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Fourth Meeting: Transcript of March 20

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                            FOURTH MEETING

                             Dallas, Texas

                        Monday, March 20, 2000

       1     MEMBERS:

                    Governor, Commonwealth of Virginia
                  DEAN F. ANDAL
       4            Chairman, California Board of Equalization

       5          C. MICHAEL ARMSTRONG
                    Chief Executive Office, AT&T
                  JOSEPH H. GUTTENTAG
       7            Senior Advisor to the Assistant Secretary
                    for Tax Policy, U.S. Department of the
       8            Treasury

       9          THE HONORABLE PAUL C. HARRIS,
                    Senior Delegate, Virginia House of
      10            Delegates

      11          DELNA JONES
                    Commissioner, Washington Country
      12            Administrative Offices

      13          THE HONORABLE RON KIRK
                    Mayor, City of Dallas, Texas
      15            Governor, State of Utah

      16          GENE N. LEBRUN
                    President, National Conference of
      17            Commissioners on Uniform State Laws

      18          THE HONORABLE GARY LOCKE
                    Governor, State of Washington
                  GROVER NORQUIST
      20            President, Americans for Tax Reform

      21          ROBERT NOVICK
                    Counselor, U.S. Trade Representative

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       1     MEMBERS (CONT'D):

       2          RICHARD PARSONS
                    President, Time-Warner, Inc.
                  ANDREW PINCUS
       4            General Counsel, U.S. Department of Commerce

       5          ROBERT PITTMAN
                    President and Chief Operating Officer
       6            America OnLine, Inc.

       7          DAVID POTTRUCK
                    President and Co-Chief Executive Officer
       8            Charles Schwab Corporation

       9          JOHN W. SIDGMORE
                    Vice Chairman, MCI WorldCom; Chairman, UUNET
                  STANLEY S. SOKUL
      11            Davidson & Company, Inc.

      12          THEODORE WAITT
                    Chairman and CEO, Gateway, Inc.

      14                     *  *  *  *  *









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       1                 P R O C E E D I N G S

       2                                              (12:30)

       3               CHAIRMAN GILMORE:  Good afternoon,

       4     ladies and gentlemen.  And welcome to the

       5     fourth and final meeting of the Advisory

       6     Commission on Electronic Commerce.  I'm Jim

       7     Gilmore, the chairman of the Commission and

       8     Governor of the Commonwealth of Virginia, and

       9     I would like to welcome everyone and to call

      10     this meeting to order.

      11               The Advisory Commission on

      12     Electronic Commerce was established by the

      13     Congress to study the issue of taxation of

      14     electronic commerce.  And for the last ten

      15     months we've been deeply engaged in that

      16     endeavor.  The Commission held its first

      17     meeting in Williamsburg, Virginia last June.

      18     We met again in New York City in September,

      19     and then again in San Francisco in December.

      20     And I think we've come a long way since last

      21     June.

      22               Since June of last year, the

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       1     Commission has heard testimony from over 55

       2     experts and academics and think tanks and

       3     interest groups representing a broad range of

       4     perspectives on tax and electronic commerce

       5     policy.  If there's an opinion out there,

       6     we've heard it.  We've received over 7,000

       7     pieces of mail and over 50,000 E-mails.  Our

       8     library has grown to over 280 selections.

       9     Our web site received an award from MultiNet.

      10     It was selected as one of that publication's

      11     top sites of 1999.  The Commission has been

      12     viewed by tens of thousands of people on

      13     C-SPAN, and our work has been closely

      14     followed by the members of the United States

      15     Congress.

      16               In short, I think we can be

      17     confident that we have fulfilled our

      18     obligation to fully engage and to educate the

      19     people of the United States on the policy of

      20     Internet taxation.  We have followed

      21     Mr. Pottruck's work plan.  And following that

      22     work plan, the Commission began to move

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       1     toward some conclusions by distilling dozens

       2     upon dozens of issues into a policies and

       3     options paper, which we discussed in San

       4     Francisco.  That document moved us to our

       5     task here in Dallas, to sift through the

       6     possible solutions and to come to some

       7     conclusions regarding the direction that we

       8     believe is best for the people of the United

       9     States.  And I'm confident that we will reach

      10     a constructive conclusion and offer to

      11     Congress policy proposals that will benefit

      12     the people of America with regard to the

      13     taxation of electronic commerce.  In short,

      14     this is the meeting that all of us have been

      15     waiting for.

      16               I would like to remind everyone

      17     that this meeting is open to the public, it

      18     is being Web-cast over the internet on the

      19     Commission's Web site, which is

      20     www.ecommercecommission, one word, .org.


      22               Additionally, we have many members

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       1     of the media who are covering our proceedings

       2     here today.  Among them is C-SPAN.  C-SPAN is

       3     taping this meeting and will broadcast it at

       4     a later date.

       5               At this time I would like to

       6     introduce the very distinguished members of

       7     the Commission.  People who have devoted

       8     hundreds of hours over the last year to serve

       9     the people of the United States.  Let me

      10     begin, if I could, and I think these are

      11     close to being in order.

      12               Mr. John W. Sidgmore on my left,

      13     the vice-chairman of MCI WorldCom and

      14     Chairman of UUNet Technologies.

      15               Mr. Robert Pittman, President and

      16     chief operating officer of America OnLine.

      17               Mr. Stan Sokul, Davidson and

      18     Company, Incorporated and consultant to the

      19     Association of Interactive Media.

      20               Ms. Delna Jones.  She is the

      21     commissioner of Washington County, Oregon.

      22               Governor Locke is not yet here;

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       1     when he arrives we will introduce him.  He is

       2     the Honorable Gary Locke, the governor of the

       3     State of Washington, who will be joining us

       4     soon.

       5               The Honorable Ron Kirk, the mayor

       6     of the City of Dallas, where this illustrious

       7     meeting is being held today.

       8               The Honorable Michael O. Leavitt,

       9     the governor of the State of Utah.

      10               Let's see here, let's see, we have

      11     one change.  Mr. Lebrun, is that you?  I'm

      12     having a hard time seeing through those

      13     lights.  Gene Lebrun, who is president of,

      14     1997-1999, the National Conference of

      15     Commissioners of Uniform State Laws.

      16               And then of course, good old Joe H.

      17     Guttentag, the senior advisor to the

      18     assistant secretary for tax policy, United

      19     States Department of the Treasury.  Joe.

      20               On my right, the Honorable Dean F.

      21     Andal, the chairman of the California Board

      22     of Equalization.

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       1               Mr. David Pottruck, President and

       2     co-chief executive officer of Charles Schwab

       3     Corporation.

       4               Mr. Theodore "Ted" Waitt, the

       5     founder and chairman of Gateway,

       6     Incorporated.

       7               Mr. Richard Parsons.  He is the

       8     president of Time Warner, Incorporated.

       9               Mr. Grover Norquist, president of

      10     Americans for Tax Reform.

      11               Mr. C. Michael Armstrong, the

      12     chairman of the Board of AT&T.

      13               The Honorable Paul C. Harris,

      14     Senior.  He is a member of the House of

      15     Delegates, Virginia State Legislature.

      16               Mr. Lebrun I have previously

      17     introduced.

      18               Mr. Novick.  Excuse me, Mr. Novick.

      19     He is the general counsel of the U.S. Trade

      20     Representative.

      21               And Mr. Andrew J. Pincus, the

      22     general counsel of the United States

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       1     Department of Commerce.

       2               Welcome, ladies and gentlemen, to

       3     this meeting in Dallas.

       4               And now with a bit of an

       5     introduction, I would like to recognize our

       6     host here in Dallas today.  Mayor Kirk, I

       7     want to thank you very much for inviting the

       8     Commission to hold this final meeting in

       9     Dallas.  Dallas has grown to be home to many

      10     of the major technology firms in the country,

      11     such as EDS and Texas Instruments, whose

      12     engineer Jack Kilby (phonetic) developed the

      13     first semiconductor, as well as

      14, now owned by Yahoo.  With the

      15     concentration of high-tech firms in this

      16     area, it's fitting for us to conclude our

      17     efforts here in Dallas.

      18               Mayor Kirk, we're addressing a big

      19     issue; Texas is a big state; Dallas is a big

      20     city, and I know I speak for my fellow

      21     Commissioners to give you a big thank you for

      22     your hospitality.  Ladies and gentlemen, the

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       1     honorable mayor of the City of Dallas, Ron

       2     Kirk.

       3               MAYOR KIRK:  Governor

       4     Gilmore and fellow members of the Commission,

       5     it's my privilege to welcome you to Dallas.

       6     I was going to tell you about Jack Kilby

       7     inventing the first semiconductor and Dallas

       8     being the home to important companies like

       9     EDS and and Texas being a

      10     big state.  But you did a pretty good job of

      11     summarizing that, Governor.  But we are

      12     thrilled to have you here.

      13               And this is an important issue for

      14     our city and for our state.  Many people may

      15     not realize the State of Texas now produces

      16     more semiconductors than they do in the

      17     Silicon Valley.  We have the second highest

      18     concentration of people employed in the

      19     technology industry, with over a hundred

      20     thousand high tech jobs added over the last

      21     several years, and many of those are here in

      22     our metropolitan area.  And this is an

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       1     important issue and will continue to be for

       2     the future.  And it's still my hope that this

       3     Commission will find enough common ground to

       4     make our work substantive rather than

       5     perfunctory, and that we will be able to meet

       6     the mandate of Congress for the required two

       7     thirds majority to give them some direction

       8     on the treatment of this incredible industry

       9     as we go forward.

      10               But in the meantime, we turned the

      11     thermostat up and the wind down and cut the

      12     rain off, and I hope you all got in safe, had

      13     a wonderful day, and I hope our meeting and

      14     our work product is as pleasant as the

      15     weather.  So, welcome, and let's get down to

      16     business.

      17               CHAIRMAN GILMORE:  Thank you,

      18     Mr. Mayor.

      19               Over the next two days the

      20     Commission will discuss several proposals and

      21     resolutions that address our main charge:

      22     What tax policies the people of America

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       1     should pursue with regard to electronic

       2     commerce.  Keeping with tradition of this

       3     Commission, I certainly encourage open

       4     discussion, a frank exchange of ideas and an

       5     honest debate over the next two days.  I

       6     expect that there are going to be some issues

       7     that we will agree on and some we will not

       8     agree on.  But the debate itself will be

       9     providing valuable information to Congress

      10     and will be recorded for posterity at the

      11     National Archives in Washington, D.C.  Which

      12     is a bit shocking.  But in any case it will

      13     be -- it will be there.

      14               Ladies and gentlemen, an agenda has

      15     been distributed to you.  You will see that

      16     the agenda proposes an orderly process for us

      17     to move through the resolution and amendments

      18     pre-filed, in advance of the meeting,

      19     pursuant to Operating Rule IV.C.  I would

      20     like to call everybody's attention to

      21     Operating Rule IV because it served the

      22     important public purpose of providing the

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       1     media, the public, and each of the

       2     Commissioners fair advance notice of the

       3     issues and policy proposals to be presented

       4     and debated at this meeting.  This is a fair

       5     and open process that the Commission approved

       6     when we developed the Operating Rules, and

       7     Heather Rosenker, the Executive Director,

       8     sent several notices to all Commissioners

       9     reminding everyone of each deadline for

      10     filing resolutions and amendments to be

      11     considered here.  As you can see from the

      12     agenda that's in your notebooks there were

      13     some 29 -- and your notebooks, there were

      14     some 29 resolutions and amendments filed in

      15     advance, and some of them are quite

      16     comprehensive and extensive.  The agenda

      17     gives each Commissioner who complied with --

      18     who complied with the rules a fair

      19     opportunity to present his or her proposal.

      20               We have received a procedural

      21     resolution filed by Andy Pincus to amend the

      22     rules to permit Commissioners to raise new

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       1     proposals from the floor even if they were

       2     not filed in advance.  With regard to

       3     Commissioner Pincus's resolution let me say

       4     that I think that each of the Commissioners

       5     here wants to preserve some flexibility in

       6     the procedures to offer floor amendments,

       7     depending upon how the debate goes today.

       8     But I think that it's important that we give

       9     those Commissioners who followed the rules an

      10     opportunity to present and adopt their

      11     proposals that they pre-filed with fair

      12     notice to the world.  So I've attempted to

      13     balance the rights of each of the

      14     Commissioners in a fair and an orderly

      15     process.

      16               First, the agenda takes up all

      17     pre-filed proposals, resolutions, and

      18     amendments, so long as each Commissioner

      19     wishes to present and move their proposals.

      20     After we've concluded the first round of

      21     presentations and debate and amendments, then

      22     I propose that we take up Mr. Pincus's

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       1     resolution.  And if it is the Commission's

       2     pleasure, give each Commissioner an

       3     opportunity to offer further amendments to

       4     proposals from the floor.

       5               Now, I think this is the fair way

       6     to proceed.  It protects the rights of the

       7     Commissioners who operated in accordance with

       8     the rules in round one; it provides for an

       9     orderly and efficient process so that we can

      10     get through the 29 pre-filed proposals

      11     without staying here until Thursday; and it

      12     accommodates a forum for floor amendments for

      13     those Commissioners who wish to offer them in

      14     a second round.  Now, a copy of this agenda

      15     was sent out last Thursday.

      16               Without objection, I move that the

      17     agenda be adopted as printed, and then we

      18     will proceed to the business of the day.

      19               GOVERNOR LEAVITT:  Mr. Chairman

      20      --

      21               CHAIRMAN GILMORE:  We'll start --

      22               GOVERNOR LEAVITT:  Mr.

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       1     Chairman, I think there is some question with

       2     respect to the agenda.

       3               CHAIRMAN GILMORE:  Governor

       4     Leavitt.

       5               GOVERNOR LEAVITT:  I think

       6     there is some concern about the fact that

       7     we're going to be looking to develop a

       8     proposal in toto.  And I'd like to move that

       9     we amend the agenda to provide for the

      10     individual resolutions that would be offered

      11     at this point in the agenda to the end of the

      12     agenda when we would be able to look at those

      13     in the context of the larger proposal.

      14     That's my motion.

      15               CHAIRMAN GILMORE:  The Governor of

      16     Utah, Mike Leavitt, has moved that we, in

      17     fact, amend the agenda.  And what is the

      18     nature of the amendment?

      19               GOVERNOR LEAVITT:  The items

      20     that we would move to now, which would be the

      21     international issues, Items A1 and A2, I

      22     would like to have those moved to the end of

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       1     the resolutions that have been filed.  The

       2     items under B, Domestic Issues, really begin

       3     to focus us on the entire package that we

       4     ultimately hope to develop.  And I would

       5     argue and move that we not try to break those

       6     into individual pieces, but deal with them

       7     after we've had a chance to look at the

       8     context of the entire report.

       9               CHAIRMAN GILMORE:  Is it your

      10     position that the floor amendments be

      11     considered throughout?

      12               GOVERNOR LEAVITT:  No, to be

      13     specific, I would move items A1 and A2 to be

      14     Item 17 1 and 2.

      15               CHAIRMAN GILMORE:  What is the

      16     pleasure of the Commission?  Is there any

      17     further debate on the movement of the agenda

      18     prior to its adoption?

      19               There is a motion from the floor

      20     that Items A 1 and 2, the international

      21     issues, be moved to be Items 17 and 18 in

      22     Section B.  Is there a second?

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       1               COMMISSIONER ANDAL:  Mr. Chairman?

       2               CHAIRMAN GILMORE:  Mr. Andal.  Is

       3     there a second?

       4               COMMISSIONER LEBRUN:  I'll second.

       5               CHAIRMAN GILMORE:  Mr. Lebrun

       6     seconds.  Open for debate.  Mr. Andal.

       7               COMMISSIONER ANDAL:  Yeah, unless

       8     there's a compelling reason that I haven't

       9     heard of, Governor Leavitt, I think that

      10     everybody here has prepared for what is kind

      11     of a torturous technical journey today by

      12     having the items in order.  And unless

      13     there's some reason that the international

      14     issues couldn't be resolved first, there's

      15     only two of them, and they don't relate to

      16     the domestic issues directly, I'd rather

      17     stick to the formula that we knew we were

      18     going to prepare for.  I think if we start

      19     mixing and matching these and moving around,

      20     that we're going to get -- make this a more

      21     complicated job than it would otherwise be.

      22     Is there a -- is there a reason, other

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       1     than --

       2               GOVERNOR LEAVITT:  The reason,

       3     basically, is we'd like to deal with the

       4     resolutions in the context of specific

       5     proposals as opposed to looking at them one

       6     at a time.  Context, we need to have context

       7     in which all of this fits.

       8               COMMISSIONER ANDAL:  Okay.  Yeah, I

       9     understand viewing things in context, but I'm

      10     not sure why these two items at the beginning

      11     or at the end are any less in context.

      12     They're both individual items, and I think

      13     it's just a matter of order.

      14               CHAIRMAN GILMORE:  Mr. Norquist?

      15               COMMISSIONER NORQUIST:  This builds

      16     on a resolution that I introduced and that we

      17     passed in New York, which is generally being

      18     supportive of this Administration's

      19     international position.  I was sort of happy

      20     that we were able to be supportive of

      21     president Clinton's international initiative

      22     prior to Seattle.  And I think it's sort of a

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       1     consensus issue within us, and when we have

       2     the opportunity to be supportive of some --

       3     something the Administration's doing right,

       4     I'd kind of like to take it.

       5               CHAIRMAN GILMORE:  Further debate?

       6               Okay, we'll call the question on

       7     the question of Governor Leavitt to move the

       8     first two items around in the agenda prior to

       9     its adoption.  Executive Director, would you

      10     please call the role on the issue of whether

      11     we pass or defeat Governor Leavitt's motion.

      12               MS. ROSENKER:  Mr. Andal?

      13               COMMISSIONER ANDAL:  No.

      14               MS. ROSENKER:  Mr. Armstrong?

      15               COMMISSIONER ARMSTRONG:  No.

      16               MS. ROSENKER:  Governor Gilmore?

      17               CHAIRMAN GILMORE:  No.

      18               MS. ROSENKER:  Mr. Guttentag?

      19               COMMISSIONER GUTTENTAG:  Yes.

      20               MS. ROSENKER:  Mr. Harris?

      21               COMMISSIONER HARRIS:  No.

      22               MS. ROSENKER:  Mr. Kirk?

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       1               MAYOR KIRK:  Yes.

2 MS. ROSENKER:  Ms. Jones?

       3               MS. ROSENKER: Governor Leavitt?

       4               GOVERNOR LEAVITT:  Yes.

       5               MS. ROSENKER:  Mr. Lebrun?

       6               COMMISSIONER LEBRUN: No.
MS. ROSENKER: Governor Locke here?
       7               Mr. Norquist?

       8               COMMISSIONER NORQUIST:  Yes.  No.

       9     Sorry.

      10               COMMISSIONER NOVICK:  Good start.

      11     Does he get to vote twice?

      12               COMMISSIONER NORQUIST:  I voted for

      13     Locke and had --

      14               MS. ROSENKER:  Mr. Norquist?

      15               COMMISSIONER NORQUIST:  No.  Thank

      16     you.

      17               MS. ROSENKER:  Mr. Novick?

      18               COMMISSIONER NOVICK:  Yes.

      19               MS. ROSENKER:  Mr. Parsons?

      20               COMMISSIONER PARSONS:  No.

      21               MS. ROSENKER:  Mr. Pincus?

      22               COMMISSIONER PINCUS:  Yes.

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       1               MS. ROSENKER:  Mr. Pittman?

       2               COMMISSIONER PITTMAN:  No.

       3               MS. ROSENKER:  Mr. Pottruck?

       4               COMMISSIONER POTTRUCK:  No.

       5               MS. ROSENKER:  Mr. Sidgmore?

       6               COMMISSIONER SIDGEMORE:  No.

       7               MS. ROSENKER:  Mr. Sokul?

       8               COMMISSIONER SOKUL:  No.

       9               MS. ROSENKER:  Mr. Waitt?

      10               COMMISSIONER WAITT:  No.

      11               CHAIRMAN GILMORE:  The Executive

      12     Director's handed me the roll call.  In favor

      13     of the motion, seven, against the motion

      14     eleven, one abstention.  The motion is

      15     defeated.

      16               Without further objection, we will

      17     proceed with the agenda.  We start with the

      18     presentation of the resolution filed by the

      19     Business Caucus entitled, Proposal to Foster

      20     International Consensus Regarding the

      21     Taxation of Electronic Commerce.  And who

      22     would like to present this resolution on

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       1     behalf of the Business Caucus?  Is there a

       2     designee?

       3               First of all, is there a motion to

       4     adopt the Business Caucus --

       5               MAYOR KIRK:  I'll move

       6     approval of Item 1.

       7               SPEAKER:  Second.

       8               CHAIRMAN GILMORE:  Motion for the

       9     approval of Item 1.  The Proposal to Foster

      10     International Consensus Regarding the

      11     Taxation of Electronic Commerce.  It is moved

      12     and seconded.  Is there debate on this issue

      13     or presentation?

      14               COMMISSIONER PITTMAN:  I would like

      15     to just say a couple of words, if I could.

      16     The international proposal is a four-part

      17     proposal that recommends Congress take

      18     actions that will foster international

      19     consensus regarding taxation of electronic

      20     commerce.

      21               Our four-part plan includes the

      22     following specific recommendations.  One,

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       1     that Congress should support a permanent

       2     extension of the current moratorium on

       3     tariffs and duties on electronic

       4     transmissions.  This proposal has been

       5     discussed at every meeting, and nearly all of

       6     us have favorably commented on the

       7     desirability of a continued tariff

       8     moratorium.

       9               Two, Congress should affirm support

      10     for the OECD's efforts to build international

      11     consensus for tax rules that allow continued

      12     growth of global E-commerce activities.  The

      13     OECD member nations have already made

      14     substantial progress.  For example, they've

      15     obtained agreement that new taxes should not

      16     be applied to E-commerce, and they support

      17     application of existing rules to avoid trade

      18     distortions.

      19               Three, Congress should provide

      20     adequate funding and other support for the

      21     U.S. Treasury Department's efforts to build

      22     international consensus for cross-border

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       1     E-commerce activities.  It's important to

       2     enable the U.S. to work with foreign

       3     governments.  We need to ensure that tax

       4     policies are not used to erect barriers to

       5     markets for U.S. companies.

       6               Fourth, and finally, Congress

       7     should avoid legislation inconsistent with

       8     the tax policy principles that emerge from

       9     the international discussion.  Otherwise our

      10     leadership position could be compromised if

      11     we take actions inconsistent with the tax

      12     policies that we're encouraging other

      13     countries to adopt.  We can be sure that the

      14     international community is watching this

      15     Commission.  Approval of this proposal will

      16     demonstrate our commitment to a consensus

      17     approach to E-commerce tax policies, to fair

      18     treatment of consumers and businesses, and to

      19     continued development of E-commerce.  I do

      20     encourage you to vote for this proposal.

      21               CHAIRMAN GILMORE:  Further

      22     discussion?  Mr. Pincus?

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       1               COMMISSIONER PINCUS:  Thank you,

       2     Governor.  Yeah, I would like to say a few

       3     words, maybe generally, and then also

       4     specifically about this issue.

       5               I think the Commission has begun a

       6     national discussion of some very important

       7     issues.  The president recognized the

       8     importance of these issues early in February

       9     '98 when he announced his support for the

      10     Internet Tax Freedom Act and noted the

      11     importance of developing consensus on them.

      12               In accordance with that view that

      13     the interests of all stakeholders have to be

      14     taken into account, we've sought to work with

      15     everyone, making good faith attempts to

      16     achieve consensus within the Commission.  And

      17     I have to single out Governor Leavitt, who's

      18     the chairman of the National Governors

      19     Association, as someone who's truly made

      20     Herculean efforts toward that goal.

      21               Unfortunately, the Commission has

      22     not yet been able to serve as a forum to

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       1     forge that consensus.  And we'd looked

       2     forward to supporting an overall package that

       3     would have reflected the views of at least

       4     two thirds of the Commission, as Congress

       5     required for a valid recommendation.  And

       6     we've been working hard as an honest broker

       7     to try and achieve the balance that that

       8     requires between technology interests, state

       9     and local governments who have to provide

      10     services and the continued viability of

      11     traditional retailers, large and small.  And

      12     we've been working hard talking to many

      13     members here about that.  Unless the

      14     consensus develops, however, we're going to

      15     abstain from voting.

      16               We remain open, however, to the

      17     possibility that a principle consensus will

      18     develop, and we hope before the meeting is

      19     over we can attract two- thirds consensus,

      20     but we do have views on the issues.  And I

      21     would like to say in connection with this

      22     debate, as we've spoken of before, the

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       1     Administration has argued forcefully

       2     internationally that the current moratorium

       3     on customs, duties on electronic

       4     transmissions should be made permanent, and

       5     that any taxation of electronic commerce

       6     should be neutral, non- discriminatory,

       7     simple, certain, fair, and flexible.  And we

       8     continue and we will continue to argue those

       9     positions forcefully in every international

      10     forum.

      11               COMMISSIONER SOKUL:  Governor?

      12               CHAIRMAN GILMORE:  Yes, sir.

      13     Mr. Sokul?

      14               COMMISSIONER SOKUL:  I just have a

      15     quick question for Tom, our counsel.  In

      16     light of that announcement, that the

      17     Administration is going to abstain, how does

      18     that affect the two-thirds supermajority

      19     requirement?  Because as I understand it, the

      20     statute says the two thirds is with reference

      21     to the Commissioners serving at the time.

      22     Not serving at the time and voting, so

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       1     abstention equals a no, effectively.  Is that

       2     true?

       3               CHAIRMAN GILMORE:  I'm going to ask

       4     the Counsel and Parliamentarian to address

       5     the issue that was raised --

       6               COMMISSIONER SOKUL:  But basically

       7     for all intents and purposes a decision to

       8     abstain is a decision to vote no.

       9               MR. GRIFFITH:  The statute requires

      10     that for findings and recommendations to be

      11     included in the report, they achieve

      12     two-thirds support of the members of the

      13     Commission.  There are nineteen members of

      14     the Commission.  It would take thirteen

      15     members to achieve that supermajority

      16     requirement.  Whether a particular

      17     Commissioner abstains or not does not affect

      18     that requirement.  So to become a finding or

      19     recommendation, according to the language of

      20     the statute, you would need thirteen votes.

      21               Does that answer your question,

      22     Commissioner Sokul?

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       1               COMMISSIONER SOKUL:  I think so.  I

       2     think what you're saying is the abstention

       3     has the same effect as a no.

       4               CHAIRMAN GILMORE:  Are you

       5     inquiring as to whether an abstention

       6     prevents the Commission from reaching the

       7     thirteen number?  It obviously does --

       8               COMMISSIONER SOKUL:  I guess that's

       9     my point, that if this is going to make it

      10     more difficult to reach two thirds because

      11     three players have been taken out of an

      12     equation and an abstention is effectively a

      13     no.

      14               CHAIRMAN GILMORE:  Well, we shall

      15     see.  Are there other inquiries on this

      16     matter?  Any other debate that wishes to be

      17     had?  Is the Commission -- Mr. Norquist?

      18               COMMISSIONER NORQUIST:  I just want

      19     to speak in favor of the measure.  I think

      20     the Administration has moved in the right

      21     direction on this, and I think the Business

      22     Proposal Resolution is very helpful and moves

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       1     in the right direction, and I'm delighted to

       2     be able to support it.

       3               CHAIRMAN GILMORE:  Okay.

       4               SPEAKER:  Call the question.

       5               CHAIRMAN GILMORE:  The motion has

       6     been made to call the question.  Second it?

       7               SPEAKER:  Second.

       8               CHAIRMAN GILMORE:  All in favor of

       9     calling the question please say aye.

      10               All opposed nay?

      11               Roll call vote, please, on the

      12     adoption of the first provision, the Business

      13     Council Proposal to Foster International

      14     Consensus Regarding the Taxation of

      15     Electronic Commerce.

      16               Ms. Rosenker, would you call the

      17     roll, please?

      18               MS. ROSENKER:  Mr. Andal?

      19               COMMISSIONER ANDAL:  Aye.

      20               MS. ROSENKER:  Mr. Armstrong?

      21               COMMISSIONER ARMSTRONG:  Yes.

      22               MS. ROSENKER:  Mr. Guttentag?

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       1               COMMISSIONER GUTTENTAG:  For the

       2     process and procedure reasons announced by

       3     Governor Leavitt and by Commissioner Pincus,

       4     I abstain.

       5               MS. ROSENKER:  Mr. Harris?

       6               COMMISSIONER HARRIS:  Aye.

       7               MS. ROSENKER:  Mr. Kirk?

       8               MAYOR KIRK:  Same reasons

       9     articulated by Mr. Guttentag and the

      10     Governor, I abstain.

      11               MS. ROSENKER:  Ms. Jones?

      12               COMMISSIONER JONES:  I abstain.

      13               MS. ROSENKER:  Governor Leavitt?

      14               GOVERNOR LEAVITT:  Abstain.

      15               MS. ROSENKER:  Mr. Lebrun?

      16               COMMISSIONER LEBRUN:  Abstain.

      17               MS. ROSENKER:  Mr. Norquist?

      18               COMMISSIONER NORQUIST:  Yes.

      19               MS. ROSENKER:  Mr. Novick?

      20               COMMISSIONER NOVICK:  Abstain.

      21               MS. ROSENKER:  Mr. Parsons?

      22               COMMISSIONER PARSONS:  Aye.

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       1               MS. ROSENKER:  Mr. Pincus?

       2               COMMISSIONER PINCUS:  Abstain.

       3               MS. ROSENKER:  Mr. Pittman?

       4               COMMISSIONER PITTMAN:  Yes.

       5               MS. ROSENKER:  Mr. Pottruck?

       6               COMMISSIONER POTTRUCK:  Yes.

       7               MS. ROSENKER:  Mr. Sidgmore?

       8               COMMISSIONER SIDGEMORE:  Yes.

       9               MS. ROSENKER:  Mr. Sokul?

      10               COMMISSIONER SOKUL:  Yes.

      11               MS. ROSENKER:  Mr. Waitt?

      12               COMMISSIONER WAITT:  Yes.

      13               CHAIRMAN GILMORE:  Chairman votes

      14     yes, also.

      15               MS. ROSENKER:  Chairman Gilmore.

      16               CHAIRMAN GILMORE:  The vote on the

      17     first item on the agenda is eleven yeas,

      18     seven abstentions.  Obviously it passes

      19     eleven to no nays, seven abstentions.  It is

      20     a majority vote, but not the statutory two

      21     thirds to yet be a recommendation within the

      22     report.

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       1               The next item is Commissioner

       2     Sokul's recommendation, The Need for Improved

       3     Knowledge of International Relations.

       4               Mr. Sokul, you wish to move the

       5     adoption of your resolution?

       6               COMMISSIONER SOKUL:  Yes.

       7               CHAIRMAN GILMORE:  Second?

       8               SPEAKER:  Second.

       9               CHAIRMAN GILMORE:  Moved and

      10     seconded to adopt Mr. Sokul's resolution, The

      11     Need for Improved Knowledge of International

      12     Ramifications.

      13               COMMISSIONER SOKUL:  Governor

      14     Gilmore?

      15               CHAIRMAN GILMORE:  It's been moved

      16     and seconded.  Debate.  Mr. Sokul?

      17               COMMISSIONER SOKUL:  If it would

      18     tease out some votes, I'd have this come up

      19     last.

      20               GOVERNOR LEAVITT:  It just

      21     might.

      22               MAYOR KIRK:  I might remind

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       1     Mr. Sokul, you just voted against that

       2     opportunity.  Would you like to change your

       3     vote on Governor Leavitt's motion?

       4               COMMISSIONER SOKUL:  I guess what

       5     you're saying is won't make a difference.

       6               MAYOR KIRK:  Might make a

       7     big difference.

       8               CHAIRMAN GILMORE:  Mr. Sokul, the

       9     Commission has concluded that it will not at

      10     this time recommend the first item.  It may

      11     not recommend yours.  But the business of

      12     this Commission will be reported to the

      13     Congress, so please proceed.

      14               COMMISSIONER SOKUL:  Okay.  I

      15     offered this resolution because I think

      16     there's a distinction that's important

      17     between the development of international

      18     rules among nations and how domestic

      19     decisions affect our global competitiveness.

      20     The previous resolution, which was an

      21     excellent resolution, deals with the need to

      22     develop consensus among nations on an

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       1     international level.  My resolution deals

       2     with how domestic decisions that we make

       3     amongst ourselves as a nation may have global

       4     ramifications.

       5               The resolution makes two points.

       6     First, I think we should recommend to

       7     Congress that whatever they do on this issue

       8     they should explore:  How would that system

       9     that they set up or the states set up affect

      10     the competitiveness of United States

      11     companies competing in the global

      12     marketplace?  And on that issue I would note

      13     that at the last meeting I asked the official

      14     from the EU if he ever foresaw a time when

      15     the European Union would require their

      16     companies to collect state and local taxes

      17     for our country.  And his response was:  No,

      18     the states should maybe try to come up with a

      19     system where their companies would

      20     voluntarily comply.  That raises the question

      21     of what if we come up with a system that

      22     forces our companies to collect every state's

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       1     taxes and burdens our companies that way?  I

       2     mean, in the Internet environment, what's to

       3     prevent a consumer from buying a product from

       4     an international company?  And unless we're

       5     going to set up a world tax organization or

       6     states are going to stop little brown trucks

       7     at the border, like we heard last meeting,

       8     that's an issue.  And I think it's an

       9     important issue that needs to be discussed.

      10               Second, the resolution makes the

      11     point that Congress should consider the

      12     effects of our decisions becoming a model for

      13     global action.  We're the leaders in

      14     E-commerce, the world watches us for signals

      15     as to what's important and how things should

      16     be structured.  And how we treat our

      17     sub-national taxes could become a model for

      18     global action.

      19               So my resolution just raises these

      20     issues in point -- and I suggest that the

      21     Commission should ask Congress not to decide

      22     one way or another, but just note that these

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       1     are important issues that should be explored

       2     and considered as they debate the Internet

       3     tax issue domestically.

       4               CHAIRMAN GILMORE:  Any further

       5     discussion on Mr. Sokul's resolution?

       6               Seeing none, ready to call the

       7     question?

       8               COMMISSIONER ARMSTRONG:  Call the

       9     question.

      10               CHAIRMAN GILMORE:  Mr. Armstrong

      11     calls the question.  Second?

      12               SPEAKER:  Second.

      13               CHAIRMAN GILMORE:  All in favor of

      14     calling the question say aye.

      15               All opposed nay?

      16               We'll call the roll, please,

      17     Ms. Rosenker.

      18               MS. ROSENKER:  Mr. Andal?

      19               COMMISSIONER ANDAL:  Aye.

      20               MS. ROSENKER:  Mr. Armstrong?

      21               COMMISSIONER ARMSTRONG:  Aye.

      22               MS. ROSENKER:  Mr. Guttentag?

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       1               COMMISSIONER GUTTENTAG:  I abstain

       2     for the reasons stated with respect to the

       3     previous resolution.

       4               MS. ROSENKER:  Mr. Harris?

       5               COMMISSIONER HARRIS:  Aye.

       6               MS. ROSENKER:  Mayor Kirk?

       7               MAYOR KIRK:  I abstain.

       8               MS. ROSENKER:  Ms. Jones?

       9               COMMISSIONER JONES:  Abstain.

      10               MS. ROSENKER:  Governor Leavitt?

      11               GOVERNOR LEAVITT:  As indicated

      12     to Mr. Sokul, this may well have my vote at a

      13     future time, as well as Mr. Norquist's, and I

      14     abstain.

      15               MS. ROSENKER:  Mr. Lebrun?

      16               COMMISSIONER LEBRUN:  Abstain.

      17               MS. ROSENKER:  Governor Locke?

      18               GOVERNOR LOCKE:  Abstain.

      19               MS. ROSENKER:  Mr. Norquist?

      20               Mr. Novick?

      21               COMMISSIONER NOVICK:  Abstain.

      22               MS. ROSENKER:  Mr. Parsons?

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       1               Mr. Pincus?

       2               COMMISSIONER PINCUS:  Abstain.

       3               MS. ROSENKER:  Mr. Pittman?

       4               COMMISSIONER PITTMAN:  Yes.

       5               MS. ROSENKER:  Mr. Pottruck?

       6               COMMISSIONER POTTRUCK:  Yes.

       7               MS. ROSENKER:  Mr. Sidgmore?

       8               COMMISSIONER SIDGEMORE:  Yes.

       9               MS. ROSENKER:  Mr. Sokul?

      10               COMMISSIONER SOKUL:  Yes.

      11               MS. ROSENKER:  Mr. Waitt?

      12               COMMISSIONER WAITT:  Yes.

      13               MS. ROSENKER:  Chairman Gilmore?

      14               CHAIRMAN GILMORE:  Aye.


      16               Mr. Sokul's resolution has received

      17     eleven votes.  No nay votes and eight

      18     abstentions.

      19               COMMISSIONER ANDAL:  Mr. Chairman?

      20               CHAIRMAN GILMORE:  Mr. Andal.

      21               COMMISSIONER ANDAL:  Yes, I have a

      22     parliamentary inquiry of the Chair.  Given

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       1     that we have a significant number of

       2     Commissioners who are not going to vote on

       3     these issues, they're going to abstain, I'd

       4     like to ask the Chair to give me the answer

       5     to two questions.  One is, what is the legal

       6     significance of a majority vote rather than a

       7     two-thirds majority vote?  And will a

       8     majority vote be reflected in our report to

       9     Congress?

      10               CHAIRMAN GILMORE:  Call on the

      11     Counsel and Parliamentarian for a response to

      12     that.

      13               COMMISSIONER LEBRUN:  Mr. Chairman?

      14               CHAIRMAN GILMORE:  Mr. Lebrun.

      15               COMMISSIONER LEBRUN:  Yeah --

      16               CHAIRMAN GILMORE:  Well, just a

      17     moment, Mr. Lebrun --

      18               COMMISSIONER LEBRUN:  On this --

      19               CHAIRMAN GILMORE:  -- I've called

      20     on the Parliamentarian first, and then after

      21     his remarks I will come back to you.

      22               Mr. Griffith?

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       1               MR. GRIFFITH:  Thank you, Mr.

       2     Chairman.  This is a question that's been

       3     directed to our office many times since the

       4     Commission was created, and we've answered it

       5     informally to a number of Commissioners and

       6     their staff.  I'm asking Mr. Jowers to

       7     distribute to each of the Commissioners now a

       8     letter that we prepared over the weekend in

       9     response to this question.

      10               At the outset let me explain the

      11     role of Counsel, the role of Parliamentarian

      12     on these sorts of issues.  The Commission

      13     itself determines its own rules.  The

      14     Commission itself has the responsibility of

      15     determining the statute and what it means and

      16     how it applies to the Commission's

      17     proceeding.  Nevertheless, Counsel can be and

      18     is now being called upon to give its best

      19     advice about the meaning of the statute.  And

      20     that's what we have done.  And you'll be

      21     seeing our work product in just a moment.

      22               Let me describe it for you orally.

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       1     The first point to keep in mind is that it is

       2     the Internet Tax Freedom Act itself that

       3     established the Commission.  It is the source

       4     of the authority for the Commission to

       5     transact its business.  In the statute,

       6     Section 1103 of the Internet Tax Freedom Act,

       7     it makes clear that it is the obligation and

       8     duty of this Commission to transmit a report

       9     of the results of its study to Congress.

      10     There is language in Section 1103 that talks

      11     about a two- thirds supermajority

      12     requirement.  That language applies only to a

      13     finding or recommendation of the Commission.

      14     It is clear from our vantage point that

      15     Congress wants a report, that Congress

      16     expects a report; that is consistent with

      17     hallmark principles of congressional

      18     accountability that have followed advisory

      19     commissions since they were created.

      20               Now, the content of that report is

      21     up to the Commission.  For example, in our

      22     view it would be perfectly appropriate for

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       1     the Commission in its report to Congress to

       2     include a listing of all the votes that came

       3     before the Commission. To vote -- to report

       4     the yeas and nays of the proposals.

       5     Furthermore, it would be appropriate for the

       6     Commission, if it were to determine that it

       7     wanted to present the report in this way, to

       8     highlight certain of the votes as being more

       9     significant for Congress's attention than

      10     other votes.  Furthermore, it's also our view

      11     that, if the Commission were so to determine

      12     it, that it would be within the meaning of

      13     the Act that the Commission could report the

      14     majority proposals of the Commission.  How

      15     the Commission presents its report is

      16     squarely within its discretion.  But it does

      17     not have the authority to call its work

      18     product a finding or a recommendation unless

      19     it has two thirds of the votes of the

      20     Commissioners.  Presumably, for those items

      21     that two-thirds supermajority support can be

      22     garnered, that will have a greater influence

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       1     and impact upon Congress.  Congress will

       2     weight that differently than it would any of

       3     the other actions of the Commission.  But

       4     it's certainly within the discretion of the

       5     Commission, in our view, to present Congress

       6     a report of its dealings.

       7               But finally, it's been brought to

       8     our attention that over the weekend the

       9     Majority Leader of the Senate, Senator Lott,

      10     and then I believe today the Speaker of the

      11     House of Representatives, Speaker Hastert,

      12     have sent letters to the Commission saying

      13     that in their view they would welcome a

      14     report of this Commission's works that

      15     included majority votes, even if there were

      16     no issues on which a supermajority could be

      17     attained.

      18               We, finally, think that that is

      19     significant direction inasmuch as Congress

      20     created this Commission, it is a Commission

      21     within the Legislative Branch of Congress,

      22     that Commissioners would do well to weigh

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       1     heavily the views of the Congressional

       2     leadership about what they expected to have

       3     from this Commission.

       4               Now, with that, I'd be happy to

       5     answer any questions.  Does that answer your,

       6     question?

       7               COMMISSIONER ANDAL:  It does.

       8               MR. GRIFFITH:  Okay.

       9               CHAIRMAN GILMORE:  It is ruling of

      10     the Chair that the report is mandatory under

      11     the statute, all actions receiving a majority

      12     vote on this Commission will be included and

      13     designated as such.  Only items receiving the

      14     super two-thirds majority will be designated

      15     as findings and recommendations.

      16               COMMISSIONER LEBRUN:  Mr. Chairman?

      17               CHAIRMAN GILMORE:  Mr. Lebrun.

      18               COMMISSIONER LEBRUN:  May I address

      19     this point?

      20               CHAIRMAN GILMORE:  Yes, sir.

      21               COMMISSIONER LEBRUN:  Will all due

      22     respect, I don't agree with Counsel.  The

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       1     statute's very clear.  It says:  No finding

       2     or recommendation shall be included in the

       3     report unless agreed to by at least two

       4     thirds of the members of the Commission

       5     serving at the time the finding and

       6     recommendation is made.  Those of us in the

       7     group that are lawyers know what findings

       8     are.  When you try a case to a court, you

       9     make findings of fact and conclusions of law.

      10     Both Items A1 and A2 conclude findings of

      11     fact, if you use it in the legal sense.  They

      12     set forth the premise upon which a

      13     recommendation may or may not be made, but

      14     they are clearly findings.  And if the

      15     findings don't obtain the necessary

      16     two-thirds vote, they are not to be included

      17     in the report.  Had Congress wanted us to

      18     include in the report something less than

      19     findings that receive two-thirds vote, it

      20     could have said so.  It chose not to.  It's

      21     my understanding that the people who are

      22     suggesting that it takes less than two thirds

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       1     are the people who suggested to Congress that

       2     they require the two thirds in the first

       3     place.  I think if we go this route, we're

       4     changing the rules, we're not doing what

       5     Congress told us to do, and I strongly object

       6     to including in the report anything that

       7     receives anything less than the necessary two

       8     thirds vote, because these are clearly

       9     findings, and calling them something else

      10     doesn't change what they actually are.  They

      11     are findings.

      12               CHAIRMAN GILMORE:  Mr. Lebrun, is

      13     that by way of a challenge to the ruling of

      14     the Chair?

      15               COMMISSIONER LEBRUN:  I suspect I

      16     know what the vote would be on that, so no, I

      17     won't challenge the ruling of the Chair.

      18               CHAIRMAN GILMORE:  You're not

      19     challenging the ruling of the Chair?

      20               COMMISSIONER LEBRUN:  Not at this

      21     time.  Mr. Chairman, I defer to Mayor Kirk.

      22               CHAIRMAN GILMORE:  Did I hear a

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       1     voice?

       2               GOVERNOR LEAVITT:  I heard

       3     Counsel say that we had the ability as a

       4     Commission to define in rule ourselves what

       5     we would include.  And I would invite the

       6     Chair to propose a rule as to how we would

       7     handle -- as opposed to just ruling from the

       8     Chair, I wonder if it would be possible for

       9     you to go through the same process in

      10     establishing the rule on what the report

      11     would follow, as we did in the adoption of

      12     all other rules governing the operation of

      13     this Commission.

      14               CHAIRMAN GILMORE:  I think the

      15     plain reading of the statute should, in fact,

      16     govern on this, and that is, in fact, the

      17     ruling of the chair.

      18               MAYOR KIRK:  Mr. Chairman,

      19     if that's the case --

      20               CHAIRMAN GILMORE:  Mr. Mayor.

      21               MAYOR KIRK:  -- then I

      22     appeal the ruling of the Chair.  And I would

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       1     refer you to the letter from our Counselman

       2     (sic) itself.  I mean, it can't be any more

       3     plain than the -- on page 2, in the first

       4     paragraph it says clearly:  A finding or

       5     recommendation that has not been agreed to by

       6     at least two thirds members of the Commission

       7     serving at that time the recommendation is

       8     made.

       9               Later in the paragraph he refers to

      10     the fact that -- and this is our Counsel, he

      11     says:  It is a cardinal principle of

      12     parliamentary law that a body acts by simple

      13     majority, unless the governing legislative

      14     authority provides differently.  And in this

      15     case, the governing legislative authority is

      16     explicit and mandates that any report or

      17     finding has to have at least two thirds a

      18     majority of this Commission.  And I would

      19     urge the Chair to either reconsider that and

      20     make it clear that, absent that two-thirds

      21     finding, that these recommendations do not go

      22     into the Commission's final report.

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       1               CHAIRMAN GILMORE:  There's a second

       2     to the appeal of the ruling of the Chair?

       3               COMMISSIONER LEBRUN:  Second.

       4               CHAIRMAN GILMORE:  Mr. Lebrun

       5     seconds the appeal of the ruling of the

       6     Chair.

       7               COMMISSIONER ANDAL:  Call to

       8     question.

       9               CHAIRMAN GILMORE:  Mr. Andal has

      10     moved the question of the ruling of the

      11     Chair.  Second to the calling of the

      12     question?

      13               SPEAKER:  Second.

      14               CHAIRMAN GILMORE:  All in favor of

      15     calling the question please say aye.

      16               All opposed say nay.

      17               The Chair has ruled that the

      18     statute is mandatory with respect to the

      19     presentation of a report.  All actions that

      20     receive a majority will be included in the

      21     report, as the statue suggests.  However,

      22     they will not be given the dignity of

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       1     findings or recommendations because, in fact,

       2     they will not have received the two-thirds

       3     ruling -- or majority vote by the Commission.

       4               COMMISSIONER SOKUL:  Governor,

       5     could you add to that, or did you mean to

       6     exclude from that that things that receive

       7     less than a majority aren't going to be

       8     included in the report?  I think if something

       9     loses one to eighteen, that should be

      10     included, too.

      11               CHAIRMAN GILMORE:  I don't think in

      12     any statute or anyplace else that there is a

      13     ruling that indicates that something that is

      14     defeated by the Commission would be included.

      15               MAYOR KIRK:  Governor, will

      16     all due respect, if we're going to report

      17     anything getting less than a two-thirds

      18     majority, if we're going to report all of our

      19     work, then you might as well report anything.

      20     Otherwise --

      21               COMMISSIONER NOVICK:  I certainly

      22     would like the opinion of Counsel on whether,

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       1     if his conclusion is that the results of this

       2     Commission can go forward, even if not as

       3     findings and recommendations, how he can

       4     take -- or whether he takes the position that

       5     something that's voted down isn't included as

       6     a result of the Commission as well.

       7               MR. GRIFFITH:  I'm sorry, I didn't

       8     hear the last part of your comment.

       9               COMMISSIONER NOVICK:  How is it --

      10     I don't know what your position is on this,

      11     but I take it that if your conclusion is that

      12     the Commission can forward a report with the

      13     results of the Commission activities, which

      14     is what the statute says, a result of the

      15     Commission activities would also be a vote,

      16     eight in favor, eleven against, six in favor,

      17     thirteen against a particular proposal.

      18               MR. GRIFFITH:  I think our view is

      19     that it would take a majority, at least a

      20     majority, vote to transmit a report from the

      21     body of the Commission.

      22               MAYOR KIRK:  Will all due

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       1     respect, Counsel -- with all due respect,

       2     could you point me to any language in the

       3     statute that --

       4               MR. GRIFFITH:  In Section 1103 it

       5     says the Commission shall transmit a report

       6     of the results of the study.

       7               MAYOR KIRK:  Right.  And it

       8     does not at all differentiate between a

       9     majority versus supermajority, does it?

      10               MR. GRIFFITH:  And the principle of

      11     statutory interpretation is when it's a

      12     legislative body and it does not require a

      13     supermajority for an action that it's a

      14     majority that determines --

      15               MAYOR KIRK:  Will all due

      16     respect, Counsel, I'm not alleging we're an

      17     advisory body and we -- it explicitly says

      18     that you have to have a two-thirds majority.

      19     There is no language anyplace else that says

      20     two thirds, except for where you have a

      21     majority or except for the stuff we don't

      22     like.  And I mean, if we're going to be that

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       1     inventive -- we've got at least be

       2     consistent, Governor.

       3               MR. GRIFFITH:  Well, I think I am.

       4     If I might, the two thirds language describes

       5     only findings and recommendations included in

       6     the report.  The way I read the statute, and

       7     I would suggest this reading to others, is

       8     that Section 1103 anticipates that there will

       9     be a report.  In the absence of language

      10     saying what type of majority is necessary for

      11     a report to be transmitted, clear

      12     parliamentary law is that it requires a

      13     majority of the Commission to do so.  The two

      14     thirds language applies only to the inclusion

      15     of findings and recommendations, which have

      16     the added weight of a finding and

      17     recommendation from this body.

      18               COMMISSIONER NOVICK:  Accepting for

      19     argument's sake that majority is enough to

      20     transmit a report, the question is what are

      21     the contents of that report?  And the statute

      22     speaks quite clearly to the effect that

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       1     what's in the report are the results of the

       2     Commission.

       3               And I think the plain meaning of

       4     the word results is whatever this Commission

       5     concludes, whatever its results are.  A no

       6     vote would be a result of this Commission.

       7     And so therefore should be contained in the

       8     report.  Even on the interpretation that the

       9     report can go forward with a majority.

      10               MR. GRIFFITH:  I think that's a

      11     fair interpretation.

      12               COMMISSIONER NOVICK:  Well, that's,

      13     I believe, the question that was posed, so if

      14     we have a vote that is six, four and thirteen

      15     against, that would also go in the report.

      16               MR. GRIFFITH:  I think that the

      17     issue is, the two issues that Mr. Novick has

      18     raised, the first issue is what does it take

      19     for this Commission to transmit a report to

      20     Congress?  Mayor Kirk is correct that nowhere

      21     in the statute does it say what type of

      22     majority is necessary to transmit any report

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       1     to Congress.  In the absence of express

       2     provision to the contrary, that means a

       3     majority vote of this Commission determines

       4     whether to send a report to Congress.  That's

       5     the first issue.

       6               The second issue now is the content

       7     of that report.  And the statute is silent as

       8     to the content of that report except for a

       9     certain type of work product called finding

      10     or recommendation.  As to that type of work

      11     product, it requires a two-thirds vote.  It

      12     does not say anything about what type of vote

      13     is required for the rest of the report.  And

      14     it's to that that I believe, again, general

      15     parliamentary procedure, general

      16     parliamentary law, says that the majority of

      17     the Commission can determine the nature of

      18     the report.  And that's the hypothetical that

      19     I gave you.  I don't presume to tell the

      20     Commission what to do, but if the Commission

      21     wanted in its report to list all the votes

      22     that took place and inform Congress of what

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       1     those votes were, I think that would be

       2     perfectly permissible for them to do so.  If

       3     they only wanted to tell Congress of half the

       4     votes that took place, I think it would be

       5     permissible to do so.

       6               COMMISSIONER NOVICK:  But that --

       7               CHAIRMAN GILMORE:  Mr. Novick, can

       8     you under --

       9               COMMISSIONER NOVICK:  -- wouldn't

      10     be consistent with the results --

      11               CHAIRMAN GILMORE:  Mr. Novick, do

      12     you understand the ruling of the

      13     Parliamentarian?

      14               COMMISSIONER NOVICK:  I think I've

      15     heard inconsistent rulings from legal counsel

      16     on the question that Mr. Sokul raised, which

      17     is:  If there's a vote six to thirteen, would

      18     that be a result of the Commission?  I think

      19     the plain reading of the statute, and I think

      20     Counsel agreed, is that it would be one of

      21     the results of the Commission.

      22               CHAIRMAN GILMORE:  You're engaging

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       1     debate, Mr. Novick, which you're entitled to

       2     do since we have not yet voted on the --

       3               COMMISSIONER NOVICK:  I appreciate

       4     that.

       5               CHAIRMAN GILMORE:  -- call of the

       6     question, and we will return to that.

       7               But, Mr. Griffith, thank you, I

       8     think you have made your position very clear.

       9               COMMISSIONER SOKUL:  Governor, Mr.

      10     Chairman --

      11               CHAIRMAN GILMORE:  Now, the

      12     Commission itself will make some decisions.

      13     I'll call on Mr. Sokul, Mr. Norquist, and

      14     then we'll return and Governor Leavitt.

      15               Mr. Sokul?

      16               COMMISSIONER SOKUL:  I'd just like

      17     to say that Counsel just answered my

      18     question, and that is that the majority

      19     determines the content of the report.  And so

      20     my prior question has been answered.

      21               CHAIRMAN GILMORE:  Mr. Norquist?

      22               COMMISSIONER NORQUIST:  It's my

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       1     understanding that we had always planned to

       2     allow Commissioners to put in their own

       3     statements at the end, which were their

       4     positions, and therefore anyone who has a

       5     minority position that they would like

       6     transmitted to Congress, it will be

       7     transmitted.  It doesn't take two thirds or a

       8     majority, that we each have, I think, a

       9     thousand words is what we'd agreed on, so,

      10     you know, if the Administration wants to make

      11     a case, they can put it in their thousand

      12     words and it will be heard.  Nothing won't be

      13     heard.  But we do have a letter from the

      14     Speaker of the House and the Majority Leader

      15     in the Senate, which is pretty authoritative

      16     from the leadership of Congress that they

      17     would like a report from us and consider a

      18     majority to be quite fine.

      19               CHAIRMAN GILMORE:  Governor

      20     Leavitt?

      21               COMMISSIONER NORQUIST:  And that's

      22     what they look forward to and expect.

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       1               CHAIRMAN GILMORE:  Governor

       2     Leavitt.

       3               GOVERNOR LEAVITT:  I'd just

       4     like clarification.  Will we ever have a

       5     chance to vote on this report if it contains

       6     no, quote, findings then, or is it the

       7     position of the Parliamentarian that we'll

       8     simply have a majority that will approve the

       9     report?

      10               CHAIRMAN GILMORE:  Governor, first

      11     of all, we have a two-thirds vote already on

      12     the record that we voted in New York on

      13     international tariffs and trade, eighteen to

      14     one.

      15               COMMISSIONER LEAVITT:  No, no.  My

      16     question is:  Will we ever have a chance to

      17     vote on the report, if it --

      18               CHAIRMAN GILMORE:  Oh, certainly.

      19               COMMISSIONER LEAVITT:  -- contains

      20     no formal findings, will we ever get a

      21     chance --

      22               CHAIRMAN GILMORE:  Oh, certainly.

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       1               COMMISSIONER LEAVITT:  And will the

       2     burden be two thirds, as it states in our

       3     rules, or will it be 50 percent?

       4               CHAIRMAN GILMORE:  No, our rules

       5     state the adoption of the report will be by a

       6     majority vote.

       7               COMMISSIONER LEAVITT:  Our rules

       8     say that --

       9               CHAIRMAN GILMORE:  Our rules say

      10     Roberts' Rules --

      11               COMMISSIONER LEAVITT:  Now, do our

      12     rules say that?

      13               CHAIRMAN GILMORE:  That is Roberts'

      14     Rules of Order.  You adopt the report by a

      15     majority vote.  However, we cannot include a

      16     recommendation or a finding without two

      17     thirds.  The statute is clear about that.

      18               COMMISSIONER LEAVITT:  I would like

      19     to have reference on the rule that adopts a

      20     report by 50 percent, and it's my

      21     understanding that we have the ability to

      22     define this by rule.  Is there a reason we

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       1     couldn't define this in the same way we have

       2     all the rest of our rules?

       3               SPEAKER:  That's right.

       4               CHAIRMAN GILMORE:  Mr. Andal?

       5               COMMISSIONER ANDAL:  It seems like

       6     you could try to do that, if you like.  But

       7     right now we have the question before us of

       8     whether or not a two-thirds majority is okay

       9     for findings and recommendations, and a

      10     simple majority under the Roberts Rules of

      11     Order is okay for the rest of the report.

      12     That was the ruling of the Chair.  That

      13     ruling has been challenged, and I suggest we

      14     move to vote on that.  And then we can -- if

      15     you want to offer motions in the future to

      16     amend the Operating Rules, we could do that.

      17     But we need to move forward, I think.

      18               I'll call the question, Mr.

      19     Chairman.

      20               CHAIRMAN GILMORE:  Well, of course

      21     the question has already been called, as a

      22     matter of fact.

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       1               SPEAKER:  Mr. Chairman?

       2               CHAIRMAN GILMORE:  And I was

       3     gaining -- adding a little latitude here so

       4     that things could be aired out, as a matter

       5     of fact.  But to return to proper order,

       6     there's a motion on the floor made by the --

       7               There is a challenge to the Chair

       8     that is made by Mayor Kirk, seconded by

       9     Mr. Lebrun.  The question is:  Shall the

      10     Commission sustain the ruling of the Chair?

      11     And now we'll proceed to vote.

      12               MS. ROSENKER:  Mr. Andal?

      13               COMMISSIONER ANDAL:  Yes.  Aye.

      14               MS. ROSENKER:  Mr. Armstrong?

      15               COMMISSIONER ARMSTRONG:  Aye.

      16               MS. ROSENKER:  Mr. Guttentag?

      17               COMMISSIONER GUTTENTAG:  I had

      18     asked Mr. Chairman to comment on this issue,

      19     but you may have overlooked my signal.  So

      20     I'd like --

      21               CHAIRMAN GILMORE:  Mr. Guttentag,

      22     you're out of order.  Just if you would,

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       1     please, just cast your vote.  There will be

       2     an opportunity, I'm sure, during the time

       3     that Mr. Pincus has requested to address some

       4     of these additional issues.  But you're out

       5     of order and called on to vote.  Unless you

       6     have a parliamentary inquiry?

       7               COMMISSIONER GUTTENTAG:  I would

       8     like to explain my vote, Mr. Chairman.  I

       9     support Mayor Kirk's position.

      10               CHAIRMAN GILMORE:  Is that a no

      11     vote, Mr. Guttentag?

      12               COMMISSIONER GUTTENTAG:  No.  Yes.

      13               MS. ROSENKER:  Mr. Harris?

      14               COMMISSIONER HARRIS:  Aye.

      15               MS. ROSENKER:  Mayor Kirk?

      16               MAYOR KIRK:  No.

      17               MS. ROSENKER:  Governor Leavitt?

      18               COMMISSIONER LEAVITT:  No.

      19               MS. ROSENKER:  Ms. Jones?

      20               COMMISSIONER JONES:  No.

      21               MS. ROSENKER:  Mr. Lebrun?

      22               COMMISSIONER LEBRUN:  No.

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       1               MS. ROSENKER:  Governor Locke?

       2               GOVERNOR LOCKE:  No.

       3               MS. ROSENKER:  Mr. Norquist?

       4               COMMISSIONER NORQUIST:  Yes.

       5               MS. ROSENKER:  Mr. Novick?

       6               COMMISSIONER NOVICK:  No.

       7               MS. ROSENKER:  Mr. Parsons?

       8               COMMISSIONER PARSONS:  Yes.

       9               MS. ROSENKER:  Mr. Pincus?

      10               COMMISSIONER PINCUS:  No.

      11               MS. ROSENKER:  Mr. Pittman?

      12               COMMISSIONER PITTMAN:  Yes.

      13               MS. ROSENKER:  Mr. Pottruck?

      14               COMMISSIONER POTTRUCK:  Yes.

      15               MS. ROSENKER:  Mr. Sidgmore?

      16               COMMISSIONER SIDGEMORE:  Yes.

      17               MS. ROSENKER:  Mr. Sokul?

      18               COMMISSIONER SOKUL:  Yes.

      19               MS. ROSENKER:  Mr. Waitt?

      20               COMMISSIONER WAITT:  Yes.

      21               MS. ROSENKER:  Chairman Gilmore?

      22               CHAIRMAN GILMORE:  Yes.

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       1               MAYOR KIRK:  Mr. Chairman,

       2     parliamentary inquiry.

       3               CHAIRMAN GILMORE:  Yes, sir.

       4               MAYOR KIRK:  Just so I

       5     understand, is it the ruling of the Chair,

       6     then, that falling short of a two-thirds vote

       7     to be a finding or recommendation, that it

       8     can only be a result of the Commission if it

       9     gets a majority vote?

      10               CHAIRMAN GILMORE:  I'm sorry, Mayor

      11     Kirk.

      12               MAYOR KIRK:  I'm not --

      13               CHAIRMAN GILMORE:  Not yet anyway.

      14               MAYOR KIRK:  It's Governor

      15     Bush.

      16               CHAIRMAN GILMORE:  Not yet anyway.

      17               MAYOR KIRK:  That fella, you

      18     were real fond of him a couple of weeks ago,

      19     I think.  And I think both he and the

      20     vice-president prefer --

      21               CHAIRMAN GILMORE:  You may have an

      22     opportunity soon.

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       1               MAYOR KIRK:  -- that I stay

       2     a mayor for some period of time.  No, I think

       3     you'd probably agree I should stay a mayor

       4     for awhile.  You and my wife.

       5               I'm just confused.  I don't mean to

       6     be argumentative.  But my concern now,

       7     Governor, is this, it seems to me that we've

       8     ruled that, short of these findings -- I mean

       9     one thing we have done, and I will tell you

      10     it distresses me personally, we've just

      11     changed the rules dramatically at the

      12     eleventh hour, and now we've basically said,

      13     through the most strange legal reading I've

      14     ever seen, that you don't have to be a

      15     finding, we're gonna get a report, and we're

      16     gonna send it on, but the only way you get to

      17     be in the report is if you have a two

      18     thirds -- I mean, a majority vote.  You have

      19     to have to have two thirds to be fact and a

      20     finding, but to be in the report as a result,

      21     you have to have a majority vote.

      22               CHAIRMAN GILMORE:  Well, that's

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       1     right.

       2               MAYOR KIRK:  That makes no

       3     sense at all.  If you call results, are the

       4     results of the Commission, they should

       5     reflect every vote irrespective of whether it

       6     is two thirds -- it's a majority or not.  And

       7     I would ask that our counsel, if they would,

       8     as expeditiously as possible, provide me

       9     anything in our rules where we at all

      10     inferred or entertained any notion that,

      11     short of a two-thirds majority, that we would

      12     have a report that would be adopted on a

      13     majority vote to include only those items

      14     that received a majority.  If you could give

      15     me any section of our rules that refers to

      16     that, I would be most appreciative.

      17               MR. GRIFFITH:  I believe the letter

      18     addresses that issue, and I'd be happy to

      19     take it up with you, but --

      20               MAYOR KIRK:  I mean, I read

      21     your letter pretty plainly that says that we

      22     follow the rules of the statute.  But you

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       1     just said we don't.

       2               MR. GRIFFITH:  No, no, I don't

       3     think that's what I said.

       4               MAYOR KIRK:  I can quote

       5     you.  I mean, this is your language, you

       6     don't quote anyone else.  You say:  It's a

       7     cardinal principle of parliamentary law that

       8     a body acts by simple majority unless the

       9     governing legislative authority provides

      10     differently.  Our legislative authority

      11     provides differently.  You come up with a

      12     ruling that says, well, that really doesn't

      13     apply to the report --

      14               MR. GRIFFITH:  Well, I guess that's

      15     where we differ, Mayor Kirk.  I don't believe

      16     that the Internet Tax Freedom Act says that

      17     it requires a two-thirds majority to issue a

      18     report.  In fact, it says nothing like that.

      19     The two thirds language applies only to

      20     findings or recommendations.

      21               SPEAKER:  Governor --

      22               CHAIRMAN GILMORE:  Is there a

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       1     parliamentary inquiry?

       2               COMMISSIONER LEBRUN:  Yes, I have

       3     one.

       4               CHAIRMAN GILMORE:  Mr. Lebrun.

       5               COMMISSIONER LEBRUN:  I think

       6     Counsel agreed that before we can make

       7     findings or recommendations, requires

       8     two-thirds vote.  I'm looking at Item 1A,

       9     which has already been voted on, and there's

      10     language in here that says, for example, no

      11     new taxes shall be applied to electronic

      12     commerce.  What is that if it's not a

      13     recommendation or a finding?  And I can go

      14     through every one of these sentences in both

      15     Items A and Item 2, and they include

      16     findings.  What are they, if they're not

      17     findings?  What is that that I just read if

      18     it's not a recommendation?

      19               CHAIRMAN GILMORE:  It's the

      20     majority opinion of the Commission,

      21     Mr. Lebrun.

      22               The Chair is sustained by a vote of

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       1     eleven to eight.  We'll move on to the

       2     agenda.

       3               Item B of the agenda is the issue

       4     of Domestic Issues.  The Business Caucus

       5     Proposal is the first matter up.  A Proposal

       6     for Internet Tax Reform and Reduction.  Is

       7     there a motion to adopt Item B1, the Business

       8     Caucus Proposal?

       9               COMMISSIONER ANDAL:  So moved.

      10               COMMISSIONER POTTRUCK:  Second.

      11               CHAIRMAN GILMORE:  It is moved by

      12     Mr. Andal, seconded by Mr. Pottruck.  The

      13     floor is open for discussion.

      14               Oh.  There are two amendments under

      15     Roberts Rules, in fact, of my own that have

      16     been placed in here.  And I might mention to

      17     the members that there are two amendments

      18     that I have filed to this resolution.  These

      19     amendments deal with the question of the use

      20     tax and my resolution that says that we

      21     should make a recommendation to the Congress

      22     to not have the use tax applied throughout

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       1     the United States.  I intend now to withdraw

       2     these amendments and not take them up at this

       3     time.  In the event that Mr. Pincus's

       4     resolution passes and we go to floor

       5     amendments, it would be my intention to offer

       6     them at that time.

       7               The third one, amendment, is

       8     Mr. Sokul's.  Mr. Sokul.

       9               COMMISSIONER SOKUL:  Thank you,

      10     Governor.  I would follow the same procedure,

      11     follow your lead and withhold my amendment at

      12     this time to be taken up later.  I think that

      13     the Business Caucus plan, as everyone in this

      14     room knows, is the centerpiece of the debate

      15     in the past few weeks, and I don't want to

      16     distract from that at this time.

      17               CHAIRMAN GILMORE:  All of the

      18     amendments to this have been withdrawn, with

      19     freedom to bring them up at a later time in

      20     the meeting, depending upon the vote on

      21     Mr. Pincus's resolution.  In the meanwhile,

      22     the floor is open for discussion of the

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       1     Business Caucus Proposal.  Mr. Pottruck?

       2               COMMISSIONER POTTRUCK:  Thank you,

       3     Governor.  I welcome the chance to present

       4     the Business Caucus Proposal.  Business

       5     Caucus really represents a starting point for

       6     Mike Armstrong, Dick Parsons, Bob Pittman,

       7     John Sidgmore, Ted Waitt, and myself to try

       8     to come together, which we did, following our

       9     San Francisco meeting, in an effort to try to

      10     develop a comprehensive proposal to coalesce

      11     around and get beyond what up to that point

      12     was essentially discussion of the views and

      13     ideas of individual Commissioners.  And it

      14     was an attempt to try to move away from a

      15     political process to build a bridge, and

      16     rather than a barrier, to competing views and

      17     see if we could come up with a middle-ground

      18     proposal.

      19               The objective from the start of

      20     this effort has been to come up with a strong

      21     set of recommendations to Congress that could

      22     establish an environment that continues to

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       1     foster the development of the Internet and

       2     electronic commerce, to lead to a simple and

       3     equitable system for state and local sales

       4     taxes that would impose equal obligations and

       5     costs on all sellers, local or remote,

       6     regardless of sales channel or technology

       7     utilized, be respectful of the privacy rights

       8     of individuals and the sovereignty of state

       9     and local governments, and attract, if we

      10     could, the votes of thirteen or more

      11     Commissioners, the amount required under the

      12     statute, to make a formal recommendation to

      13     Congress.

      14               The proposal has been the subject

      15     of numerous discussions with virtually every

      16     Commissioner, and many, many interested

      17     public sector groups.  There's been a lot of

      18     dialogue and a lot of effort toward reaching

      19     a compromise consensus.  Now, consensus

      20     doesn't meant that everybody agrees with

      21     everything or even agrees to the final

      22     proposal for the same reasons.  There's been

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       1     a lot of debate and dialogue about this

       2     proposal.

       3               This is definitely a

       4     no-new-taxes-on-the-Internet proposal.  But

       5     it's not a no-sales-taxes-ever-on-the

       6     Internet proposal.  Our statement even has

       7     the following language, it says:  We do not

       8     presume that the collection of sales and use

       9     taxes on Internet transactions is an

      10     inevitability.  And we make that statement

      11     because we recognize that simplification is

      12     an absolute precursor for any effort to

      13     create a level playing field or the remote

      14     collection of sales taxes.  We've tried to

      15     present a fairness proposal.  A proposal that

      16     lays out the ground rules for simplification

      17     and the ground rules to create a playing

      18     field that is fair, regardless of sales

      19     channel taken.  We say the following in our

      20     proposal.  By eliminating any disparate

      21     burden on interstate commerce, states will

      22     have a pathway toward a system that extends

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       1     their collection of existing state taxes to

       2     remote sellers.

       3               Concepts alone are not sufficient

       4     to provide adequate guidance to Congress and

       5     would not reflect the significant effort that

       6     has been extended by all Commissioners

       7     throughout the existence of this Commission.

       8     Thus, the Business Caucus Proposal is

       9     intended to satisfy two goals.  One, portray

      10     a broader consensus, and two, provide

      11     sufficient specificity to be useful to

      12     policymakers who will draft legislation.

      13               The following items comprise the

      14     general principles that are the basis for the

      15     detailed recommendations in the Business

      16     Caucus Proposal.  First, we do not see the

      17     Internet as a target for new taxes, nor do we

      18     want to endorse any action that would expand

      19     the digital divide, i.e., reduce the

      20     availability of the Internet to those

      21     Americans at the bottom of our socioeconomic

      22     ladder.  Accordingly, it's our recommendation

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       1     that the temporary moratorium on taxes on

       2     Internet access be extended permanently.  One

       3     of the principal areas of agreement among

       4     virtually all Commissioners was that it is in

       5     our national interest to eliminate all

       6     barriers to Internet access.

       7               Second, we do not believe there

       8     exists any compelling reason to impose taxes

       9     exclusively targeted at electronic commerce.

      10     The Commission's issues and options paper

      11     proclaims, quote, it is in the national

      12     interest to establish an environment that

      13     continues to foster innovation and

      14     technological advancement in the development

      15     of the Internet and electronic commerce, end

      16     quote.  Discriminatory taxes on electronic

      17     commerce will not create such an environment

      18     and will simply further expand the digital

      19     divide.  Accordingly, we believe the current

      20     moratorium barring multiple and

      21     discriminatory taxes should be extended for a

      22     period of five years.

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       1               Third, there's a widespread belief

       2     among Commissioners that the current myriad

       3     of taxes applied to telecommunications puts

       4     an unnecessary compliance burden on that

       5     industry, creates a competitive disadvantage

       6     internationally, and ultimately increases the

       7     cost to consumers.  The oldest of these

       8     taxes, the federal excise tax on

       9     telecommunications, was enacted to pay for

      10     the Spanish-American War and no longer serves

      11     the policy purpose.  It should be repealed.

      12     The telecommunications tax system should be

      13     reformed to reduce the overall tax burden on

      14     consumers and simplified so that consumers

      15     can have lower access costs to the nation's

      16     information highway.

      17               Fourth, we come to the issue of

      18     privacy.  There is enormous sensitivity

      19     around this topic.  The administration of any

      20     tax system that includes large, multi-task

      21     computers collecting information about the

      22     spending habits of Americans creates

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       1     significant trepidations for most

       2     Commissioners.  Individuals harbor great

       3     fears that such information will be used in

       4     ways that impinge upon their privacy.

       5     Consumer privacy rights must be protected,

       6     even though such protection could provide

       7     significant obstacles to the formation of any

       8     new approach which requires remote sellers to

       9     collect sales taxes.  Our recommendations are

      10     mindful of this concern.

      11               Fifth, the difficult issue of

      12     collection of taxes on remote sales over the

      13     Internet must be addressed.  If the debate

      14     and dialogue in this Commission has made

      15     anything clear, it is the need for a

      16     structured process that will lead to the

      17     substantial simplification and reform of

      18     state and local sales tax systems.  Our

      19     proposal recommends that this be accomplished

      20     by adherence to a set of guidelines that

      21     includes uniform rules and procedures, equal

      22     burdens on all sellers and no interference

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       1     with the innovation and technological

       2     advancement of Internet and electronic

       3     commerce.  The need to do this is tied

       4     directly to the fact that at some point in

       5     the not-too-distant future, bricks and mortar

       6     retailers will be completely transformed into

       7     clicks and mortar retailers.  In such a

       8     world, we cannot let the tax system drive

       9     business structure, perpetuating the type of

      10     contempt and non-compliance that exists

      11     today.

      12               Now, if the states ultimately

      13     succeed with their effort toward

      14     simplification, creating an ability for

      15     remote sellers to collect sales taxes, it is

      16     not our intention to create a tax receipt

      17     increase.  Our proposal states the following:

      18     Because we do not believe that any party in

      19     the debate has sought to increase tax

      20     revenues through more taxes, we believe it is

      21     appropriate for states whose overall sales

      22     and use tax revenue collections increase as a

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       1     result of use tax collections on remote sales

       2     to make substantial and proportional

       3     reduction in their overall sales tax rates,

       4     thus maintaining revenue neutrality in

       5     overall sales and use tax collections.

       6               The taxation of remote sales does

       7     not appear to be a problem demanding a

       8     solution instantly.  Electronic commerce is

       9     still a very small percentage of our total

      10     commerce.  In addition, the Center for the

      11     Study of the States recently released a

      12     report indicating that total sales tax

      13     revenues were up 7.4 percent in the fourth

      14     quarter of '99, and further strong gains are

      15     likely this year.

      16               But I just got a report from some

      17     very authoritative sources which quote

      18     Forrester, a research group that studies the

      19     Internet, and here's what they had to say,

      20     which I thought was particularly important.

      21     75 percent -- 75 percent of the 16 to

      22     22-year-olds who go online buy online.

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       1     Forrester predicts that on-line sales of 170

       2     billion in '99 will jump to 3.2 trillion in

       3     2003.  More liberal estimates forecast 10

       4     trillion in a mere four years.  This is an

       5     important issue that needs to move toward

       6     some new approaches.

       7               Importantly, as states work toward

       8     a simpler tax system, our proposal attempts

       9     to clarify perhaps the most litigious and

      10     uncertain area of tax law compliance for

      11     businesses that operate in multiple states,

      12     and that's the issue of nexus.  We attempt to

      13     draw some bright lines in the nexus area by

      14     listing factors that in and of themselves

      15     will not result in the imposition of

      16     collection obligation on sellers or the

      17     imposition of business activity taxes.

      18               And finally, our recommendations

      19     recognize that the burden and responsibility

      20     of reform lies with the state and local

      21     governments.  Clearly there is a national

      22     interest in ensuring that interstate commerce

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       1     flows freely.  In designing a process to

       2     produce this system, we recognize that while

       3     there is a national interest in creating an

       4     environment that fosters growth of electronic

       5     commerce and ensuring any taxing system does

       6     not unduly burden interstate commerce, we

       7     also recognize the need to be mindful of the

       8     sovereignty of state and local officials in

       9     setting policies for their electorate.  We

      10     believe our proposals strike the appropriate

      11     balance.

      12               I put forward this proposal.

      13               CHAIRMAN GILMORE:  Further

      14     discussion?  Mr. Norquist?

      15               COMMISSIONER NORQUIST:  Yeah, I'd

      16     like to speak in favor of the proposal.  I

      17     think it puts together a very coherent

      18     overview on how government, federal, state

      19     and local, should look at the Internet.  I

      20     was put on this Commission to fill the slot

      21     for the representative for consumers, and

      22     looking at it from the standpoint of

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       1     consumers, I think we make a real step

       2     forward in the recommendation to get rid of

       3     the 3 percent federal excise tax.

       4               As has been pointed out, that is an

       5     excise tax that was put in to fund the

       6     Spanish-American War more than a hundred

       7     years ago.  It was put in when it was a tax

       8     on the rich, and it was sold that way.  Only

       9     a hundred thousand people had phones at the

      10     time and were paying taxes.  It was presumed

      11     to be a temporary tax because of that.  And

      12     it has unfortunately lasted for a hundred

      13     years.

      14               I have a resolution later looking

      15     to sunset the Gore tax, the E-rate tax, once

      16     its goal of wiring all schools has been

      17     achieved.  And the reason for that is, if we

      18     don't sunset that that we could be paying --

      19     our grandchildren could be paying the Gore

      20     tax long after schools have been wired and

      21     many other things have come to pass, but the

      22     tax could last forever.

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       1               In addition to the importance of

       2     abolishing the 3 percent telecommunications

       3     tax, and I hope people are aware that there's

       4     been legislation introduced both by

       5     Mr. Tauzin of Louisiana, and Mr. Portman

       6     of Ohio to do this.

       7               So I think Congress has been

       8     listening to us as we've discussed this

       9     issue.  On the 3 percent in particular.

      10     We've had several, I don't know, test votes

      11     here where everybody except the

      12     Administration representatives supported

      13     those efforts.

      14               But in addition the simplification

      15     and reduction of state and local excise

      16     taxes, I think, is also particularly

      17     important.  As people testified during the

      18     hearings here, the average tax, excise tax,

      19     sales taxes on telecommunications is 14

      20     percent, and it gets to 25 and 30 percent in

      21     some states and localities.  The average

      22     sales tax in the country is a lot closer to 5

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       1     or 6 percent.  We have a discriminatory tax

       2     structure that discriminates against

       3     telecommunications.

       4               I understand how we got there, and

       5     that's that telecommunications used to be a

       6     government granted monopoly and a government

       7     regulated monopoly, and because local

       8     governments and state government could pass

       9     on taxes that went just to their local

      10     consumers, it was as if they were passing a

      11     tax on the people who lived in their city or

      12     their state.  But today with real competition

      13     between telecommunications, states or cities

      14     that add additional taxes on

      15     telecommunications as if they were immobile

      16     and couldn't move, as if they were government

      17     monopoly, I mean, we are taxes what is

      18     becoming increasingly a competitive market as

      19     if it was a monopoly.  And I think the

      20     recommendations to clarify those taxes, to

      21     simplify those taxes is extremely important

      22     for consumers, because I don't think -- the

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       1     gist is there's been a nationwide movement to

       2     fight against the high excise taxes on

       3     automobiles.  And Governor Locke in

       4     Washington state, the voters voted almost two

       5     to one to cut those discriminatory excise

       6     taxes.

       7               Governor Gilmore, you've taken a

       8     lead in fighting for reducing discriminatory

       9     excise tax on automobiles.  American

      10     consumers are beginning to look at their

      11     phone bills and seeing similar overburdensome

      12     taxes there.  And I think from a consumer

      13     standpoint, this is a very strong proposal.

      14               I personally would propose -- would

      15     have preferred to put a permanent ban on

      16     taxation of electronic commerce starting now

      17     and into the future.  But I think in terms of

      18     building a majority consensus for this, I

      19     think this is a very good staring point, and

      20     I'm delighted that the leadership in Congress

      21     has already said that they're looking forward

      22     to receiving this proposal.

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       1               CHAIRMAN GILMORE:  Thank you,

       2     Mr. Norquist.  Having looked around the room

       3     and not seen a hand raised, I'm going to take

       4     a moment and address it myself, if I could.

       5               I think everybody on the Commission

       6     is aware that my position has been that we

       7     ought to work towards a proposition that

       8     eliminates Internet taxes on E-commerce to

       9     the greatest possible extent that we can.

      10     I've listened very closely to the kiosk

      11     argument that was so eloquently made by

      12     Governor Locke last time, and believe that an

      13     issue like that can be addressed by banning

      14     sales on remote -- banning taxes on remote

      15     sales as opposed to the downtown sale.  And I

      16     believe that we can minimize any impact,

      17     which I think is undemonstrated, to states

      18     and localities by doing this elimination with

      19     respect to business to consumers.  And that,

      20     of course, would minimize that impact.  But

      21     I've listened very closely over this past ten

      22     months to the issues of impact upon

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       1     localities and states, impact upon

       2     traditional retail, and the evidence just

       3     isn't there.  But what is there is an

       4     opportunity to do something that's good for

       5     consumers.  So having looked at the business

       6     proposal, it not being, certainly, my

       7     proposal, but having looked at it, what is

       8     contained within it, and I want to explain

       9     why I'm going to vote for this.

      10               It does extend the moratorium on

      11     internet sales.  I have been a critic of this

      12     moratorium in many ways, but it is a good

      13     start, to extend this moratorium at least

      14     five years.  It does define nexus, which

      15     means that businesses that are going to be

      16     setting up in this country in order to do

      17     business will have some clear picture about

      18     what they can and what they can't do before

      19     they are subjected to taxes or the collection

      20     type of obligations with respect to

      21     consumers.  It does contain an elimination of

      22     the 3 percent telecom tax, which is very good

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       1     for the working men and women of this country

       2     that I've been trying to watch out for in

       3     this process.  It calls for the elimination

       4     of access taxes on taxes onto the internet.

       5     And furthermore, one of the difficulties with

       6     the current moratorium is that it

       7     grandfathers in those taxes which currently

       8     exist with taxation of access to the

       9     Internet.  This proposal eliminates that and

      10     says we will not tax access to the Internet.

      11               It does have a full call for

      12     simplification.  The people on this

      13     Commission have a different idea about

      14     simplification.  There are people on this

      15     Commission that want simplification so that

      16     they can find a pathway to new taxation of

      17     the Internet, and I acknowledge that.  And

      18     there are people, such as myself that want

      19     simplification because they think it's better

      20     for business and for the consumers of this

      21     country, and I am for that.  And so I can

      22     support this.

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       1               It does have the ability here for

       2     an extended period of time for the National

       3     Conference of Commissioners on Uniform State

       4     Laws, NCCUSL, I believe its designation is,

       5     to go forward and try to draft some uniform

       6     statutes.  Having worked with Mr. Lebrun, I

       7     am confident that NCCUSL will do a wonderful

       8     job with this, if it becomes a part of that.

       9     It calls for a new commission to monitor all

      10     of those developments as it goes along, and

      11     reduces taxes on telecommunications, which I

      12     think is good for working men and women.  So

      13     I think this will go a long way, and that's

      14     why I have come to support this and will

      15     continue to on the vote that is coming

      16     immediately.

      17               Next individual, Governor Leavitt.

      18               COMMISSIONER LEAVITT:  Thank you,

      19     Governor.  I would like to ask Mr. Pottruck

      20     some questions related to his presentation,

      21     and to say how much I have appreciated the

      22     very good spirited sense of work that you

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       1     have done over the course of the last several

       2     weeks.  I know you've put an enormous amount

       3     into this effort, and I want to, as a person

       4     who really is not involved in retail

       5     commerce, I think you've done an

       6     extraordinary service.

       7               Couple of questions, if I could.

       8     The first is, you mentioned a statement that

       9     we do not presume that the collection of

      10     sales and use tax on Internet transactions is

      11     inevitable.  In other words, are you saying

      12     that this -- it would be unfair to

      13     characterize this as an anti-tax proposal?

      14               COMMISSIONER POTTRUCK:  There were

      15     several negatives there, Mike, I want to make

      16     sure I have it right.  Say that one more

17 time.  
18           COMMISSIONER LEAVITT: Well, as you have characterized this to me in our conversations, you've indicated

      19     that this is not designed to be a

      20     "anti-Internet -- anti-tax proposal."  Is

21 that a fair characterization?  

      22     different people support it for different

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       1     reasons.  I think Governor Gilmore may support

       2     this proposal for reasons different than the

       3     ones I support it.  We all see -- it's a

       4     compromise.  We seek different things in it

       5     that we particularly like.  From my

       6     perspective, I very strongly like the fact

       7     that there's no new taxes; we're clear on

       8     that, no new taxes.  We don't want these

       9     access taxes and all these other types of

      10     taxes that -- even the ones that have been

      11     grandfathered in, we think they should be

      12     out.  We think that certain kinds of

      13     telecommunications taxes are important to be

      14     reduced.

      15               We also recognize, however, and it

      16     says it in the language, that Internet tax --

      17     the pathway of buying things over the Net and

      18     the pathway of buying things in a store

      19     physically, face to face, are going to get

      20     very blurred in the years ahead.  And the

      21     legal constructions that may come out of all

      22     of that, it's hard to imagine how that's

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       1     going to be good for consumers or good for

       2     fairness.  And, therefore, we've tried to

       3     create a pathway recognizing that today's

       4     sales tax system, we've all been educated

       5     about this, 30,000 different taxing

       6     jurisdictions, different definitions, the

       7     process of trying to create a system to apply

       8     today's sales tax system to remote sellers

       9     would be a monumental undertaking and very,

      10     very difficult.

      11               And so, therefore, we view the

      12     fact, and I view the fact, that a precursor

      13     to remote sales collection over the Internet

      14     is simplification.  But that down the road

      15     with that precursor of simplification, it

      16     seems to me that we will have an opportunity

      17     to come back and visit, revisit, where are

      18     we, are these numbers here accurate?  Are

      19     more and more sales moving to the Net?  And

      20     in fact we've come to a situation where we do

      21     see -- unlike today where we see sales tax

      22     collections are strong, we see an erosion of

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       1     the tax base of local governments.  We're

       2     going to have an opportunity to work toward

       3     simplification, look at what's happening, and

       4     come to a conclusion of whether it's time to

       5     reconsider Quill and have a very new

       6     approach, a 21st Century approach that

       7     employs technology to create a playing field

       8     that is fair to all sellers.

       9               COMMISSIONER LEAVITT:  May I just

      10     follow on that?  Those are the words that I'm

      11     interested in.  You speak in the report of

      12     equalizing the burdens of tax collection for

      13     local and remote sellers.  Are you speaking

      14     here toward the ultimate policy of a level

      15     playing field?

      16               COMMISSIONER POTTRUCK:  Well, we're

      17     trying to address the issue of how

      18     competition is going to happen in the years

      19     ahead, and I would hope that some of my

      20     colleagues in the Business Caucus would also

      21     jump in here, as I finish, or at any time, at

      22     any time.  In fact, right now would be okay,

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       1     too.

       2               COMMISSIONER ARMSTRONG:  You want

       3     some help, David?

       4               COMMISSIONER POTTRUCK:  Yeah, Mike.

       5     Go ahead.

       6               COMMISSIONER ARMSTRONG:  All righty.

       7               COMMISSIONER LEAVITT:  Was that a

       8     lateral or a forward pass?

       9               COMMISSIONER POTTRUCK:  That was a

      10     Tennessee Titans pass of some sort.

      11               MAYOR KIRK:  I think it's

      12     more of a tag team.

      13               COMMISSIONER ARMSTRONG:  We don't

      14     mean to gang up, we just want to answer.

      15     Mike, I would answer your question, is this

      16     an anti-tax proposal, I'd say yes.  Today

      17     there are an average of 18 percent taxes on

      18     access in telecommunications.  That is a

      19     barrier to access to the Internet and to

      20     telecommunications.  That's a terribly

      21     regressive tax.  That's a huge contribution

      22     to the digital divide.  And I'm really

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       1     against that, both in being the chief tax

       2     collector in this audience, to collect that

       3     from consumers.  I don't think it's fair.

       4               We talk about a level playing

       5     field, I think that's not a level playing

       6     field, and I think all of us should be

       7     against that kind of a playing field.  But if

       8     you ask me if I'm for a fair playing field or

       9     a level playing field or however we want to

      10     put it, sure we all are.  And I think the

      11     issue is:  How do we get there?  And I think

      12     we believe let's simplify and standardize.

      13               Mr. Chairman, I have to withdraw a

      14     prior comment I made where I suggested that

      15     AT&T was paying 55,000 different taxes

      16     annually.  And I'm sorry that, upon further

      17     staff work, we included our wireless as well

      18     as our cable, and we have to report that we

      19     pay 99,000 different taxes.

      20               UNIDENTIFIED MALE SPEAKER: You just

      21     acquired all those since we met last.

      22               COMMISSIONER ARMSTRONG:  I did that

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       1     to impress you.

       2               UNIDENTIFIED MALE SPEAKER:  I'm not the only

       3     one that's impressed.

       4               COMMISSIONER ARMSTRONG:  And, Mike,

       5     that's one point two a minute.  And doggone

       6     it, not only do we have to get rid of the

       7     regressive nature that imposes a digital

       8     divide, we have to simplify this tax system.

       9               COMMISSIONER LEAVITT:  Let me see

      10     if I understand what you've said.  You've

      11     said this is clearly an anti-tax proposal

      12     when it comes to telecom and

      13     telecommunications because you believe --

      14               COMMISSIONER ARMSTRONG:  And access.

      15               COMMISSIONER LEAVITT:  And access.

      16               COMMISSIONER ARMSTRONG:  Yeah.

      17               COMMISSIONER LEAVITT:  Because you

      18     believe, as I believe most people around this

      19     table do, that it's overtaxed as an industry

      20     and too complex.  But I've also heard you say

      21     that the long-term policy that you believe in

      22     is the creation of a level playing field when

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       1     it comes to sales tax and transactions that

       2     occur over the Internet.

       3               COMMISSIONER ARMSTRONG:  And that I

       4     disagree that that ought to be a mandate

       5     irrespective of the complexity, the lack of

       6     simplification and standardization.  So I

       7     just -- it's the order of things.

       8               COMMISSIONER LEAVITT:  So in other

       9     words, if we could achieve a highly

      10     simplified system that did not discriminate

      11     against those who played on the Internet or

      12     otherwise, a level playing field is the --

      13     should be the object of our efforts?

      14               COMMISSIONER ARMSTRONG:  In my

      15     words, I don't think that any form of

      16     distribution should have one advantage over

      17     another form of distribution.

      18               COMMISSIONER PARSONS:  If I could

      19     add something, Mr. Chairman?

      20               CHAIRMAN GILMORE:  Mr. Parsons.

      21               COMMISSIONER PARSONS:  Just

      22     speaking in behalf of the proposal, I thought

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       1     the colloquy between the Governor and David

       2     and Michael was helpful.  Certainly, you

       3     know, I support the proposal.  I think it

       4     does provide what I would call the pathway to

       5     a level playing field.  I think that is a

       6     premise of the Business Community's proposal.

       7     I think that pathway involves a necessary

       8     simplification of the state taxing system,

       9     otherwise you do run afoul of Quill and all

      10     of the burdens that the current system

      11     implies.

      12               But assuming that simplicity could

      13     replace complexity, I think that actually in

      14     some respects down the road expands the base

      15     and thereby would allow the states to reduce

      16     the absolute level of taxes so that, you

      17     know, I associate myself with what Mike was

      18     saying in terms of being anti-tax but for

      19     reduced levels of taxation, not just in the

      20     telecommunications area but across the board,

      21     because if we could get a simplified form

      22     that would allow you to expand the base, then

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       1     everybody's else tax, you know, the overall

       2     water level would go down.

       3               So I think it's, you know, it isn't

       4     perfect.  As you know, Governor, a lot of us

       5     tried to noodle at the edges of this to try

       6     and see if we could create something that

       7     would form a bigger bridge than maybe we have

       8     already.  Everybody, I think, within our

       9     caucus would have tweaked here a little

      10     differently or there a little differently,

      11     but as a package I think it's premised on the

      12     right foundations and moves in the right

      13     direction.  So we support it.

      14               SPEAKER:  Mr. Chairman?

      15               CHAIRMAN GILMORE:  Delna Jones.

      16               COMMISSIONER JONES:  Mr. Pottruck,

      17     I don't know who wants to take this.  You can

      18     decide.  The issue of tax neutrality has been

      19     mentioned, but I have a question and I want

      20     you to explain how tax neutrality fits with

      21     the issue of the electronically submitted, or

      22     digital submitted, activities?  How does that

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       1     compare with the issue of tax neutrality?

       2               COMMISSIONER POTTRUCK:  Let me see

       3     if I understand what you're talking about --

       4     what you're referring to, Delna.  Are you

       5     referring to the part of our proposal that

       6     talks with taxes on digital goods, are you

       7     talking about?

       8               COMMISSIONER JONES:  Yes.

       9               COMMISSIONER POTTRUCK:  Well, in

      10     our proposal we recognize, you know, and a

      11     lot of this comes from me, it was listening

      12     to the testimonies.  We had so much testimony

      13     in our three meetings, it was an educational

      14     process, I'm sure, for all of us.  That to

      15     tax digitally delivered goods was going to be

      16     extremely difficult and would probably drive

      17     providers of digital goods off shore or make

      18     U.S. providers uncompetitive.  And so we

      19     included in our proposal a tax relief on

      20     digitally provided goods.  And recognizing

      21     that would create an uneven playing field for

      22     their physical equivalents, we recommended an

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       1     equal relief for the physical equivalents of

       2     digitally provided goods.

       3               Now, maybe either Bob or Dick would

       4     like to comment further on that.

       5               COMMISSIONER PITTMAN:  Well, I can

       6     take a little bit of it.

       7               I really think there are two

       8     primary reasons for this exemption.  First,

       9     we believe the nature of the distribution of

      10     digital products would make it nearly

      11     impossible, as David mentioned, to

      12     effectively enforce such a tax.  And the

      13     second issue is that we think taxing

      14     digitized content would raise serious

      15     concerns about privacy.  I mean, and those of

      16     us in this business are not sure how you

      17     would get that information without

      18     compromising privacy, and we think that is a

      19     huge issue with the consumer.  So I think

      20     with those two in front of us, I think we

      21     tried to be pragmatic about it and find some

      22     way to build it into the framework of this

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       1     whole proposal.

       2               COMMISSIONER PARSONS:  And I agree

       3     with Bob.  I mean, if a level playing field,

       4     as the term has been used, is good for the

       5     goose, it's good for the gander.  That if an

       6     object is not taxable in its digitally

       7     delivered form, which it shouldn't be, and

       8     the real issue from my perspective was the

       9     privacy one.  There's no way you can

      10     determine, you know, where the tax -- on whom

      11     the tax should be levied and how and where

      12     without inquiring to things, I think, most

      13     consumers would not want to have to, you

      14     know, reveal, necessarily, with respect to

      15     every purchase.  And, therefore, again, you

      16     wanted not to favor one channel of

      17     distribution as opposed to another.

      18               So that was the reasoning behind

      19     it.  But as I say, there are lots of things

      20     in the proposal, and this is obviously why we

      21     put it in, to subject it to debate which

      22     people could have -- reasonable people would

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       1     have differing views on.

       2               COMMISSIONER JONES:  Let me follow

       3     up, if I can.

       4               CHAIRMAN GILMORE:  Go ahead, Delna

       5     Jones.

       6               COMMISSIONER JONES:  Let me make

       7     sure that I'm clear.  That means if you sell

       8     a CD in the store or if you sell a video in a

       9     store or if you sell a book in a store, a

      10     main street bookstore, that is no longer --

      11     taxes are no longer collected on that product

      12     or any other product that could possibly be

      13     delivered digitally?

      14               COMMISSIONER POTTRUCK:  I think

      15     that is the -- that is our starting point

      16     that's in our proposal.  That's correct.

      17               COMMISSIONER JONES:  That's a

      18     starting point?  Glad to hear you say that.

      19               COMMISSIONER POTTRUCK:  That's what

      20     in our --

      21               COMMISSIONER JONES:  Thank you.

      22               COMMISSIONER POTTRUCK:  Well, I

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       1     think that our proposal --

       2               COMMISSIONER PARSONS:  The proposal

       3     was a starting point.

       4               COMMISSIONER POTTRUCK:  Our

       5     proposal is a starting point, and our

       6     proposal, when it ultimately finds its way to

       7     Congress, will be subject to more discussion

       8     and debate.  We don't expect anything to be

       9     approved; it will be a point of discussion.

      10               And I think Governor Leavitt was

      11     someone who brought up this issue in our San

      12     Francisco meeting about the difficulty of

      13     digitally delivered goods and so forth, and

      14     we thought that disadvantaging people who

      15     provide the equivalent of digitally delivered

      16     goods in physical form was a bad idea.  And

      17     so that's where we are.

      18               CHAIRMAN GILMORE:  Ted Waitt.

      19               COMMISSIONER WAITT:  Thanks,

      20     Governor.  And just add my thoughts, you

      21     know.  I think we have an obligation to

      22     achieve as much as we can, given the fact

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       1     that there's really no one single solution

       2     out there.  And these are complex issues

       3     we're dealing with, and the Business Caucus

       4     Proposal deals with a lot of issues.  It's a

       5     fairly comprehensive proposal.  And it does

       6     provide a few things.  I mean, it provides

       7     the clarity that is needed.  It definitely

       8     provides for simplicity.  It deals with

       9     issues like privacy and the digital divide,

      10     which are crucially important in this new

      11     economy.  And it does move us towards, you

      12     know, this level playing field that we've --

      13     that we've been talking about.

      14               Most importantly in all this issue

      15     is to keep this new economy rolling.  I mean,

      16     in terms of what's going to be best for

      17     businesses, consumers, as well as the various

      18     taxing entities around is to keep the new

      19     economy rolling and to keep everybody

      20     successful because that's where everything's

      21     coming from.

      22               Let me just make one comment real

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       1     quickly about, you know, one of the areas

       2     that has probably been a little more

       3     controversial in the Business Caucus

       4     Proposal, and that's been around the area of

       5     clarification of the nexus rules.  You know,

       6     having dealt with the vagaries of nexus that

       7     exist out there, it has been very difficult,

       8     and I think we heard testimony in the last

       9     few times we were here, from various entities

      10     how complicated it is to deal with this, the

      11     lack of clarification in the nexus world.  It

      12     is extreme -- it is extremely vague, and you

      13     need clarity for both existing businesses as

      14     they move towards the clicks and

      15     mortar/bricks and clicks that I believe David

      16     talked about, and also new business that get

      17     created.  Right now the people that benefit

      18     mostly from the vagaries are the various

      19     attorneys that deal with corporate

      20     restructurings and answering all these

      21     questions because when it's vague you've got

      22     to get a lot of advice to figure out, you

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       1     know, what you're supposed to do.

       2               So, anyway, I mean, from my

       3     perspective, I support this because I think

       4     it's the right thing for consumers, it's the

       5     right thing for businesses, and most

       6     importantly it's right for the new economy.

       7               CHAIRMAN GILMORE:  Delegate Harris.

       8               COMMISSIONER HARRIS:  I would like

       9     to lend my support to the Business Caucus

      10     Proposal.  I think it's a great starting

      11     point for future discussions on how to deal

      12     with this very complex issue.

      13               Anyone who has followed this

      14     Commission from its inception and our first

      15     meeting in Williamsburg, Virginia, realizes

      16     that we got off to a very slow start.  Our

      17     meeting in Williamsburg at best can be

      18     described by one obstruction after another,

      19     procedurally, in terms of organizing this

      20     Commission.  And finally we've been able to

      21     get down to the business that this Commission

      22     was started for, which is to address the

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       1     critical issues affecting E-commerce and how

       2     our constituencies would be affected.

       3               I think all sides on this issue

       4     have been willing to work together, to do

       5     what's best for the American people, to do

       6     what's best for America's businesses, to make

       7     sure that America maintains its competitive

       8     edge worldwide, to close the digital divide.

       9     We've heard a lot of talk about closing the

      10     digital divide.  This proposal takes us in

      11     that direction.  We've heard a lot of talk

      12     about a level playing field.  But no one has

      13     bothered to define what a level playing field

      14     is, other than the obvious fact that the most

      15     vocal advocates for a level playing field

      16     would clearly prefer that there would be some

      17     part of this proposal that would impose now a

      18     new tax collection requirement and saddle the

      19     American people with about a $49 billion a

      20     year tax burden.

      21               This proposal put forth by the

      22     Business Caucus is both responsible, it's

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       1     comprehensive, it's obvious that the members

       2     of the Business Caucus have taken into

       3     account all of the various perspectives on

       4     this issue.  And it's the part about closing

       5     the digital divide and allowing this engine

       6     that is fueling the American economy, this

       7     technology industry, to continue unabated by

       8     undue regulation and interference.

       9               The greatest thing that we have to

      10     generate more prosperity in the future for

      11     Americans is our own creativity.  And the

      12     Internet provides a wonderful opportunity for

      13     individuals who have not been able to avail

      14     themselves to cash to start up a business,

      15     who haven't had the political connections or

      16     business connections to get a business

      17     started, for the first time to have the

      18     opportunity to provide their creativity in a

      19     worldwide setting in an open market where

      20     ideas can create prosperity.

      21               And I want to thank the members of

      22     the Business Caucus for realizing all of the

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       1     various complex legal domestic and

       2     international issues involved in crafting a

       3     position that takes into account both the

       4     anti-taxers' position, some of the views of

       5     the pro-taxers' positions, but doing what's

       6     best for all of us.  And it's unfortunate

       7     that at our final meeting, in my view, we're

       8     still seeing some of the same obstructions

       9     that we saw in Williamsburg.  We see the same

      10     people throwing the same monkey wrenches into

      11     this process.  And what we ought to do is

      12     come together and be willing to give and take

      13     in an environment so that we can propose a

      14     responsible proposal to Congress that will

      15     serve as a meaningful platform for future

      16     debate on how we should deal with E-commerce.

      17     And I'm satisfied that this Business Caucus

      18     Proposal achieves that objective.  And it's

      19     unfortunate that we can't get a broader

      20     consensus because there is nothing in this

      21     Business Caucus Proposal that would require

      22     today that Americans pay more taxes.  And I

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       1     want to thank the members of the Business

       2     Caucus for their proposal.

       3               CHAIRMAN GILMORE:  Mr. Sidgmore.

       4               COMMISSIONER SIDGEMORE:  Obviously

       5     I, want to lend my support to the proposal.

       6     And I want to get back to Governor Leavitt's

       7     question before, because I think it's an

       8     important one to me.

       9               It's obvious that some of us

      10     support this proposal for different reasons.

      11     And I certainly do not see this as an

      12     anti-tax proposal.  I mean, it is certainly

      13     anti-tax with respect to access to the basic

      14     technology and the telecommunications cost

      15     associated with that.  I think, actually, you

      16     know, we've had a few disagreements on this

      17     panel.  That's probably the one item that

      18     we've all agreed on from the beginning, and I

      19     think it's important to acknowledge that.

      20     And even though I get some perverse pleasure

      21     in the fact that Mike fills out 99,000 forms

      22     each year, it's unfortunate that we probably

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       1     fill out the same number or similar.

       2               I think the way I saw this from the

       3     beginning was sort of almost as a bridge

       4     between the pro-tax camp and the anti-tax

       5     camp, if I could draw it with such bright

       6     lines.  And, you know, I think if you look

       7     through the proposal basically we've

       8     acknowledged the issue of level playing

       9     field, we've actually provided a pathway to a

      10     level playing field, no formula, which I

      11     understand some would like, but we left it

      12     open so that we can revisit that important

      13     topic on the transactional tax side in a few

      14     years when I think the situation will be much

      15     more clear.

      16               CHAIRMAN GILMORE:  Mr. Norquist.

      17               COMMISSIONER NORQUIST:  Yeah,

      18     again, I think that this is a very good

      19     proposal.  It is a compromise.  I would like

      20     a prohibition, federal prohibition on taxing

      21     electronic commerce.  But Governor Leavitt

      22     asked whether this was sufficiently anti-tax.

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       1     In my work-a-day job I run Americans for Tax

       2     Reform, and we ask all candidates for office

       3     to make a commitment not to raise taxes.  We

       4     ask governors, state legislators,

       5     congressmen, and senators.  We have two

       6     hundred and nine members of the U.S. House,

       7     forty-one members of the Senate, six

       8     governors, and eleven hundred state

       9     legislators.  And any state legislator or

      10     congressman who voted for this would be very

      11     much in keeping with the taxpayer protection

      12     pledge.  This does not in any way lead to

      13     higher or new taxes or the imposition of

      14     taxes that haven't been imposed, it doesn't

      15     require any of that.  It does, in fact, call

      16     for a significant tax reduction on

      17     telecommunications taxes and for

      18     simplification, which state and local

      19     governments should have been doing over the

      20     last 30 years, but it would be nice to start

      21     now down that path.

      22               There are some people who think

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       1     that if you simplify stuff, that down the

       2     road people may wish to allow Alabama

       3     politicians to impose taxes on Michigan

       4     businesses.  I think that would violate the

       5     Commerce clause.  But five years from now we

       6     at least won't have what we do have now,

       7     which is some people coming up with the

       8     hysterical projections that the world's going

       9     to end if we don't tax electronic commerce

      10     now.

      11               We've seen after this Christmas,

      12     the first Internet Christmas, that all of --

      13     that not only was Y2K a big nothing, the

      14     threat that everybody would buy everything

      15     over the Internet and there wouldn't be any

      16     sales in malls, that also didn't happen this

      17     Christmas.  And I think that as we go through

      18     a number of Christmases the understandable

      19     concerns that some have had will be assuaged.

      20     We've also been through this twice before.

      21     About twenty, 25 years ago the pro-tax and

      22     spend politicians said everyone will buy

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       1     everything over catalogs, and therefore we

       2     have to tax catalog sales.  Congress then, as

       3     it did on the day it created this Commission,

       4     rejected that idea, voted overwhelmingly no,

       5     and of course malls and downtown stores have

       6     done fine.  People don't go to catalogs to

       7     buy sandwiches.

       8               We also had about ten years ago the

       9     tax and spend politicians said if we don't

      10     tax services the world's going to Hades.  And

      11     Governor Martinez, former Governor Martinez,

      12     of Florida thought that was a good idea.  And

      13     got his little backside kicked out of the

      14     governorship.  And we haven't gone to

      15     extensive taxing of services, and the schools

      16     still run, and government spending as a

      17     percentage of GNP by state and local

      18     governments is growing, while government

      19     spending as a percentage by the federal

      20     government is shrinking.  The federal

      21     government's becoming more efficient as state

      22     and local governments have become less

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       1     efficient.

       2               So, again, I think a five-year

       3     breathing period where we can look at this

       4     again, people will understand that we don't

       5     need to violate the Constitution and upend

       6     the commerce clause, that state and local

       7     governments are doing just fine, they've got

       8     more money than they know what to do with

       9     wisely, and that we can, then, take another

      10     look at it.

      11               So it doesn't close the door,

      12     Governor Leavitt.  I wish it would close the

      13     door.  But we have a majority on this

      14     Commission that's willing to say, let's close

      15     the door for five years, and I think that's a

      16     fine proposal.  Again, I've talked to

      17     congressional leaders who are aware what this

      18     proposal is, they're looking forward to it.

      19     And I think this is going to be extremely

      20     well received in Congress and could be law

      21     quickly.

      22               CHAIRMAN GILMORE:  Mayor Kirk.

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       1               MAYOR KIRK:  Thank you,

       2     Governor.  I don't know quite where to start.

       3     I would like to be able to support a proposal

       4     that does all of the things that we've heard

       5     these various Commissioners around the table

       6     say they want to accomplish, because all of

       7     us have agreed we would like to not increase

       8     the tax burden, we've all paid a lot of lip

       9     service to this notion of a level playing

      10     field, no matter how undefined it is.  But

      11     regrettably, I just don't believe this

      12     proposal gets here.  I think there's a reason

      13     when this proposal first surfaced that the

      14     Business Commissioners may have done

      15     something that a lot of us felt was

      16     unthinkable, that they got all the government

      17     representatives to come out and say that's a

      18     bad proposal.  Governor Gilmore doesn't like

      19     it, Governor Leavitt didn't like it, we

      20     didn't like it. The E-Fairness Coalition

      21     didn't like it, main street retailers.

      22     People were aghast that this Commission would

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       1     come out with something this flagrant in

       2     terms of a huge money grab for the business

       3     members of this Commission.

       4               Now, one of our Commissioners has

       5     talked about the fact that we got started off

       6     on the wrong foot and we got caught up in

       7     procedure, and those procedures are important

       8     because we have rules and we say we're going

       9     to govern by themselves, and one of the

      10     reasons -- one of the first issues that we

      11     discussed was, and we lamented the fact,

      12     Congress didn't give us any money.  And we

      13     were sitting there sort of lamenting the fact

      14     how are we going to do this job in less time

      15     that we had with no budget, and one of the

      16     first recommendations of the Chair was, why

      17     don't we get AT&T and the business members to

      18     pay for it?  And wisely, with that logic, all

      19     the business members said, are you kidding?

      20     That would be the worst thing we can do is

      21     forward to the Congress a report with a logo

      22     that said Paid for by AT&T, AOL, Gateway and

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       1     them, they'll laugh us out of the house.  And

       2     so we wisely retracted from that.

       3               But what we've done, though,

       4     regrettably, is come in the back door with a

       5     proposal that at least we've got one group

       6     out there telling us is going to cost the

       7     American public over $20 billion a year, with

       8     all of the breaks and all of the take-aways

       9     within this proposal.  And I can't see how

      10     anyone in good conscience could forward this

      11     to Congress in the name of fairness.

      12               If we're worried about their being

      13     a lawyers' haven now over nexus, there's

      14     not -- even the worst lawyer -- even I, and,

      15     Ted, I'm not the best lawyer in the world --

      16     even I could figure out a way under these new

      17     nexus proposals designed in this proposal to

      18     figure that no business would ever have a

      19     presence in any state.  So we're going to

      20     have a new level playing field, and that new

      21     level playing field is no one will be present

      22     in a state and no one will pay taxes.

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       1               We have no idea what the fiscal

       2     impact is on this.  This is more than a

       3     starting point.  We've done the worst thing,

       4     that I couldn't imagine that we would do, is

       5     recommend that Congress create even yet

       6     another Commission to arguably oversee the

       7     work of NCCUSL and the state legislators and

       8     governors to see if, in fact, we do exactly

       9     what they tell them to do in this report

      10     that's not a report because we now changed

      11     the rules at the eleventh hour.  And even

      12     though I don't want to be -- I definitely

      13     don't like dealing in rules versus substance,

      14     but I want to make sure I register my

      15     objection to the previous ruling of the Chair

      16     and Commissioners.  I would read to you what

      17     our rules say, not the statute, what our

      18     rules say, is that -- and it's Section E of

      19     our rules it says, upon approval of an

      20     interim or final report by at least two

      21     thirds of the Commissioners serving at the

      22     time the report is issued, the Commission

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       1     shall transmit a report to the Speaker of the

       2     House of Representatives.

       3               We're playing a very dangerous game

       4     with the American Public by deciding that

       5     just because we can do it and we've all got a

       6     majority, we're not going to play the

       7     rules -- by the rules that Congress

       8     established for us or that we established for

       9     ourselves, just for the sake of we've got

      10     ourselves at the table now, we've all got our

      11     hands in the pie and we're going to grab as

      12     much as we can and try to send that off in

      13     the name of public policy.

      14               COMMISSIONER NORQUIST:  Mayor --

      15               MAYOR KIRK:  Finally, I want

      16     to call to your attention -- I did not

      17     interrupt you, Grover.

      18               I want to call to your attention an

      19     article, the front page of our Dallas Morning

      20     News today that says U.S. software dominance

      21     facing threat principally because the world's

      22     richest economy turns to one of the world's

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       1     poorest for the 300,000 well-trained

       2     technicians, and it goes on into the reality

       3     of the fact that we are suffering a real

       4     intellectual glut in this country because of

       5     our inability to finance and to prepare young

       6     people for careers in this economy, and we're

       7     having to go more and more to other countries

       8     to look for the intellectual and technical

       9     help that we need.  That is the fuel that's

      10     driving this economy.  John Sidgmore said it

      11     Wednesday, I've heard Mike Armstrong say it,

      12     I've heard every Business member of this

      13     Commission state, one of your principal fears

      14     is finding the intellectual technical talent

      15     to do this.  And if a business needs to

      16     thrive because they're not going pay taxes,

      17     all of us have raised a question as whether

      18     or not that business ought to be subsidized.

      19     And they shouldn't be.  And we haven't

      20     addressed that.

      21               I'd love to be able to support a

      22     proposal that does what we've said it does --

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       1     what you've each committed yourselves and

       2     what we've said it does.  But, gentlemen,

       3     this isn't it.  And I think we do ourselves a

       4     real disservice, Governor, if we don't at

       5     least adhere to the rules that we established

       6     and get about the business of trying to do

       7     what we've all said we've committed ourselves

       8     to do.  We have plenty of time.  We were

       9     awfully close to having the required

      10     consensus that would produce the report that

      11     did all of these things.  There's no reason

      12     we can't get on to that once this proposal

      13     fails.

      14               CHAIRMAN GILMORE:  The Chair does

      15     not accept the idea that his ruling is in

      16     violation of the rules, but we will --

      17               MAYOR KIRK:  Governor, I

      18     just want to do whatever I need to do to

      19     maintain and preserve that option, that I

      20     can't -- if you would read the rules, I can't

      21     understand how it can be more plain than

      22     reading our own rules that say that the final

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       1     report must receive at least a two-thirds

       2     vote.  And I'm not reading from the statute,

       3     I'm reading from the rules adopted by this

       4     Commission.

       5               CHAIRMAN GILMORE:  Yes, Mayor, but

       6     the statute trumps the rules.  And that --

       7               MAYOR KIRK:  But the statute

       8     said --

       9               CHAIRMAN GILMORE:  -- is, in fact,

      10     the rules.

      11               MAYOR KIRK:  -- two-thirds,

      12     and then you had our lawyer write an opinion

      13     that said that our rules would override on

      14     the report, which was less than the

      15     findings --

      16               CHAIRMAN GILMORE:  May I clarify?

      17     I --

      18               MAYOR KIRK:  -- so now I'm

      19     reading the rules.

      20               CHAIRMAN GILMORE:  I understand

      21     your position.  I think that it's important

      22     for you to understand my position, which is

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       1     that I am not ruling in contravention of

       2     either the statute or the rules.

       3               Mr. Sokul is next on the list.

       4     Mr. Sokul, you're next.

       5               COMMISSIONER SOKUL:  If Mr. Pittman

       6     wanted to respond to something specifically,

       7     I'd wait.

       8               CHAIRMAN GILMORE:  Mr. Pittman, did

       9     you want to go into this --

      10               COMMISSIONER PITTMAN:  Yeah, I just

      11     wanted, you know, I'm really begging for it

      12     to ever disagree with you, Mayor, having

      13     heard you at a couple of these meetings, but

      14     I do want to make the point that I don't

      15     think Business is at all grabbing for money.

      16     The taxes are given to other folks, they're

      17     not kept in our profits.  And I think one of

      18     the issues that all of us in business face

      19     is -- in a strange way it's less about taxes

      20     and more about where you deploy assets.  And

      21     I think all of us who have been in business

      22     are very concerned that at a time when are in

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       1     a crunch for technical people, we are working

       2     very hard to improve our services day in and

       3     day out because we're getting increasing

       4     demand, increasing competition, not only from

       5     this country but from other countries, is

       6     that we deploy every asset we can find to

       7     making the product better, not to stop that

       8     while we try and build a complicated tax

       9     collection system, which we think would bog

      10     down this economy.  So again, the taxes are

      11     not us trying to get -- keep money; we don't

      12     keep the taxes, we give them to somebody

      13     else.  All we've ever done in any process is

      14     collect taxes on behalf of some authority.

      15               CHAIRMAN GILMORE:  Mr. Lebrun.

      16               COMMISSIONER LEBRUN:  Thank you,

      17     Mr. Chairman.  First of all, I would concur

      18     in the comments of Mayor Kirk.  Section 1103

      19     of the enabling legislation not only required

      20     a two-thirds vote for our findings, but it

      21     also states, and I'll quote, any

      22     recommendation agreed to by the Commission

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       1     shall be tax and technologically neutral and

       2     apply to all forms of remote commerce.  One

       3     of the recommendations contained in the

       4     Business Caucus Proposal is this continuation

       5     of the moratorium for five years, but also a

       6     prohibition of taxes on sales of digitized

       7     goods and products and their non-digitized

       8     counterparts.

       9               It is my understanding that there

      10     are currently twenty-eight states that

      11     consider downloaded software to be taxable,

      12     and nineteen states consider downloaded

      13     information taxable.  Twelve states,

      14     including my state of South Dakota, imposes a

      15     sales tax on broad categories such as

      16     electronic information services.  If this

      17     proposal were enacted, it is not tax neutral.

      18     My state and any state that falls in these

      19     categories I just outlined are going to have

      20     an immediate adverse effect on tax revenues.

      21     I'm sure Governor Locke can speak for

      22     Washington, but it's my understanding that

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       1     Washington alone would lose over a hundred

       2     and $50 million annually in sales tax revenue

       3     if digitized products or comparable products

       4     such as CDs, music, radios, newspapers,

       5     magazines, all which can be obtained from a

       6     digitized form, becomes tax exempt.  So I

       7     don't think that this proposal, in this

       8     instance alone is tax neutral.

       9               Now, we've heard from over 6,000

      10     retailers and employees of retailers.  And

      11     they're saying this proposal that you've got

      12     before us is not a level playing field

      13     because they still have to collect that tax

      14     paid by the citizens of my state or your

      15     state, if your state imposes a sales tax.  I

      16     can't figure out what economic reason there

      17     is to make a distinction if I buy something

      18     over the Internet, over the telephone,

      19     through a catalog, or from the brick and

      20     mortar store, why it should be treated

      21     differently.  And there aren't 30,000 taxing

      22     districts out there imposing sales and use

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       1     tax; the closest figure I ever heard is maybe

       2     6,000, and that can probably be reduced with

       3     a simplified tax form.  But to use the number

       4     30,000 is misleading; that's not the case.

       5               The level playing field means just

       6     what it says.  Why should there be a

       7     difference in the media that's used to

       8     purchase a product or a service?  If it's a

       9     taxable type of transaction, it should be

      10     taxable regardless of the media that's used

      11     to purchase it.  I don't believe that your

      12     proposal meets the requirement of the

      13     statute.

      14               CHAIRMAN GILMORE:  Mr. Pottruck,

      15     did you wish to respond to Mr. Lebrun?

      16               COMMISSIONER POTTRUCK:  Yes, I

      17     would like to do that.

      18               Mr. Lebrun, the Supreme Court found

      19     in the Quill case that there were reasons not

      20     to impose those taxes.  And they have to do

      21     with complications largely and the amount of

      22     work necessary for businesses to understand

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       1     the complexity of local sales tax structures

       2     all over the United States.  And that's not a

       3     political organization, that's our Court,

       4     listening to arguments on all sides and

       5     coming to that conclusion.  Now, that hasn't

       6     changed very much.  If anything, the sales

       7     taxes have become more complicated in the

       8     interim since the Quill decision.

       9               We have an opportunity, as Governor

      10     Leavitt said, to see a problem that's big

      11     enough to see and small enough to still solve

      12     and to get on it now.  We have that

      13     opportunity.  We have that opportunity to

      14     simplify.  We've tried to lay a road map out

      15     to simplify and to encourage the states to

      16     simplify.

      17               I believe that a lot of our debate

      18     is around the details.  There were a lot of

      19     discussions about the Business Caucus

      20     Proposal, with Governor Leavitt, with Mayor

      21     Kirk, with many members of this Commission

      22     who ultimately appear not to be able to

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       1     support our proposal largely around the

       2     details of the proposal, and I understand,

       3     the devil is in the details.  We considered

       4     whether we should have a more simplified

       5     proposal that would move from a 10,000-foot

       6     level to a 30,000 foot level and therefore

       7     eliminate the details so maybe we could reach

       8     a broader consensus.

       9               But it seemed to us that weren't

      10     going to get there, we weren't going to do

      11     our work for Congress if we simply operate at

      12     that level.

      13               CHAIRMAN GILMORE:  Mr. Sokul.

      14               GOVERNOR LEAVITT:  Mr.

      15     Chairman, following Mr. Sokul's remarks, I'd

      16     like to call the question on them.

      17               CHAIRMAN GILMORE:  All right,

      18     Governor Leavitt, I have a list and I think

      19     it's unfair not to be able to go down it on

      20     people I've already recognized on the list,

      21     but at the conclusion of the list

      22     Mr. Pottruck will have a chance to sum up

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       1     and, in fact, we will call the question.

       2               Mr. Sokul.

       3               COMMISSIONER SOKUL:  Okay, thank

       4     you, Governor.

       5               I support this proposal, and I'd

       6     just like to briefly explain why.  It has to

       7     do with why I think this Commission has

       8     already been a success and what our

       9     obligation is to make it an even better

      10     success.

      11               Our Commission is already a great

      12     success.  It's already contributed to the

      13     public policy debate in the following

      14     fashion.  When we were in Williamsburg we

      15     heard a lot about fairness, the need for

      16     fairness and the need for level playing

      17     field.  And that's still occurring.  But a

      18     funny thing happened on the road to Dallas.

      19     This Commission exposed and put a spotlight

      20     on state and local tax systems.  And it

      21     showed very brightly and very clearly that

      22     those systems are terrible.  They're terrible

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       1     enough for intrastate commerce, but they're

       2     horrible for a company engaged in interstate

       3     commerce.  And before we can talk about

       4     applying that system to electronic commerce,

       5     which is inherently interstate and indeed

       6     inherently global, the states really need to

       7     clean up their act, to put it bluntly.

       8               And I don't agree that this

       9     proposal is a money grab by the companies on

      10     this Commission.  The companies that are on

      11     this Commission are on this Commission

      12     because they're the ones that are affected so

      13     much by this current state and local tax

      14     systems.  And when they point out those

      15     problems and shine the light on those

      16     problems, I don't consider that a money grab,

      17     I consider that a constructive suggestion to

      18     Congress.

      19               Now, what is a level playing field?

      20     We've heard a lot about a level playing

      21     field.  In my way of thinking, a level

      22     playing field will occur when there will be

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       1     equal burdens for everybody.  Equal burdens.

       2     When the state and local governments, through

       3     the NCCUSL process or otherwise, reform their

       4     use tax system to such an extent that they're

       5     willing to impose the exact same burdens on

       6     their local merchants, then we will have a

       7     level playing field.  I'm here in Dallas, I'm

       8     from Virginia, I bought something in the gift

       9     shop earlier.  They didn't ask me where I was

      10     from.  They didn't force me for the City of

      11     Dallas, for the State of Texas, to identify

      12     where -- who I was, where I'm from, what I

      13     was buying.  And they're not going to have to

      14     send the tax back to Virginia.

      15               CHAIRMAN GILMORE:  Yeah, but we

      16     know now, Mr. Sokul.

      17               COMMISSIONER SOKUL:  I know.  And

      18     to Fairfax County.  Now, that's the problem

      19     that the Quill decision addressed, and that's

      20     why states can't force remote merchants to

      21     collect taxes.  It's because the -- while it

      22     might be, on one level, unfair to a local

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       1     merchant now, the proposed solution is fifty

       2     times more unfair than what a local merchant

       3     confronts today.  So when the state and local

       4     governments devise a system that's so simple

       5     they will impose the exact same burdens on

       6     their local retail merchants, then we will

       7     have a simple system and then we will have

       8     equal burdens.

       9               Now, finally, the final reason that

      10     I'm supporting this proposal is that we're

      11     not a law- making body.  We're making

      12     suggestions to Congress for their action.

      13     And to me that implies or strongly suggests

      14     that we shouldn't be timid.  We should point

      15     out the problems, we should be comprehensive

      16     in what the problems are, and we should be

      17     aggressive on suggested solutions to foster

      18     debate and move the process along.  I think

      19     this proposal does a wonderful job at that,

      20     and that's why I'll vote for it.

      21               CHAIRMAN GILMORE:  Last three names

      22     on my list are Mr. Andal, myself, and

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       1     Mr. Pottruck to close.  Mr. Andal.

       2               COMMISSIONER ANDAL:  Thank you, Mr.

       3     Chairman, and I'd like to thank, before I

       4     begin, the Business Caucus members who

       5     struggled to reconcile some really difficult

       6     issues here, trying to put something on the

       7     table that most of us could accept.  I'm

       8     sorry that we can't get unanimous opinion,

       9     but I think we've come a long way.

      10               I want to talk about two things in

      11     the proposal.  One is what I view as the

      12     disproportionate taxation of

      13     telecommunications in our country, and why

      14     that's so harmful to ordinary citizens.  And

      15     then second of all, what I view as the sales

      16     tax compromise proposal that has been put

      17     forth in the Business Caucus Proposal.  It is

      18     not exactly everything I wanted, but it, I

      19     think, helps to go down the path of

      20     simplification.

      21               On telecommunications, Mike

      22     Armstrong mentioned earlier that he was

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       1     the least-expensive tax collector in a

       2     country.  I do collect more tax than AT&T,

       3     $29 billion a year, but I'm not nearly as

       4     inexpensive as you are.  You are free.  And

       5     telecommunications tax -- companies collect

       6     boat-loads full of tax for state and local

       7     governments across the country, and they

       8     collect it at -- in most cases without any

       9     recompense from the government, and their

      10     customers pay that tax.  And in the old days

      11     it didn't really matter that much because you

      12     had regulated monopolies, they collected the

      13     tax, and when it came time to have a rate

      14     increase, they'd just pass it on to their

      15     customers.  That's no longer true.  Now it

      16     goes to their bottom line.

      17               And so when we have all these

      18     disproportionate share -- taxes on

      19     telecommunications all across the country,

      20     that kind of -- expense and bottom line goes

      21     directly to these companies' spreadsheets,

      22     balance sheets at the end of the year.  On my

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       1     phone bill in California there are eight

       2     different surcharges.  And I'm often asked as

       3     a tax official, what are all these for?  And

       4     no one knows.  Billions of dollars of

       5     surcharge revenue, just in California, are

       6     collected by telecom companies.  In addition

       7     to that, those taxes that don't apply to

       8     other businesses in California.  In addition

       9     to that, these companies do not get treated

      10     the same for property tax purposes across the

      11     country.  They are singled out for different

      12     kinds of property tax assessment than other

      13     companies.

      14               Now, you say, why should we care?

      15     Why should we care about AT&T, why should we

      16     care about MCI, why should we care about

      17     these telecom companies?  The reason we

      18     should care as ordinary citizens here in

      19     Dallas or in California or anywhere else in

      20     the country, is because they are the ones

      21     that are investing in the Internet backbone.

      22     They're buying the fiberoptic line, they're

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       1     buying the switching stations, they're the

       2     ones that are moving at a faster and faster

       3     speed to deliver data and voice and

       4     information to our homes.  The more they have

       5     to pay in taxes, the less they have on their

       6     balance sheet at the end of the year, the

       7     more capital requirements that aren't being

       8     met, and the less they're investing in the

       9     Internet backbone.  We should all be

      10     concerned about the disproportionate share of

      11     taxes that go on telecommunications in this

      12     country, and we should all do something about

      13     it because we want to grow the Internet as

      14     fast as possible to keep our international

      15     advantage.

      16               So I like very much the pieces of

      17     this proposal that relate to that, relate to

      18     getting the disproportionate property tax

      19     burden off the telecom companies.  And by the

      20     way, telecommunications companies are some of

      21     the biggest property owners in each state in

      22     terms of value.  This is a lot of money at

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       1     stake.

       2               And then I want to go to the sales

       3     tax issue.  This is a compromise, even though

       4     it's not seen as enough by some of those who

       5     wanted to go further.  The compromise is

       6     basically this in the Business Caucus

       7     Proposal.  I want to codify existing law,

       8     Quill and otherwise, and I want to say to the

       9     governors and the state tax collectors across

      10     the country, you cannot go outside of your

      11     border to collect sales tax from a company

      12     that doesn't have a physical presence in your

      13     state.  This proposal, though, does -- says

      14     that we ought to codify existing law and we

      15     ought to keep it there until, until, the

      16     states simplify their own tax system.  And

      17     Mayor -- or I guess it was Gene that said the

      18     6,000 rates.  There are 6,000 rates, there

      19     are over 30,000 tax rate areas.

      20               And when Mike Armstrong and John

      21     Sidgmore talk about all these tax returns

      22     they have to follow, it's not just the rate,

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       1     it's the rate, plus the tax rate area, plus

       2     the non-uniform tax base in each state.  It

       3     creates an administrative nightmare.  And to

       4     be honest with ya, with all due respect to my

       5     friends in the state and local tax community,

       6     these states have done absolutely nothing to

       7     simplify their tax systems.  They come here,

       8     they come to forums, they come to Congress

       9     and they say, we will simplify if you do

      10     this.  The you do this is always we want to

      11     raise taxes.  And the simplifying never

      12     happens. And what the Business Caucus

      13     Proposal does is it calls that bet.  It says

      14     if you want to overturn Quill and you want to

      15     impose tax collection burdens on out of state

      16     collectors, then you simplify first.  It

      17     ought to have had it on the cover of the

      18     proposal, simplify first, then we will move

      19     to the discussion of whether or not to

      20     overturn existing law as to out of state

      21     sellers.  That's the only way we can protect

      22     our Internet commerce from a slowdown that

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       1     relates to confusion, litigation, and

       2     administrative cost.

       3               I have to talk about a few things.

       4     Mayor Kirk talked about this would be a $20

       5     billion loss to American taxpayers.  And this

       6     all, I guess, depends on where you come from,

       7     but where I come from when you -- when the

       8     taxpayers pay less and the government gets

       9     less, the American taxpayers are getting

      10     savings, not cost.  We're allowing those

      11     taxpayers to keep their money, not send it to

      12     the government.  That is not a cost to

      13     American taxpayers, that is a savings to

      14     American taxpayers.

      15               And finally, we talked about the

      16     rules, and we spent a lot of time talking

      17     about rules around here, but in the Internet

      18     Tax Freedom Act, there is an obligation to

      19     have tax neutrality.  And I think, my friend,

      20     it does not say revenue neutrality.  Tax

      21     neutrality means similar products get taxed

      22     the same.  Therefore, if you have a music CD

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       1     that's in tangible personal property form,

       2     and a musical CD that's digitally

       3     transferred, that it should be taxed the

       4     same.  That is tax neutrality, and that's

       5     exactly what the Business Caucus Proposal

       6     does.  It need not be, to satisfy the rules,

       7     revenue neutral.  And I think that's one of

       8     the confusions that we have.

       9               Finally, I'd just like to say that

      10     we -- this is a proposal that I think it

      11     accomplishes a great deal of good.  The

      12     reason I vote for it, even though I'm

      13     strongly opposed to overturning Quill, is I

      14     don't think the states will simplify.  I

      15     don't think if you go twenty years back and

      16     listening to all the promises and all the

      17     speeches and all the good intentions, that

      18     they have ever simplified anything.  The

      19     states continually make it more complicated,

      20     not more simple.  And if they want to tax, if

      21     they want to go out of our state's borders

      22     and tax the Internet transactions, then they

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       1     ought to simplify first, and then we'll

       2     discuss it.  And I don't think they will.

       3     And I think this is a reasonable compromise,

       4     and I strongly support the Business Caucus

       5     Proposal.

       6               CHAIRMAN GILMORE:  I previously

       7     failed to see Governor Locke's hand.

       8     Governor Locke.

       9               GOVERNOR LOCKE:  Thank you, Mr.

      10     Chairman.  I really appreciate Mr. Pottruck

      11     and others of the business community for

      12     putting together their proposal.  In many

      13     ways we've actually been more aligned than

      14     would be apparent.  But I cannot support this

      15     particular proposal, and I just want to make

      16     a few comments.

      17               First of all, I think there's

      18     almost unanimity among the group, all the

      19     Commission members, that we ought to

      20     permanently ban future access charges, not

      21     just extend the moratorium, but ban access

      22     charges with respect to the Internet so that

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       1     there is unencumbered use of the Internet and

       2     we ought to encourage that -- this growing

       3     medium.

       4               Second of all, I think there's a

       5     great deal of support among the members here,

       6     including myself, to repeal the Federal

       7     telecommunications tax.  So there's not

       8     disagreement there.

       9               Nobody that might be opposed to

      10     this Business Caucus Proposal is suggesting

      11     that we collect any additional taxes today,

      12     or even three or four years from now.  In

      13     many ways, I and others agree with Mr. Andal

      14     that unless there is simplification first,

      15     the states will not be allowed under Quill or

      16     any other type of law to try to collect taxes

      17     from remote sellers, whether it's catalog

      18     sales or sales over the Internet.

      19               I am concerned, however, that this

      20     proposal, with its level of detail, goes too

      21     far.  And that's what concerns me.  I think

      22     we agree in principle and wish that we could

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       1     have reached that 30,000 level -- or

       2     30,000-foot elevation and focused on the

       3     principles, which would have then given

       4     guidance to the Congress.  But the details

       5     here, I think, go too far, and let me just

       6     give you one example.  It may be fine to say

       7     that digitized goods should not be taxed

       8     because of the privacy issues and the

       9     complexity of trying to track that down, but

      10     then to say that their physical counterparts

      11     should also be exempt from tax, so if I go to

      12     the department store and I buy a CD, if I go

      13     to the book store and buy a book, if I buy a

      14     magazine, if I buy at the airport off the

      15     newsstand Golf Digest Magazine, when I could

      16     actually have much of that downloaded and

      17     read it over the computer, to say that those

      18     physical items would no longer be subject to

      19     sales tax, that troubles me, because in our

      20     state of Washington that would be a loss to

      21     us annually of almost a hundred and $30

      22     million a year.

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       1               Now, there are some who believe

       2     that there should be no sales tax over the

       3     Internet, whether it's simplified or what

       4     have you because they say that the sales tax

       5     is an outmoded form of taxation.  That may be

       6     true.  And maybe over time we'll find out.

       7     But, some of those people say that revenues

       8     to local governments will increase, not

       9     because of sales taxes, but through the

      10     income taxes.  And I know that people in

      11     California have cited the growth in income

      12     taxes and have, therefore, said that there

      13     should be less reliance on the sales tax.

      14     But we need to look at the various -- the

      15     fact that in many jurisdictions all across

      16     America there are no income taxes.  And this

      17     is an issue of states' rights.  That if the

      18     states are going to be facing the dinosaur of

      19     a sales tax, let that be their burden, let

      20     them figure that out, let's not mandate them

      21     or force them into other methods of taxation,

      22     whether property taxes or income taxes

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       1     because of the loss of sales taxes due to

       2     the -- due to the exemptions that would be

       3     given to the Internet or the lack of a level

       4     playing field.

       5               And if we're going to say that the

       6     tangible equivalents of digitized goods are

       7     not subject to sales tax, why is it that we

       8     then say that if we buy clothes over the

       9     Internet from a remote sale -- a remote

      10     seller, it's not subject to sales tax.  And

      11     again, nobody here is proposing that we

      12     subject those items to sales tax until there

      13     is simplification, if and when that ever were

      14     to occur.  But if we say that, for instance,

      15     you buy clothes from L.L. Bean, whether the

      16     Internet or by catalog sales, there's no

      17     sales tax there, but if I go and buy that

      18     same item in my store in my local community I

      19     pay sales tax.  How is that a level playing

      20     field?  How is that a level playing field

      21     where we say that the tangible equivalent of

      22     a digitized good is not subject to sales tax

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       1     if we buy it in our own communities, but if

       2     we also buy the physical component from our

       3     own community and not through the Internet

       4     and not through catalog sales, we do pay

       5     sales tax over that?  And so I guess I'm

       6     concerned that in our quest to try and reach

       7     consensus that we've focused so much on the

       8     details that it's proven problematic for many

       9     of us.

      10               Yes, there should not be access

      11     charges for the Internet.  Yes, we should

      12     eliminate the telecommunications tax.  Yes,

      13     there should be simplification before there

      14     ever is any duty to collect on remote

      15     sellers, and maybe that will never happen.

      16     Maybe that will never happen and that

      17     simplification will never happen, in which

      18     case the law of the land stays.  There is no

      19     sales tax on remote sellers whether by

      20     Internet or by catalog sales.

      21               And finally, there should be a

      22     level playing field.  Even with respect to

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       1     what we're doing with respect to encouraging

       2     the growth of Internet sales.  And finally,

       3     nobody is proposing any additional taxes

       4     today.  Thank you.

       5               CHAIRMAN GILMORE:  Thank you,

       6     Governor Locke.  If I may have the floor for

       7     just a moment.

       8               With respect to this proposal that

       9     has come forward, which I intend to vote for

      10     as chairman, it has some language in it that

      11     I believe acknowledges the positions of both

      12     of the groups that are here on this

      13     Commission.  In fact, that, I think, is one

      14     of the more appealing aspects of this.

      15     Frankly, there's some language in this

      16     proposal that I think is a little tough to

      17     take.  It talks a great deal about the

      18     details about simplification, about extra

      19     commissions to monitor such simplification.

      20     While I'm not opposed to simplification, I'm

      21     for it, but there's a heavy implication that

      22     it will mean at some point a taxing type of

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       1     authority or proposal up the road.

       2               But on the other hand, the Business

       3     group was willing to place into

       4     acknowledgement within this document both

       5     sides, not just one side and to say that, in

       6     fact, there were people on this Commission

       7     who adamantly do not believe that even in the

       8     face of simplification that that

       9     automatically means a sales tax up the road.

      10     That's when I was able to begin to come

      11     toward this Commission report because -- or

      12     this compromise report because it does do

      13     major tax cuts to help out consumers and

      14     working men and women of the country, as well

      15     as fostering the growth and opportunities of

      16     this great new industry.

      17               But a level playing field?  That

      18     means a lot of things to a lot of different

      19     people.  The truth is that there is very

      20     rarely a level playing field in this country

      21     and among all of these industries and types

      22     of occupations, even within retail, things

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       1     are not identical, and it's impossible to

       2     make things identical.  And if that's what

       3     meant by a level playing field in terms of

       4     taxing, then you have to make everything a

       5     level playing field everywhere all the time.

       6               We had a firm come into this

       7     Commission and basically take me on, I think

       8     it was in San Francisco, a major firm that

       9     said that they always had a level playing

      10     field, they never got any governmental

      11     benefits.  Just this past week we made a

      12     major grant in the State of Virginia to that

      13     very same company that said that they do not

      14     have any types of benefits out of government,

      15     but we made that grant because we wanted the

      16     jobs, we wanted the growth, and we wanted the

      17     opportunity, we wanted the income tax, we

      18     wanted the new jobs.  And that firm was quite

      19     frightened, as a matter of fact, at one point

      20     because they weren't sure that they were

      21     going to get their special grant, and said so

      22     in the paper.  Well, they were going to get

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       1     it because it was good for the people of

       2     Virginia to foster that type of development.

       3     But then they're gonna come tell me that

       4     everything has to be a level playing field

       5     and everything has to be identical.  Because

       6     we have to be wise and assess, as a matter of

       7     fact, the nature of there various industries

       8     and where, in fact, the playing field is for

       9     the best interests of the people of our

      10     respective states and of the United States.

      11               I think the most compelling thing I

      12     would say about this proposal is it contains

      13     language in this that, for those people who

      14     want to reach a taxing opportunity somewhere

      15     up the road, it gives them some -- buys them

      16     some time, which I think is a remarkable

      17     concession, quite frankly.  We don't believe

      18     necessarily that it will ever arrive, but the

      19     opportunity is there for those people who

      20     want a taxing regime to exist somewhere up

      21     the road.  It's a remarkable, I think,

      22     concession.  But we don't believe that there

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       1     will ever be a need for that type of taxing

       2     authority, many of us that are on the

       3     Commission.

       4               But this is a very evenhanded

       5     proposal that acknowledges both of these

       6     matters, while at the same time delivering

       7     major tax cuts to the people of the United

       8     States.  So I'm going to vote for it.  I'm

       9     going to support it.  And I believe that it's

      10     the best approach. And those who would either

      11     vote no or abstain should remember that they

      12     may be passing up the one opportunity they

      13     have in a piece of language to recommend to

      14     the Congress, to do a finding and a

      15     recommendation, which says that there may be

      16     an opportunity for further thought on this up

      17     the road.

      18               The closing, before we call

      19     Governor Leavitt's question, the closing

      20     remarks go to the person who has proposed it,

      21     and that is Mr. Pottruck.

      22               COMMISSIONER POTTRUCK:  Thank you,

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       1     Mr. Chairman.  Well, I think we can all see

       2     that there's a lot of debate around this

       3     proposal, and people support it for different

       4     reasons.  They see in it what they like.  And

       5     it's -- if we look back upon the entire

       6     process, as a business person who sits on

       7     this Commission, this process is so unusual

       8     because in business we try to make problems

       9     as small as they -- as we can and then solve

      10     them, and of course in government the process

      11     of dialogue and debate makes problems bigger,

      12     and then they seem almost impossible to

      13     solve.  But that's what I think we've done,

      14     we've in fact invited in all points of view

      15     in the four meetings that we've had.  We've

      16     had lots of debate, lots of presentations,

      17     and the problem is big and very complicated.

      18     And therefore to reach a recommendation, to

      19     reach any kind of even a majority point of

      20     view, or a supermajority point of view, it

      21     requires us to put together a proposal where

      22     you like some things and can just live with

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       1     others to try to find a middle ground. And

       2     that's what we've tried to do; we've tried to

       3     create something that's a middle ground.

       4               We recognize the fact that

       5     virtually nobody wants new access taxes on

       6     the Internet.  There's almost unanimity about

       7     the idea of repealing telecommunications

       8     taxes.  There's clear support for the

       9     importance of simplification.  Some view

      10     simplification as the precursor for an

      11     opportunity for a level playing field of how

      12     taxes are applied, others see simplification

      13     as an end in and of itself.  And in either

      14     case simplification is a valuable thing to

      15     do.  And I don't think anyone supports the

      16     idea that this should be a windfall for

      17     taxes.  Nobody thinks that this should raise

      18     tax receipts on Americans.  Nobody thinks

      19     that that's what's needed right now.

      20               So we have this compromise proposal

      21     that we think does a lot of good, provides

      22     the pathway for moving to a 21st Century

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       1     structure.  And I am delighted by the work

       2     that people have done to make this possible.

       3     We've had a lot of discussion, a lot of

       4     participation.  Even those that can't support

       5     this proposal, Mr. Chairman, have

       6     participated in the discussion.  And I think

       7     in many cases they've come to that conclusion

       8     because they couldn't support the details.

       9     But we've tried to come to something here

      10     that represents a very moderate point of

      11     view, and I'm delighted on behalf of the

      12     Business Caucus to move this proposal

      13     forward.

      14               CHAIRMAN GILMORE:  Governor Leavitt

      15     has called for the question.  Is there a

      16     second?

      17               COMMISSIONER ANDAL:  Second.

      18               CHAIRMAN GILMORE:  All in favor of

      19     calling the question please say aye.

      20               All opposed nay.

      21               The question is called.

      22     Ms. Rosenker, if you would call the roll,

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       1     please.  A yes vote adopts the Business

       2     Caucus Proposal, a no opposes it.  We shall

       3     now see the cards.

       4               MS. ROSENKER:  Mr. Andal?

       5               COMMISSIONER ANDAL:  Aye.

       6               MS. ROSENKER:  Mr. Armstrong?

       7               COMMISSIONER ARMSTRONG:  Aye.

       8               MS. ROSENKER:  Mr. Guttentag?

       9               COMMISSIONER GUTTENTAG:  Abstain.

      10               MS. ROSENKER:  Mr. Harris?

      11               COMMISSIONER HARRIS:  Aye.

      12               MS. ROSENKER:  Mayor Kirk?

      13               MAYOR KIRK:  No.

      14               MS. ROSENKER:  Ms. Jones?

      15               COMMISSIONER JONES:  Abstain.

      16               MS. ROSENKER:  Governor Leavitt?

      17               GOVERNOR LEAVITT:  Abstain.

      18               MS. ROSENKER:  Mr. Lebrun?

      19               COMMISSIONER LEBRUN:  Abstain.

      20               MS. ROSENKER:  Governor Locke?

      21               GOVERNOR LOCKE:  Abstain.

      22               MS. ROSENKER:  Mr. Norquist?

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       1               COMMISSIONER NORQUIST:  Aye.

       2               MS. ROSENKER:  Mr. Novick?

       3               COMMISSIONER NOVICK:  Abstain.

       4               MS. ROSENKER:  Mr. Parsons?

       5               COMMISSIONER PARSONS:  Aye.

       6               MS. ROSENKER:  Mr. Pincus?

       7               COMMISSIONER PINCUS:  Abstain.

       8               MS. ROSENKER:  Mr. Pittman?

       9               COMMISSIONER PITTMAN:  Yes.

      10               MS. ROSENKER:  Mr. Pottruck?

      11               COMMISSIONER POTTRUCK:  Yes.

      12               MS. ROSENKER:  Mr. Sidgmore?

      13               COMMISSIONER SIDGEMORE:  Yes.

      14               MS. ROSENKER:  Mr. Sokul?

      15               COMMISSIONER SOKUL:  Yes.

      16               MS. ROSENKER:  Mr. Waitt?

      17               COMMISSIONER WAITT:  Yes.

      18               MS. ROSENKER:  Chairman Gilmore?

      19               CHAIRMAN GILMORE:  Aye.

      20               CHAIRMAN GILMORE:  The Commission

      21     has voted for the proposal.  Eleven yeas, one

      22     nay, seven abstentions.  It cannot be a

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       1     recommendation of this panel, but will be so

       2     reported as voted in that manner to the

       3     Congress.

       4               The next item on the agenda is the

       5     State and Local Caucus Proposal, which is in

       6     your books, is an alternative proposal to the

       7     one that we have adopted, but is one that we

       8     can fully discuss at this time and vote once

       9     again.

      10               Is there a motion to adopt the

      11     State and Local Caucus Proposal submitted by

      12     Commissioners Kirk, Leavitt, Lebrun, and

      13     Locke?

      14               GOVERNOR LEAVITT:  So moved.

      15               GOVERNOR LOCKE:  Second.

      16               CHAIRMAN GILMORE:  Moved by

      17     Governor Leavitt, seconded by Governor Locke.

      18     This floor is open for discussion.

      19               GOVERNOR LEAVITT:  Mr.

      20     Chairman, I'd like to be recognized.

      21               CHAIRMAN GILMORE:  Governor

      22     Leavitt.

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       1               GOVERNOR LEAVITT:  Mr.

       2     Chairman, it's my purpose at this time to

       3     offer an amendment to our proposal.  I'd like

       4     to characterize the amendment because I

       5     believe it's of some importance in

       6     understanding its derivation.

       7               First, the words of this proposal

       8     are coming from a combination of two places.

       9     First, a proposal written by Mr. Pottruck,

      10     that I believe the members of our -- of this

      11     Commission, many of them, thought was very

      12     productive, well written and well reasoned,

      13     that follow the same essential line of

      14     reasoning that we have had discussed today.

      15     The second part is the business proposal

      16     itself.  And it's our purpose now to actually

      17     put forward a proposal based on the Business

      18     proposal that we believe will allow us to

      19     move toward a -- a decision and a significant

      20     policy guidance.

      21               CHAIRMAN GILMORE:  Governor

      22     Leavitt, the amendment is out of order.  The

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       1     proposal itself has been filed in due course

       2     and may be presented and voted upon.  The

       3     amendment is out of order unless at a later

       4     time we pass Mr. Pincus's floor amendment

       5     proposal.

       6               GOVERNOR LEAVITT:  I would, Mr.

       7     Chairman, then ask for a suspension of the

       8     rules to allow a proposal based on the

       9     Business proposal that I believe would be

      10     quite well received by many members of this

      11     group, if, in fact, there is a desire to see

      12     this resolved or if we're just interested in

      13     being able to use parliamentary procedure to

      14     block it.  I would like to have -- make a

      15     motion for a suspension of the rules and ask

      16     that it -- this amendment to my own proposal

      17     be allowed.

      18               SPEAKER:  Second.

      19               CHAIRMAN GILMORE:  It is moved and

      20     seconded that we suspend the rules in order

      21     to allow an amendment to the proposal.

      22     The --

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       1               SPEAKER:  I'd like to speak to the

       2     amendment.

       3               CHAIRMAN GILMORE:  It is the --

       4     such a suspension of the rules requires a

       5     two-thirds vote.  It is debatable.

       6               Mr. Andal, you had your hand up.

       7               COMMISSIONER ANDAL:  With all due

       8     respect, Governor, we have spent an enormous

       9     amount of time mostly on procedural votes by

      10     your group arguing that we ought to stick to

      11     the rules.  And I spent -- we listened to

      12     Mayor Kirk for at least ten minutes talking

      13     about how important the Operating Rules are.

      14     All of the people listed here, Items 1

      15     through 16, have put their materials in

      16     before this meeting so that we could review

      17     'em, that we could look at 'em, we could see

      18     whether or not we liked them or not, and we

      19     could have a significant analysis done on

      20     them, and we did that with your State and

      21     Local Caucus Proposal and I'm prepared to

      22     vote on it.  But in the absence of that, I

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       1     think we need to treat you just the same way

       2     that we treat everyone else, which means that

       3     we go -- if you want to make another

       4     proposal, which it sounds like you do, you

       5     need to go down to Item 17 and Commissioner

       6     Pincus's proposal to do floor amendments.

       7     But in the absence of that, it is completely

       8     unfair, I think, to all the people who

       9     submitted their resolutions in advance to

      10     allow you to amend your proposal before we

      11     vote on it.  So I'm going to oppose the --

      12               COMMISSIONER LEBRUN:  Mr. Chairman?

      13               COMMISSIONER ANDAL:  -- motion to

      14     suspend the rules.

      15               GOVERNOR LEAVITT:  Mr.

      16     Chairman, may I respond?

      17               CHAIRMAN GILMORE:  Governor

      18     Leavitt.

      19               GOVERNOR LEAVITT:  I think

      20     there would be some value in members of the

      21     Commission understanding the basic nature of

      22     the proposal in order for them to make a

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       1     decision as to whether or not they would

       2     choose.  I heard from the last discussion

       3     some very clear themes of agreement.  First

       4     of all, that we all recognize

       5     telecommunications is, in fact, too complex

       6     and over taxed and that there is a need for

       7     us to reduce it.  Second, that we should be

       8     moving generally toward a level playing

       9     field.  Third, that simplification should

      10     come before any nexus.

      11               There is an agreement, I believe,

      12     that could be reached, based on the fact that

      13     we would include their words, on the

      14     following things:  First, that the Internet

      15     isn't a target for new taxes; second, that

      16     there's no reason to impose exclusive or

      17     targeted taxes on electronic commerce; third,

      18     that telecommunications should be reduced;

      19     fourth, that privacy is a concern; fifth,

      20     that taxes are -- that are owed today but

      21     they're not being collected and that's part

      22     of the process, that's part of the proposal

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       1     that's there now, that we should be moving

       2     toward a level playing field, that we should

       3     extend the moratorium.  I think it's very

       4     important to note that the proposal, the

       5     Business proposal is not to extend a

       6     moratorium on sales taxes collected on the

       7     Internet, but access taxes in specific.  We

       8     can reach agreement on that point.  That

       9     there should limited carve-outs on defining

      10     nexus.  And that there should be a 3 percent

      11     federal excise tax ultimately eliminated.

      12     That we should have -- that there is

      13     currently an excess -- that any excess burden

      14     should be eliminated.

      15               So what would be the differences of

      16     the proposal?  Well, first of all, they would

      17     be -- we would look at the fact that there

      18     are, in fact, $20 billion worth of carve-outs

      19     in this -- in the Business proposal, and we

      20     would simply like to talk about those

      21     carve-outs.  Now, we can reach basic

      22     agreement if we can talk about these

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       1     carve-outs.  Right now at this table there

       2     are no -- there are five -- six business

       3     representatives.  There are no retailers at

       4     this table, there are no small business

       5     people at this table, and I'm inclined to

       6     believe that if we had a Business proposal

       7     that represented that spectrum of business as

       8     well as simply the perspectives of those

       9     honorable people who are here, it might look

      10     substantially different.  Those $20 billion

      11     of carve-outs would benefit a certain segment

      12     of business.  Not directly, but they would

      13     certainly benefit because it would allow them

      14     not to have to collect it, and that's a

      15     competitive advantage that needs to be dealt

      16     with.

      17               The second primary difference is

      18     that this -- Commissioner Andal talked about

      19     the need to simplify first.  We're in

      20     complete agreement, we need to simplify

      21     first.  We need to define the result, then

      22     simplify, and then get the result.  What's

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       1     being proposed in both of these proposals

       2     that would be drawn from the exactly the

       3     Business proposal is that we have a

       4     revolution in sales tax collection, and it's

       5     a needed revolution.  The question is, how do

       6     we go about getting there?

       7               Now, Mr. Chairman, we are very

       8     close here.  There are lots of areas of

       9     agreement.  There's been a lot -- we've been

      10     very close as a group in working together

      11     between the meetings.  It seems very

      12     unfortunate to me that we would at this point

      13     choose not to have an alternative proposal

      14     that would move us forward simply on the

      15     basis of a need to suspend the rules.  And I

      16     would implore on my fellow Commissioners that

      17     we allow this to be done.  And then, Mr.

      18     Chairman, I'd like to call at the end of that

      19     I'd like to call for a recess where we could

      20     give the details of this and allow it to be

      21     studied by members of the Business Caucus and

      22     others to see if, in fact, between now and

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       1     tomorrow morning we might be able to find a

       2     resolution that would allow us to give to

       3     Congress true -- a true guidance on this

       4     issue.

       5               CHAIRMAN GILMORE:  Ladies and

       6     gentlemen of the Commission, what is before

       7     the house is the question of whether we will

       8     suspend the rules for an amendment at this

       9     time.  When we earlier addressed this issue

      10     we decided to go in order on matters that

      11     have, in fact, been filed on due notice, and

      12     then if at the end of the day Mr. Pincus's

      13     resolution to offer amendments from the floor

      14     at that time is adopted, then it will be

      15     done.  In fact, I would anticipate something

      16     similar to this being offered at that time,

      17     should Mr. Pincus be successful in his

      18     motion.  But in any case, that is the issue

      19     that is before us at this time.  Whether to

      20     suspend the rules requires a vote of

      21     two-thirds.

      22               COMMISSIONER PARSONS:  Point of

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       1     information --

       2               COMMISSIONER LEBRUN:  Mr.

       3     Chairman --

       4               COMMISSIONER PARSONS:  Point of

       5     information, Mr. Chairman?

       6               CHAIRMAN GILMORE:  Yes,

       7     Mr. Parsons.

       8               COMMISSIONER PARSONS:  Do I

       9     understand the Chair -- well, let me ask the

      10     question directly.  If Mr. Pincus's motion to

      11     have floor amendments be appropriate at some

      12     point in these proceedings, and presumably

      13     once we've gone through the agenda, if that

      14     is approved, would the Governor have an

      15     opportunity to raise his amended proposal

      16     then --

      17               CHAIRMAN GILMORE:  Yes, he will.

      18               COMMISSIONER PARSONS:  -- which

      19     would also give some of us a chance to read

      20     it.

      21               CHAIRMAN GILMORE:  Yes, he will.

      22               COMMISSIONER PARSONS:  All right,

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       1     thank you.

       2               COMMISSIONER LEBRUN:  Mr. Chairman?

       3               SPEAKER:  Point of order --

       4               CHAIRMAN GILMORE:  Go ahead.

       5     Mr. Lebrun.

       6               COMMISSIONER LEBRUN:  I would urge

       7     support of the motion to suspend the rules.

       8     We've just heard a good debate on the

       9     Business Caucus Proposal, a lot of these

      10     issues were discussed thoroughly.  I don't

      11     think there's any issue before this

      12     Commission as important as what we're talking

      13     about right now, and that's the taxability of

      14     transactions over the Internet or other

      15     remote sales.  We've got a huge agenda.  If

      16     we don't get to this proposed compromise that

      17     Governor Leavitt suggested until the very

      18     end, and that's where it would kind of fall,

      19     we're going to be short on time.  It seems to

      20     me that now is the time when we're in this

      21     topic to try to get this matter resolved.

      22     The Business Caucus Proposal did not get the

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       1     necessary two-thirds vote.  Why don't we take

       2     a chance now to look at a compromise, and

       3     most of you have seen it, probably all of you

       4     have seen it, to let us debate that now when

       5     it's fresh in all of our minds, and take that

       6     vote.  Perhaps we will get the necessary

       7     two-thirds vote.  But to postpone it until we

       8     go through all these other items will not

       9     give it the sufficient time it's going to

      10     need.  It's four o'clock and the end of our

      11     first day already.  So I would urge you to

      12     support the motion to suspend the rules so we

      13     can proceed with this particular matter.

      14               SPEAKER:  Mr. Chairman?

      15               CHAIRMAN GILMORE:  Mr. Sidgmore.

      16               COMMISSIONER SIDGEMORE:  Yeah, I

      17     think, you know, if we really are as close as

      18     Governor Leavitt suggests, I think all of us

      19     would like to see exactly what it is we're

      20     close on and what we're not close on.  On the

      21     other hand, amending it on the fly and

      22     talking about it verbally here at this time,

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       1     I just don't see how that gets us forward.

       2     So, I mean, my approach would be let us --

       3     you know, let us see it in writing and then

       4     we can take it up, you know, at the next --

       5               GOVERNOR LEAVITT:  Mr.

       6     Chairman, I'd be happy to distribute it --

       7               COMMISSIONER HARRIS:  Mr. Chairman.

       8               GOVERNOR LEAVITT:  -- and I'd

       9     be happy to put off action until we've had a

      10     chance to meet.

      11               COMMISSIONER HARRIS:  Mr. Chairman.

      12               CHAIRMAN GILMORE:  I can't see who

      13     that is.  Paul Harris.

      14               COMMISSIONER HARRIS:  Mr. Chairman,

      15     I would hope that we would reject this offer

      16     to suspend the rules.  I mean, it's important

      17     in our last meeting that we have some order

      18     in this agenda.  If we suspend the rules on

      19     this, then we open the floor for all sorts of

      20     tricks and shenanigans and delays, just like

      21     we had in Williamsburg.  It's important to

      22     discuss these issues.  If they're so

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       1     important, why didn't we all have an

       2     opportunity to receive these well in advance

       3     of the Commission's meeting in Dallas so that

       4     we could individually review them, research

       5     them, ask questions about 'em, and not be

       6     handed these amendments on the fly as has

       7     been suggested earlier?  I think these issues

       8     are far too important for us to be making

       9     these types of ad hoc changes to the agenda

      10     when we don't have the kind of time that we

      11     need to carefully and thoughtfully look

      12     through what's being proposed.

      13               CHAIRMAN GILMORE:  Mr. Harris, I

      14     believe that Governor Leavitt has withdrawn

      15     the motion to suspend the rules at this time.

      16               GOVERNOR LEAVITT:  No, no, I

      17     have not.

      18               CHAIRMAN GILMORE:  You have not?

      19               GOVERNOR LEAVITT:  No, I have

      20     not.

      21               CHAIRMAN GILMORE:  Then we will --

      22               COMMISSIONER ANDAL:  Call the

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       1     question.

       2               CHAIRMAN GILMORE:  Mr. Andal has --

       3               GOVERNOR LEAVITT:  I have a

       4     point of order, Mr. Chairman.  I'd like to

       5     ask the parliamentarian if it's necessary to

       6     suspend the rules to substitute my own

       7     proposal for another.

       8               CHAIRMAN GILMORE:  Mr. Parliamentar

       9     ian?

      10               MR. GRIFFITH:  I'm sorry, could you

      11     repeat the question again, Governor Leavitt?

      12               GOVERNOR LEAVITT:  I'd like to

      13     know if it is -- in order to substitute a

      14     proposal that I have submitted, along with my

      15     colleagues, if it's necessary for us to

      16     suspend the rules, if that is the same as a,

      17     quote, floor amendment, or if this is simply

      18     a substitute that's necessary to --

      19               MR. GRIFFITH:  If you have an

      20     existing proposal that was on file and was

      21     approved as part of the agenda once the

      22     agenda is approved, it's taken away from you

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       1     and it belongs to the meeting.  To amend the

       2     agenda it takes two-thirds vote to do so.  So

       3     I think the effect is the same.

       4               GOVERNOR LEAVITT:  Mr.

       5     Chairman, I'd also like to respond to

       6     Commissioner Harris.  And, I mean, there have

       7     been some of us who have spent a lot of time

       8     negotiating, I mean actually negotiating and

       9     compromising on some of these things.  And

      10     frankly that happened less than forty- five

      11     days ago.  In fact, it happened Wednesday or

      12     Thursday.  In fact, we're hopeful it will not

      13     just happen Wednesday or Thursday, but maybe

      14     this afternoon and tomorrow, and that perhaps

      15     we'll be able to actually reach a solution to

      16     this and not simply do it autocratically on

      17     the basis of whatever you might have eleven

      18     votes to do.

      19               SPEAKER:  Governor --

      20               COMMISSIONER ARMSTRONG:  Mr.

      21     Chairman.

      22               CHAIRMAN GILMORE:  We have a motion

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       1     to suspend the rules, which is, in fact,

       2     still on the floor.  Does anyone wish to

       3     speak to the motion of whether we should

       4     suspend the rules?  Mr. Armstrong?

       5               COMMISSIONER ARMSTRONG:  Yes.  I

       6     would like to acknowledge Governor Leavitt's

       7     points that I hope he's right, we are really

       8     coming closer together if we could spend some

       9     time together.  I find this forum a difficult

      10     one to do that.  We have a Business Caucus

      11     Proposal, and rather than deal with the

      12     suspension of the rules, I note both from

      13     Governor Locke and Governor Leavitt a listing

      14     of all the things we agree on, and from my

      15     perspective it's the important stuff.  And

      16     the things that we seem to have a separation

      17     on, although we don't dive very deep, are

      18     that the digital goods and tangible

      19     equivalents are troubling, and that the

      20     preemption of the states on nexus might be

      21     troubling.

      22               And if that's the case, rather than

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       1     play with the rules -- I've never spent so

       2     much time on rules since I was on the student

       3     council.  And I hate to tell you how long ago

       4     that was.  I would rather get on with the

       5     rules, get on with the business, and recess

       6     as early as possible, and hear suggestions

       7     and proposals on the Business Caucus Proposal

       8     that Governor Leavitt and Governor Locke

       9     would like to make.  Thank you.

      10               COMMISSIONER ANDAL:  Call the

      11     question.

      12               CHAIRMAN GILMORE:  Motion is

      13     whether or not to suspend the rules.  Second

      14     for the call to question?

      15               SPEAKER:  Second.

      16               CHAIRMAN GILMORE:  All in favor say

      17     aye.

      18               Question is called.

      19               Ms.  Rosenker?

      20               MS. ROSENKER:  Mr. Andal?

      21               CHAIRMAN GILMORE:  Excuse me.  The

      22     question before the house is:  Shall the

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       1     rules be suspended so as to allow a floor

       2     amendment at this time?

       3               COMMISSIONER ANDAL:  Andal.  No.

       4               MS. ROSENKER:  Mr. Armstrong?

       5               COMMISSIONER ARMSTRONG:  No.

       6               MS. ROSENKER:  Mr. Guttentag?

       7               COMMISSIONER GUTTENTAG:  Aye.

       8               MS. ROSENKER:  Mr. Harris?

       9               COMMISSIONER HARRIS:  No.

      10               MS. ROSENKER:  Mayor Kirk?

      11               MAYOR KIRK:  Aye.

      12               MS. ROSENKER:  Ms. Jones?

      13               COMMISSIONER JONES:  Aye.

      14               MS. ROSENKER:  Governor Leavitt?

      15               GOVERNOR LEAVITT:  Aye.

      16               MS. ROSENKER:  Mr. Lebrun?

      17               COMMISSIONER LEBRUN:  Aye.

      18               MS. ROSENKER:  Governor Locke?

      19               GOVERNOR LOCKE:  Aye.

      20               MS. ROSENKER:  Mr. Norquist?

      21               COMMISSIONER NORQUIST:  No.

      22               MS. ROSENKER:  Mr. Novick?

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       1               COMMISSIONER NOVICK:  Yes.

       2               MS. ROSENKER:  Mr. Parsons?

       3               COMMISSIONER PARSONS:  No.

       4               MS. ROSENKER:  Mr. Pincus?

       5               COMMISSIONER PINCUS:  Yes.

       6               MS. ROSENKER:  Mr. Pittman?

       7               COMMISSIONER PITTMAN:  No.

       8               MS. ROSENKER:  Mr. Pottruck?

       9               COMMISSIONER POTTRUCK:  No.

      10               MS. ROSENKER:  Mr. Sidgmore?

      11               COMMISSIONER SIDGEMORE:  No.

      12               MS. ROSENKER:  Mr. Sokul?

      13               COMMISSIONER SOKUL:  No.

      14               MS. ROSENKER:  Mr. Waitt?

      15               COMMISSIONER WAITT:  No.

      16               MS. ROSENKER:  Chairman Gilmore?

      17               CHAIRMAN GILMORE:  No.

      18               GOVERNOR LEAVITT:  Mr.

      19     Chairman, I move for a recess.

      20               SPEAKER:  Second.

      21               CHAIRMAN GILMORE:  The motion to

      22     rescind the rules fails, eight yeas, eleven

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       1     nays.

       2               There is a motion on the floor for

       3     a recess.

       4               COMMISSIONER NORQUIST:  How long a

       5     recess, and are we going to be looking at

       6     the Kirk, Leavitt, Lebrun, Locke proposal

       7     or --

       8               CHAIRMAN GILMORE:  Let me stop

       9     where we are.  We have on the floor at the

      10     present the State and Local Caucus Proposal,

      11     which is open to debate at this time and

      12     eligible for a vote at the conclusion of that

      13     debate.  I had anticipated, frankly, a recess

      14     at that time.  But thereafter we will move,

      15     frankly, to many of the issues that were just

      16     raised with respect to some of these specific

      17     taxes, Internet taxes -- access taxes, and

      18     federal excise -- on stand-alone resolutions,

      19     and we will, in fact, be taking them up in

      20     the next hour or so, and then we will move to

      21     the question of whether or not to open the

      22     floor to floor amendments and have a general

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       1     melee on that for a few hours.

       2               So this is where the meeting is and

       3     we are on our way.  I had intended to have

       4     the State and Local Caucus Proposal aired at

       5     this time, and then move for recess, but it

       6     is up to the body as to whether they would

       7     like to recess at this time.  That is where

       8     we stand.

       9               COMMISSIONER NORQUIST:  My body

      10     says health break.

      11               CHAIRMAN GILMORE:  Without

      12     objection we'll recess for fifteen minutes.

      13     Thank you very much.

      14               GOVERNOR LEAVITT:  Mr.

      15     Chairman, we need longer than fifteen

      16     minutes.  We'll never get it done.

      17                    (Recess)

      18               CHAIRMAN GILMORE:  Okay, ladies and

      19     gentlemen. I believe our

      21     intentions are to take some substantive steps

      22     here in order to streamline the agenda so

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       1     that we can go directly to the question of

       2     the floor amendment issue, and deal with some

       3     of those issues today, and see where we go

       4     from here.

       5               But where we are on the agenda

       6     right now is the State and Local Caucus

       7     Proposal as submitted 30 days in advance.

       8     Governor Leavitt.

       9               GOVERNOR LEAVITT:  Mr.

      10     Chairman, I'm prepared to withdraw that

      11     proposal pending the fact that we'll have a

      12     chance to deal with the Pincus amendment,

      13     which would allow for a substitute motion to

      14     be made with the plan that I spoke of

      15     earlier.

      16               CHAIRMAN GILMORE:  The State and

      17     Local Caucus Proposal is withdrawn.  What

      18     remains on the agenda in terms of the

      19     stand-alone proposals, many of which could

      20     also some back by way of a floor amendment at

      21     a later time, are Items 3 through 16.

      22     Without objection all of those are withdrawn

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       1     at this time.

       2               And we move on the agenda to Item

       3     C, Procedural Issues.  The one item that we

       4     have is the Commissioner Pincus Amendment to

       5     the Operating Rules Regarding Offering

       6     Amendments or Modifications.  This proposal

       7     is now on the floor.  If it passes, there

       8     will be additional floor amendments offered

       9     at this time, one additional one.  At which

      10     time I propose that we will recess for a

      11     period of 45 minutes and then return and

      12     address some of the additional floor

      13     amendments, if any.

      14               In the meanwhile, we are at C1.

      15     Mr. Pincus, do you have a motion?

      16               COMMISSIONER PINCUS:  I move the

      17     adoption of that amendment, Mr. Chairman.

      18               CHAIRMAN GILMORE:  Is that

      19     seconded?

      20               COMMISSIONER ANDAL:  Second.

      21               CHAIRMAN GILMORE:  It has been

      22     moved, and seconded by Mr. Andal, that the

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       1     Commissioner Pincus's Amendment to the

       2     Operating Rules be adopted.  Is there

       3     discussion?  Seeing none, all in favor of the

       4     adoption of Mr. Pincus's Amendment please

       5     say -- well, let's see, do we need to do a

       6     roll call on this?

       7               Let's see -- say aye.

       8               Any objection, any nays?

       9               In the absence of any nays, without

      10     any objection, Mr. Pincus's Amendment to the

      11     Operating Rules is adopted.

      12               COMMISSIONER ANDAL:  Do you guys

      13     want to abstain?

      14               CHAIRMAN GILMORE:  Mr. Pittman.

      15               COMMISSIONER PITTMAN:  I would like

      16     to offer an amendment that we -- just in the

      17     interest of time and making sure we can move

      18     ahead quickly, is that we limit the floor

      19     amendments to one per Commissioner and we

      20     limit the discussion to ten minutes on each.

      21               COMMISSIONER ANDAL:  Second.

      22               CHAIRMAN GILMORE:  In line with our

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       1     placing some order on the additional

       2     proceedings for this day, Mr. Pittman has

       3     made his motion to limit debate and offerings

       4     under the floor amendment proposal.  It is

       5     seconded.  Any discussion?

       6               MAYOR KIRK:  Bob, is your --

       7     on the time limit is my only -- I think I

       8     agree with you wholeheartedly in terms of

       9     limiting it to one amendment per Commissioner

      10     or even one -- just limit it to the maker of

      11     the motion, but this is important enough I

      12     hope we're not just -- I don't even know if

      13     he can explain it -- help me understand the

      14     timing part of it.

      15               COMMISSIONER PITTMAN:  Well, I

      16     think, and correct me if I'm wrong, that we

      17     always have the ability to amend that ten

      18     minutes if we find we have a great

      19     discussion.  What I'm trying to avoid is I'm

      20     not -- I don't do what you guys do normally,

      21     and it just seems to me we've got some very

      22     important issues to deal with, and we can get

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       1     sidetracked with lots of discussion about

       2     issues which seem to be not at the central

       3     issue here, which is -- which people have all

       4     brought up and it sounds like we're pretty

       5     close on agreement.  So, mine is really to

       6     avoid distracting us from, I think, important

       7     issues.

       8               MAYOR KIRK:  Thank you.

       9               CHAIRMAN GILMORE:  Further

      10     discussion?

      11               COMMISSIONER LEBRUN:  Mr. Chairman?

      12               CHAIRMAN GILMORE:  Mr. Lebrun.

      13               COMMISSIONER LEBRUN:  I'd hate to

      14     see us restrict the opportunity to debate an

      15     amendment.  We devoted considerable amount of

      16     time discussing and debating the Business

      17     Caucus Proposal.  What Governor Leavitt is

      18     about to present I think is as important, and

      19     I think it would be a mistake to either limit

      20     the time or limit those who may have

      21     something worthwhile to offer on it.  I would

      22     hope that we don't put any such limitations

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       1     on the debate.

       2               CHAIRMAN GILMORE:  Mr. Lebrun, I

       3     don't think there's any intentions to ever

       4     limit debate on the filed motion that

       5     everything had notice on, in the same way

       6     that the Business Caucus one did.  I think

       7     the concern at this point is a plethora of

       8     floor amendments with no predictability to it

       9     of any kind running us into the evening or

      10     even into the week.  In the absence that,

      11     though, if we go to a main substantive motion

      12     for further discussion, I'm sure there will

      13     be latitude by the Commission.

      14               GOVERNOR LEAVITT:  Mr.

      15     Chairman, I'd like to say I support limiting

      16     debate on floor amendments, but I have

      17     withdrawn the State and Local Proposal in

      18     order to preserve time for other matters.

      19     And I would not want to be -- would not

      20     like -- want that gesture to be rewarded with

      21     only a ten-minute discussion on our proposal.

      22               CHAIRMAN GILMORE:  Mr. Pottruck.

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       1               COMMISSIONER POTTRUCK:  I'd like to

       2     support Governor Leavitt in that regard.  I

       3     think that we should follow Mr. Pittman's

       4     recommendation, but here we have a clear

       5     example of where a pre-existing proposal was

       6     put in, replaced by a new proposal.  We may

       7     not ultimately complete the discussion of

       8     that proposal.  But I'd hope that we could

       9     spend a little more than ten minutes on it.

      10               CHAIRMAN GILMORE:  Is there an

      11     amendment to Mr. Pittman's proposal, or shall

      12     it be voted on?

      13               GOVERNOR LEAVITT:  Mr.

      14     Chairman, I would offer an amendment that

      15     we -- to Mr. Pittman's proposal that we allow

      16     up to the same amount of time that was

      17     provided with the other one for the State and

      18     Local substitute, and ten minutes for all

      19     others.

      20               COMMISSIONER ANDAL:  I'm a little

      21     lost in this whole thing.  I thought it was

      22     ten minutes per Commissioner.  So if you add

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       1     up ten minutes per Commissioner, that's a lot

       2     of time to spend on one proposal.  Is it for

       3     each proposal?

       4               COMMISSIONER PITTMAN:  Ten minutes

       5     per proposal was my thought, that if we get

       6     into one that's very interesting and that we

       7     think we're making progress on and is

       8     substantive, we always have the ability to

       9     amend the ten-minute rule, but it keeps us

      10     from just -- I think keeps us on track and

      11     keeps us moving, and hopefully keeps us

      12     focused on the important ones.

      13               SPEAKER:  Mr. Chairman?

      14               CHAIRMAN GILMORE:  I'm going to

      15     offer a motion and see if we can't satisfy

      16     everybody by doing the following.  We're

      17     going to recess, I believe, for 45 minutes.

      18     When we come back, at that time, why don't we

      19     give a half an hour to this debate; if -- an

      20     extension would be favorably considered if

      21     necessary, if we're making some progress.

      22     And then we might be able to conclude this

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       1     matter at a reasonable hour.  Would that, as

       2     a substitute motion, be acceptable to you,

       3     Mr. Pittman?

       4               COMMISSIONER PITTMAN:  It would

       5     indeed.

       6               CHAIRMAN GILMORE:  Forty-five

       7     minute recess followed by a half hour debate,

       8     which will be seen --looked upon favorably if

       9     we have to -- to do that.

      10               GOVERNOR LEAVITT:  Mr.

      11     Chairman?

      12               CHAIRMAN GILMORE:  Governor

      13     Leavitt?

      14               GOVERNOR LEAVITT:  I'm

      15     wondering, I haven't looked at the full

      16     agenda, but I'm wondering, given the nature

      17     of the side discussions and all the things

      18     that we've been talking about, if there is

      19     there a need for us to come back, or could we

      20     have the recess continued until tomorrow so

      21     we'd have enough time to kind of work among

      22     ourselves and see if we couldn't find places

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       1     where this could be brought to solution?

       2               COMMISSIONER ANDAL:  I think there

       3     is a potential reason not to do that.  If

       4     we -- it takes some time to write this report

       5     in physical form so that we can vote on it

       6     tomorrow.  If we don't make our decisions

       7     today, it's going to be very difficult to

       8     have it in a form that we can vote on finally

       9     tomorrow.  And I think as long as it takes

      10     today, we ought to get it done, we ought to

      11     debate it as long as we want, we ought to

      12     come to conclusions, but we ought to get it

      13     done today so we can have it available for a

      14     final vote tomorrow.

      15               GOVERNOR LEAVITT:  I have a

      16     feeling that any resolutions may not happen

      17     around this table.  It may happen at another

      18     table.

      19               COMMISSIONER PARSONS:  May I, Mr.

      20     Chairman?

      21               CHAIRMAN GILMORE:  Mr. Parsons.

      22               COMMISSIONER PARSONS:  It does seem

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       1     to me that we've made some substantive

       2     progress, the prospect for making some

       3     additional substantive progress is out there.

       4     I would much rather take the time to explore

       5     that and find out if it's possible.  And then

       6     if it's possible, I suspect the rest of it

       7     will fall together pretty quickly, Dean, than

       8     try and adhere to a timetable that might not

       9     allow for full exploration and then we miss

      10     an opportunity.  I think the proposal, first

      11     of all, it's -- I guess it's 20 -- 15 to 5:00

      12     now.  If we broke for 45 minutes, we'd be

      13     back at 5:30 and we'd be off to the races.  I

      14     know somebody's got some big plans for this

      15     evening, I believe.

      16               COMMISSIONER NORQUIST:  6:30.

      17               COMMISSIONER PARSONS:  It seems to

      18     me that if we -- if we took the time to

      19     really sort of explore in depth and then

      20     decide whether there is progress to be made

      21     or not, that makes more sense than trying to

      22     shoehorn ourselves into an artificially tight

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       1     schedule.

       2               COMMISSIONER NORQUIST:  Governor.

       3               CHAIRMAN GILMORE:  Mr. Parsons,

       4     discussions have been going on, of course,

       5     for a number of weeks in this matter with

       6     some deal of intensity.  It certainly would

       7     be the Chair's wish that we try to do this

       8     today instead of going over until tomorrow.

       9     The Commission, of course, can make that

      10     decision.  But it would be my intention to

      11     stay by the agenda and come back today and

      12     try to resolve this matter.  We all know what

      13     the issues are, let's see if we can address

      14     it instead of going off all night.  And that

      15     would be the intention of the Chair.

      16               SPEAKER:  Mr. Chairman.

      17               COMMISSIONER NORQUIST:  Some of us

      18     gave up, you know, our votes in order to

      19     speed this up.  Why don't we take the 45

      20     minutes, see what we can do in half an hour,

      21     and see if we can accomplish it?  I mean,

      22     let's try and get the work done today.  You

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       1     know, those of us who put our resolutions in

       2     30 days ahead made sacrifices for people who

       3     want to do stuff at the last minute.  I mean,

       4     let's not --

       5               CHAIRMAN GILMORE:  Mr. Pittman, do

       6     you want to withdraw your motion and we'll

       7     take the recess now?

       8               COMMISSIONER PITTMAN:  I would.

       9               SPEAKER:  Mr. Chairman?

      10               CHAIRMAN GILMORE:  Motion is

      11     withdrawn.

      12               GOVERNOR LEAVITT:  I would like

      13     to ask if Mr. Parsons was making a motion

      14     that we adjourn for the evening, I'd be

      15     willing to second it.

      16               COMMISSIONER PARSONS:  I was not

      17     making a motion, I was making an observation.

      18     And expressing a perspective.  I think there

      19     was a motion on the floor, however.  And I

      20     understand where the Chair is, and we'll see

      21     where the vote falls, and we'll do what we

      22     gotta do.

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       1               CHAIRMAN GILMORE:  Is there a

       2     motion to recess for 45 minutes?

       3               COMMISSIONER ARMSTRONG:  So moved.

       4               COMMISSIONER ANDAL:  Seconded.

       5               CHAIRMAN GILMORE:  Mr. Armstrong,

       6     seconded by Mr. Andal.  All in favor please

       7     say aye.

       8               All opposed nay.

       9               Ayes have it.  Forty-five minute

      10     recess.  Excuse me, roll call vote.  I beg

      11     your pardon.  Roll call vote because we have

      12     opposition.  The motion is to recess for 45

      13     minutes.  Heather Rosenker.

      14               MS. ROSENKER:  Mr. Andal?

      15               COMMISSIONER ANDAL:  Aye.

      16               COMMISSIONER ARMSTRONG:  I'd like

      17     to ask -- I don't know even if it's the right

      18     phrase, parliamentary inquiry.

      19               CHAIRMAN GILMORE:  Parliamentary

      20     inquiry?

      21               COMMISSIONER ARMSTRONG:  Yes, sir.

      22     Do we have the option, Mr. Chairman, that if

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       1     in this 45 minutes we are on the issues that

       2     would appear from both sides to close in on

       3     this rather than the reopening of the whole

       4     darn thing, that we can communicate that we

       5     wish to continue working, or are we obligated

       6     to come back and begin conducting business

       7     again?

       8               CHAIRMAN GILMORE:  The Chair will

       9     accept a communication with respect to the

      10     time involved for further discussions.

      11               COMMISSIONER ARMSTRONG:  Thank you.

      12     Then I vote for the recess.

      13               MS. ROSENKER:  Mr. Guttentag?

      14               COMMISSIONER GUTTENTAG:  Aye.

      15               MS. ROSENKER:  Mr. Harris?

      16               COMMISSIONER HARRIS:  Aye.

      17               MS. ROSENKER:  Mayor Kirk?

      18               MAYOR KIRK:  Aye.

      19               MS. ROSENKER:  Governor Leavitt?

      20               GOVERNOR LEAVITT:  Aye.

      21               MS. ROSENKER:  Ms. Jones?

      22               COMMISSIONER JONES:  Aye.

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       1               MS. ROSENKER:  Mr. Lebrun?

       2               COMMISSIONER LEBRUN:  Aye.

       3               MS. ROSENKER:  Governor Locke?

       4               GOVERNOR LOCKE:  Aye.

       5               MS. ROSENKER:  Mr. Norquist?

       6               COMMISSIONER NORQUIST:  Aye.

       7               MS. ROSENKER:  Mr. Novick?

       8               COMMISSIONER NOVICK:  Aye.

       9               MS. ROSENKER:  Mr. Parsons?

      10               COMMISSIONER PARSONS:  Aye.

      11               MS. ROSENKER:  Mr. Pincus?

      12               COMMISSIONER PINCUS:  Aye.

      13               MS. ROSENKER:  Mr. Pittman?

      14               COMMISSIONER PITTMAN:  Aye.

      15               MS. ROSENKER:  Mr. Pottruck?

      16               COMMISSIONER POTTRUCK:  Aye.

      17               MS. ROSENKER:  Mr. Sidgmore?

      18               COMMISSIONER SIDGEMORE:  Aye.

      19               MS. ROSENKER:  Mr. Sokul?

      20               COMMISSIONER SOKUL:  Aye.

      21               MS. ROSENKER:  Mr. Waitt?

      22               COMMISSIONER WAITT:  Aye.

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       1               MS. ROSENKER:  Chairman Gilmore?

       2               CHAIRMAN GILMORE:  I'll point out

       3     this will be a recommendation and finding in

       4     the final report, this vote that we just had.

       5     We are adjourned.

       6               GOVERNOR LEAVITT:  Mr.

       7     Chairman?

       8               CHAIRMAN GILMORE:  We are in recess

       9     for forty- five minutes.

      10               GOVERNOR LEAVITT:  Mr.

      11     Chairman.  I need to tell -- the amendment

      12     that was passed out was the wrong version,

      13     and that we are now circulating the proper

      14     version.  Just wanted you to know that.

      15               CHAIRMAN GILMORE:  Thank you.

      16                    (Recess)

17               CHAIRMAN GILMORE:  Ladies and gentlemen, we will now        reconvene.  May I ask

      18     whether or not a quorum exists?  I believe a

      19     quorum does exist -- there is no absence of a

      20     quorum.  Ladies and gentlemen, without

      21     objection we will go to dinner and we will

      22     recess, and we will reconvene at the call of

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       1     the chairman.  Is there objection?

       2               COMMISSIONER NORQUIST:  What's for

       3     dinner?

       4               CHAIRMAN GILMORE:  We are in

       5     recess, and on the call of the chairman.

       6                    (Whereupon, at 7:46 p.m., the

       7                    PROCEEDINGS were continued.)

       8                     *  *  *  *  *















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