Opening Statement of Chairman Chris Cannon for Subcommittee on Commercial and Administrative Law Hearing on the Streamlined Sales and Use Tax Agreement: States’ Efforts to Facilitate the Collection of Sales Taxes from Remote Vendors
October 1, 2003
Good afternoon ladies and gentlemen; this hearing of the Subcommittee on Commercial and Administrative Law will now come to order.
We consider today the efforts made by States to achieve a uniform sales and use tax regime. I am pleased to convene this hearing following the recent passage of the Internet Tax Nondiscrimination Act, H.R. 49. As many of you know, H.R. 49 ensures tax-free access to the Internet for all Americans, and I encourage my colleagues in the other body to move quickly to pass the companion bill prior to the expiration of the existing moratorium on November 1.
The concepts we will discuss today have long been linked to the Internet access issue. During consideration of H.R. 49, I stated my intention to convene a separate hearing on this issue to afford it careful attention. This hearing is the result of my commitment and I thank my colleagues with whom I’ve worked. I would also add that my Subcommittee may hold additional hearings on this subject in the future.
The Streamlined Sales and Use Tax Agreement – or SSTA – is the result of a considerable effort by States and organizations. In November 2002, thirty-one States ratified the SSTA following substantial review and discussion by members of the Project. Following ratification of the SSTA, member States began to adopt tax legislation in compliance with the terms of the Agreement.
The SSTA marks a significant departure from the sales and use tax system now in place in the United States. Under the Commerce Clause of the U.S. Constitution, Congress has sole authority to regulate commerce among the States. The Commerce Clause prevents the States from interfering with or unduly burdening interstate commerce through the use of its taxing authority. Particularly relevant to our discussion are two Supreme Court cases, National Bellas Hess v. Dept. of Revenue of Illinois and Quill Corp. v. North Dakota. These rulings prohibit States from compelling a remote seller lacking a physical presence in the State to collect and remit taxes for sales made to citizens within that State’s boundaries. The Court added that it was up to Congress to determine whether, when, and to what extent States may burden interstate mail order concerns with a duty to collect use taxes.
Given these rulings, the SSTA remains voluntary. However, the Project seeks Congressional approval of the Agreement, which would authorize the States to compel out-of-State merchants to collect sales and use taxes on all sales to customers in their respective States. I add that, while legislation has been introduced to authorize this Agreement, that bill, while likely to be referred to this Subcommittee, is not before us today for consideration. Rather, what we first address are the concepts contained in the Agreement before considering legislative action.
In light of the duties bestowed upon Congress by the U.S. Constitution, we must consider this Agreement carefully to ensure that its provisions would not unduly burden interstate commerce. We must not take our responsibility lightly. For these reasons, I look forward to the testimony of our highly informed panel, each of whom is an expert on this complex subject. Some, but not all, Members have followed the intricacies of this Project closely, and the details are extremely important here. I therefore encourage my colleagues to ask questions of the witnesses in order to inform this debate.
I now yield to Mr. Watt, the Ranking Member of the Subcommittee, for an opening statement.
Before I begin with witness introductions, the record of this hearing will remain open for five legislative days, until close-of-business on Tuesday, October 7. During that time, interested parties may submit statements for inclusion in the hearing record.