in
fact offer some counsel and help in this ongoing debate about taxation
of remote sales, but let that happen naturally--that is my hope and
prayer--as opposed to forcing it into the second-degree amendment in a
way that would run the risk of destroying the underlying purpose of the
proposal, and in that sense doing damage to Internet commerce and all
who both benefit from it as consumers and benefit from it because they
work in companies that are using it.
  I want to mention one other matter before closing. That is this:
There are times when we talk about Main Street and the effect of
Internet commerce on Main Street as if it were, one wins and one loses.
  The reality is that e-commerce has the potential to expand the
winner's circle, to make more winners. I want to cite real cases from
Connecticut which I learned about in the last 6 months to a year, and I
think are typical of what is happening all over the country.
  First, let me say that a recent survey in Connecticut found that 38
percent of small- and medium-sized companies have a web page--almost
two out of five. A little over half of those are using their web page
to sell goods and services--right now. And 21 percent are planning to
add a web page next year. I am sure those numbers are going to grow
dramatically in coming years.
  The fact is, insofar as some folks who are in taxing jurisdictions
and the concern of this amendment has to do with treatment of direct
mail-order sales or phone sales, if the mail-order catalogs that I get
at my house are any indication of what the future is, I am being truly
encouraged, aggressively encouraged by those catalogs instead of
calling up, to use the Internet. So I think more and more of that kind
of commerce will be done by e-commerce.
  But let me give you two great examples from home about the effect
that the Internet is having on Main Street. A small company in old
Broad Brook, CT, beautiful town by the water on Long Island Sound,
called Stencil Ease, family-owned, 18 employees, sells stencils for
home decorating and crafts. It

[[Page S11668]]

started a web page in 1996. They have been averaging 100 to 200 hits a
day. Their sales increased 10 percent the first year due to the web
site and 20 percent the next year.
  Here is a startling story in the second one--Coastal Tool & Supply. I
have been there. It is a small, family-run hardware store in Hartford,
CT, capital city. It was threatened, interestingly, by a location
nearby of one of the large chain hardware stores. It was having a hard
time. They decided to go on the Internet, in a sense to leap over the
big competitor down the street. I think it was Home Depot, but it
doesn't matter--a big competitor down the street and in a sense enter
the global main street and hired a very able young man, skilled in
computer matters, who put their catalog essentially on the Internet.
Sales have grown almost 500 percent. They are doing more business over
the Internet than they are from people coming into the store.
  So this is what the future holds, and it is a situation, if we do it
right, where not only the big companies, but a lot of mom-and-pop
stores and businesses are going to be able to benefit from Internet
sales.
  Now, as it grows, it will actually have an effect on taxing
jurisdictions, and we will naturally, in the normal order of business,
want to create an opportunity for equity and to protect State and local
jurisdictions that we represent. But this is not the time to do it, and
this amendment is not the place to do it. Let's let this commission
deal with the unique problems of e-commerce.
  Mr. WYDEN. Will the Senator yield?
  Mr. LIEBERMAN. I will be glad to yield to my friend from Oregon.
  Mr. WYDEN. I want to say that I think the Senator has made an
especially effective approach and tell him that hardware account he
gave is essentially what this legislation is all about. There has been
discussion about who benefits here, huge corporations and the like. The
people who benefit here are the 100,000 home-based businesses in my
State, the hardware store that the Senator from Connecticut is talking
about.
  The reason why that is the case is that the Internet is a great
equalizer for those small businesses. The small businesses now that we
are seeing in the State of the Senator from Connecticut and rural
Oregon are having great difficulty today competing against the Wal-
Marts of the world. They do not have huge advertising budgets like Wal-
Mart. They don't have batteries of lawyers and accountants. These are
small, entrepreneurial operations that now look at the Internet as a
tool that can trampoline them into extraordinary economic opportunities
they have never had.
  Without this legislation and the good work that has been done by the
Senator from Connecticut and the Senator from New Hampshire, if you are
a small, home-based business in Oregon or Connecticut, you may well
face a good chunk of the thousands of taxing jurisdictions in our
country looking at your business as a cash cow.
  One of our colleagues said the threat here is the World Wide Web
would become the ``World Wide Wallet'' if that kind of approach went
forward.
  So what the Senator was talking about with respect to that hardware
store account is why I introduced this legislation early in 1997. That
is the very kind of operation that I think we ought to be looking to
grow in the 21st century.
  I thank the Senator for yielding me this time. I heard his account of
the hardware store from the Cloakroom, and I think some have said--in
fact, I heard it again today--that this was about Amazon.com or someone
like that. Those people are not going to be in need of this kind of
approach. This is going to benefit the small entrepreneurs, the home-
based business, the kind of person the Senator from Connecticut is
talking about. I thank him for yielding me this time.
  Mr. LIEBERMAN. I thank the Senator from Oregon for his comments. I
thank him for his leadership. Senator Gregg and I were happy to merge
together with the work the Senator from Oregon and the Senator from
Arizona have done.
  I want to end with one story the Senator from Oregon has stimulated
in my memory when I visited that hardware store. It shows how you not
only jump over the big store down the block but into the global
shopping mall.
  One of their favorite stories--and this is not a pure market example
because the particular customer I am about to refer to is from a Middle
Eastern country--is about a man who happened to work for his country's
national airlines, so his trip here was paid for, but he needed some
large, heavy tools. He went on the Internet, found his way to the
Coastal Tool & Supply web site, competitively priced, figured out the
advantage, was on a flight to New York as part of his normal work, got
off the plane, rented a truck, drove up to Hartford, bought the tools
that he needed, drove back, put them on the plane, and went back to the
Middle East, all smart shopping and good for business.
  So I hope that our colleagues will resist the allures of this second-
degree amendment and will not disrupt the noble and, I think, very
necessary intention of the underlying bill. We can come back some other
day, hopefully, informed by the work of the commission created herein
to deal with the border problems that I know concern the Senator from
Arkansas and the other cosponsors of the amendment.
  I yield the floor.
  Mr. HUTCHINSON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. HUTCHINSON. I thank the Chair. I just want to make a few closing
observations of my perspective on this second-degree amendment and
clarify a few things that I think are not representative at all of what
this second-degree amendment does.
  May I just say also, being the Senator from the State of Arkansas and
being from the hometown in which Wal-Mart stores are nationally
headquartered, world wide headquartered, and Wal-Mart has been
disparagingly mentioned several times----
  Mr. WYDEN. Will the Senator yield?
  Mr. HUTCHINSON. Not at this time. In my office in the Dirksen
Building I have a hanging portrait of the 5-&-10-cent store where Sam
Walton started the Wal-Mart stores. There is nothing in this amendment
that is antientrepreneur. The fact is that Wal-Mart, with their huge
advertising budget, as it was alluded to, started as a little 5-&-10-
cent store, as a mom-and-pop store in Arkansas. That is an American
success story which ought to be applauded, not disparaged. Every
American ought to have that opportunity, to have that dream. We ought
not with legislation undercut that little Main Street store that cannot
be replicated, cannot be replaced. No matter how great the Internet is,
no matter how great catalogs are, they cannot replace that store on
Main Street giving to the little league and supporting the local
efforts and local initiatives.
  A couple other things. It has been implied that somehow this
amendment, this second-degree amendment would mandate that they focus
the study, the commission focus their study on interstate sales.
Nothing could be further from the truth. If you look at the bill, it
says, and I quote, ``may include in the study *under subsection,'' may
include a study of. It is, in fact, the Gregg amendment, the McCain-
Gregg amendment that excludes even their authorization to study the
impact, the obvious impact of remote sales including catalog, including
Internet, all of the Internet remote sales, its impact upon small
businesses and upon local and State government. It simply says ``may.''
It is simply authorizing, permissive language. It is, in fact, the
House bill that mandated that they study this area and its impact,
because it is so obvious the impact that it could potentially have, and
that any study that should be done, if it is in fact to be a thorough
study, must include this area.

  It is the proponents of the Gregg amendment who would say what the
Finance Committee did by a vote of 19 to 1 should be overturned. The
Finance Committee, led by Senator Roth, included a study of these
issues--and they should be included. They should be studied. The
language in the bill says ``thorough study.'' How can you have a
thorough study and then delete the area of interstate sales? It puzzles
me. How can anyone object to having a broader study that would include
all of the various issues involved in a very complex subject?

[[Page S11669]]

  It has been implied that somehow this second-degree amendment, which
would say this issue ought to be studied, is protax. My goodness,
anybody who has ever looked at Tim Hutchinson's record in the
statehouse in Arkansas, the U.S. House of Representatives, and the U.S.
Senate, would have a hard time believing this amendment I am offering
is protax or somehow a roadmap to higher taxes. Nothing could be
further from the truth. We are not prejudging any kind of conclusions
or any kind of recommendations that this commission might make. And, I
remind my colleagues, it requires a two-thirds vote of the members of
the commission to make any recommendation, and that is all they can
make, is a recommendation. The final say remains with the Congress.
  How in the world can you say this somehow is going to lead to higher
taxes or somehow thwart the growth of the Internet? And that, may I
say, has been another mischaracterization of this amendment--that it is
somehow not only protax but anti-Internet.
  We have applauded, and I applaud, the growth of the Internet. I
quoted the statistics, from $8 billion in 1998 to the estimated $300
billion in sales in the year 2002; that is a good thing. But while it
is a good thing, we should not be so blind as to think it is not going
to have serious consequences, serious impacts, that ought to be
examined in advance.
  I support the bill. I support the timeout. I support the pause. I
support the moratorium. But I also believe, if we are going to have a
study, it ought to truly be a thorough study. It ought not say look at
everything but don't look at the impact upon business, don't look at
the impact upon the city government or the State government. It ought
to truly be a thorough study. You cannot deal with these issues in a
vacuum. They are interrelated, all of these, and they need to be, in
fact, thoroughly studied.
  Let me just conclude by saying I thought Senator Enzi's comments were
moving. I, like Senator Dorgan, did not realize that he and his wife
operated a little Main Street shoestore for over 20 years in Gillette,
WY. I did not know that. I had a great appreciation for Senator Enzi. I
have a greater appreciation now. But I think also that, as he paid
those sales taxes day in and day out, as he made the struggles that any
small business person makes in order to stay in existence, as he
contributed to the Little League, as he contributed to the United Way,
as he did everything that only a physical entity actually being right
there in the community can do--irreplaceable--that we need to consider
them, we need to think about them, as we pass this needed legislation.
  I believe if they will simply look at the language of the second-
degree amendment restoring what the Finance Committee did by a 19-to-1
vote and saying this is an area that ought to be examined, ought to be
looked at, then I think my colleagues will realize that in fact it does
make good sense and they will support it. I ask for their support.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Sessions). The Senator from Arizona.
  Mr. McCAIN. Mr. President, the amendment does not say anything about
what to do or not to do. What we are talking about here is whether the
commission should say we should overturn the Quill decision. That is
what we get down to, if we want to get through all the rhetoric and
language about this. We don't think the Quill decision should be
overturned. Obviously, the proponents of the amendment do, and that
really is, to a significant degree, what this amendment is all about.
  Mr. President, I move to table the amendment and ask for the yeas and
nays.
  Mr. BUMPERS. Mr. President, will the Senator withhold for about 2
minutes?
  Mr. McCAIN. I will be glad to withhold for 2 minutes before I make
the motion to table.
  Mr. BUMPERS. I thank the distinguished manager very much.
  Mr. President, this is really a strange scenario for me. I have
fought for years to allow States to do exactly what the Supreme Court,
in the Quill decision, said we had the right to do, and that was to
allow States to make mail order houses collect sales taxes on
merchandise being shipped into our respective States. That is what the
Supreme Court said. We would not be overturning the Quill decision. We
would simply be taking advantage of what the Supreme Court said we had
a right to do: Remove the interstate commerce clause as a burden and
allow the States, 45 of whom have sales taxes on merchandise from out
of State--allow those States who have passed those laws to implement
them. They cannot be implemented. We are saying we do not care what
kind of laws you pass at the State level, we are not going to allow you
to implement them.
  Last week we once again killed my amendment to allow states to
mandate that remote sellers collect the taxes they ought to. Yesterday,
the Senate decided that we cannot even make Internet sellers alert
consumers to the fact that there is a sales tax in the State. We cannot
even tell them to alert people to the fact that somebody may knock on
their door from their state revenue department and try to collect the
unpaid use tax. Think about that. Mr. President, 45 States have a sales
tax and we voted yesterday not to even require Internet sellers to tell
consumers there may be a tax on their purchases.
  Now we come here today saying we cannot even study it. My God, how
far are we going to go?
  The PRESIDING OFFICER. The 2 minutes has expired.
  Mr. McCAIN. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion of
the Senator from Arizona. The yeas and nays have been ordered.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) and the
Senator from South Carolina (Mr. Hollings) are necessarily absent.
  The PRESIDING OFFICER (Mr. Grams). Are there any other Senators in
the Chamber who desire to vote?
  The result was announced--yeas 30, nays 68, as follows:

                      [Rollcall Vote No. 304 Leg.]

                                YEAS--30

     Boxer
     Burns
     Campbell
     Coats
     Collins
     Craig
     Dodd
     Faircloth
     Frist
     Grams
     Gregg
     Hagel
     Kempthorne
     Kerry
     Kohl
     Kyl
     Lautenberg
     Lieberman
     McCain
     McConnell
     Moseley-Braun
     Murray
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Stevens
     Thompson
     Torricelli
     Wyden

                                NAYS--68

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bryan
     Bumpers
     Byrd
     Chafee
     Cleland
     Cochran
     Conrad
     Coverdell
     D'Amato
     Daschle
     DeWine
     Domenici
     Dorgan
     Durbin
     Enzi
     Feingold
     Feinstein
     Ford
     Gorton
     Graham
     Gramm
     Grassley
     Harkin
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerrey
     Landrieu
     Leahy
     Levin
     Lott
     Lugar
     Mack
     Mikulski
     Moynihan
     Murkowski
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Sessions
     Specter
     Thomas
     Thurmond
     Warner
     Wellstone

                             NOT VOTING--2

     Glenn
     Hollings

  The motion to lay on the table the amendment (No. 3760), as modified,
was rejected.
  Mr. McCAIN. Mr. President, the Senate has spoken. I move that we
adopt the underlying amendment and the pending amendment.
  The PRESIDING OFFICER. The question is on the second-degree
amendment.
  Without objection, the amendment is agreed to.
  The amendment (No. 3760), as modified, was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mr. DORGAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                     Amendment No. 3722, as amended

  The PRESIDING OFFICER. The question is on the first-degree amendment.

[[Page S11670]]

  The amendment (No. 3722), as amended, was agreed to.
  Mr. McCAIN. Mr. President, I move to reconsider the vote.
  Mr. DORGAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                 Amendments Nos. 3732 And 3733, En Bloc

  Mr. McCAIN. Mr. President, I send two amendments to the desk, en
bloc, and ask for their immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain] proposes amendments
     numbered 3732 and 3733, en bloc.

  Mr. McCAIN. Mr. President, I ask unanimous consent that reading of
the amendments be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments are as follows:

                           amendment no. 3732

           (Purpose: To modify the duties of the Commission)

       On page 22, line 2, strike ``interstate'' and insert
     ``instrastate, interstate''.

                           amendment no. 3733

           (Purpose: To modify the report of the Commission)

       On page 25, line 12, insert ``Any recommendation agreed to
     by the Commission shall be tax and technologically neutral
     and apply to all forms of remote commerce.'' after ``this
     title.''.

  Mr. McCAIN. These have been accepted by both sides. I know of no
further debate.
  The PRESIDING OFFICER. If there is no further debate, without
objection, the amendments are agreed to.
  The amendments (No. 3732 and No. 3733), en bloc, were agreed to.
  Mr. McCAIN. Mr. President, we are now down to basically two issues
about which the Senator from Wyoming, the Senator from North Dakota,
and the Senator from Oregon are deeply concerned. We are negotiating
those. We hope we can get an agreement on those so that we can finish
up on this legislation. If not, we will probably have votes on those
two issues. But we have resolved the remaining amendments, except for
those two. There is more than one amendment associated with those two
issues. But if we can get that agreement within the next half hour or
so, I think we can move to final passage. I thank the Senator from
North Dakota for his cooperation with this difficult issue.
  I yield the floor.
  Mr. DORGAN. Mr. President, it is also my hope that in a relatively
short period of time we will be able to resolve the remaining issues.
We have made a lot of progress on the bill. I will say again that the
Senator from Arizona has done an excellent job, and the Senator from
Oregon and others have pushed very hard to get us to this point. There
are other significant issues, but I expect to get them resolved in
relatively short order. I hope we will make the final progress
necessary on this piece of legislation.
  I yield the floor.
  Mr. LOTT addressed the Chair.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. LOTT. Mr. President, we are working on a unanimous consent
agreement now that we hope we can get approved, which would allow us to
get to a conclusion and a final vote on the Internet tax freedom bill.
I commend all who have been involved, including Senators McCain, Dorgan
and Wyden. I believe we can actually get to a conclusion. There has
been the possibility that it would be tangled up in other matters, but
I think maybe we have an agreement that will allow us to complete that.

                          ____________________
