[Congressional Record Volume 144, Number 132 (Monday, September 28, 1998)]
[Senate]
[Pages S11014-S11017]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        MAIL-ORDER CATALOG SALES

  Mr. BUMPERS. Madam President, I rise today to once again address an 
issue that I have addressed a number of times here in the U.S. Senate. 
It deals with mail-order catalog sales. Everybody within earshot of my 
voice knows what I am talking about because when they come home at 
night and pick their mail up, they will find mail-order catalogs. At my 
house, the average is about 6 to 10 mail-order catalogs on a daily 
basis. You can buy anything under the shining sun. If you save all of 
those catalogs, sooner or later you will

[[Page S11015]]

get one to offer you every product that can be bought in any retail 
house in America.
  Now, I have two reasons for my strong feelings about this. No. 1, I 
was a small town Main Street merchant, as well as a practicing lawyer. 
Most people don't know it, but I was the only lawyer in town--you are 
listening to the whole South Franklin Bar Association right now--in a 
little town of 1,200 to 1,500 people.
  When I got out of law school, I knew I wouldn't be able to make a 
living practicing law so I bought back a business that my father had 
owned before he and my mother were tragically killed in an automobile 
accident. I was in law school in Chicago at the time, and 3 years later 
when I got out of law school, I had no intention of going back to the 
small town. I had left Arkansas to go to Chicago law school because I 
didn't think Arkansas was nearly big enough for me. But because of that 
and the fact that Mrs. Bumpers' family all lived in this little town, 
we went home and I bought the hardware, furniture and appliance 
business that my father had owned, hoping that it would sustain me 
while I built my law practice.
  Believe you me, I needed a lot of sustaining while I was building a 
law practice. People would walk into my office and say, ``Aren't you 
sort of a lawyer?'' And I would have to grudgingly admit yes, that is 
exactly what I was--``sort of a lawyer.''
  So I speak today as a former retail merchant in a little country town 
in Arkansas called Charleston. But I also speak as the former Governor 
of Arkansas where in 1971 I had to raise the income tax because we felt 
that the sales tax, which is a regressive tax, was already about as 
high as we could make it.
  That was quite an undertaking because some of the wealthy people in 
my State, many years before, had seen to it that the constitution of 
Arkansas provided that any tax other than a sales tax would require a 
75-percent vote of both houses of the legislature. You think about 
that. If you wanted to raise the sales tax, which affects working 
people and poor people more than anybody else, it would only require a 
51-percent majority; but if you wanted to raise the income tax, which 
hit the wealthy people, it required a 75-percent vote. I remember it 
took nine votes in the Arkansas State Senate before we passed an income 
tax bill. That bill, which raised the marginal rate from 4 to 7 
percent, is the thing that made my State--I don't say this to boast, 
but every economist and every political scientist will tell you that it 
is the one thing that made Arkansas fairly stable economically 
thereafter.
  Do you know something? While it is a very volatile thing, I got a lot 
of hate mail when I was championing it, but I got about 65 percent of 
the vote next time I ran, which shows that people are not dumb, if you 
go to them and explain your actions. You can always trust the American 
people to do the right thing. Winston Churchill once said, ``You can 
always depend on the American people to do the right thing once they 
have explored all the other possibilities.''
  The truth of the matter is, when you talk sense to the American 
people, they respond sensibly. So this problem of mail-order catalog 
houses is simply this: If you wanted to come into my store and buy a 
$500 refrigerator, the tax on that was 5 percent, or $25. If you want 
to order that refrigerator from a mail-order catalog house in another 
State, there is no $25 tax, no tax of any kind. If you want to buy 
almost anything under the shining sun, from a toboggan to hunting 
boots, you can find a mail-order catalog that sells those items. A lot 
of these companies will tell you in their advertising that there is no 
sales tax. They tell you ``no sales tax,'' even though, actually, 45 of 
the 50 States in this country have what is called a ``use tax,'' and 
that applies to out-of-State purchases.
  Do you know what the problem with that is? You might say, well, what 
are you up there shouting and shooting your mouth off about if there is 
already a use tax in 45 out of 50 States. I will tell you why. It is 
very simple. The tax is on the purchaser, not the seller. So if I buy 
that refrigerator and they said ``no sales tax,'' that is a deception.
  Arkansas has a use tax, which is a tax on anything brought into the 
State. But the only problem is, it is on me and I don't even know the 
tax exists. I promise you--I don't know how many people are within 
earshot of what I am saying, but I guarantee you that precious few of 
them know there is a use tax on anything they buy from a mail-order 
catalog house. They don't know it, so they don't pay it.
  Maine has become so frustrated that they have a provision in their 
income tax return requiring them to multiply .004 or .0004, by your 
adjusted gross income and send it in. That is to make up for anything 
you bought out of a mail-order catalog, whether you bought anything or 
not. I said, in 1995--the last time I offered this amendment--that I 
think it is very suspect, from a constitutional standpoint, to tax 
people on mail-order sales when you didn't buy anything. Yet, Maine has 
been doing that.
  A lot of people--for example, Indiana--do a little auditing from time 
to time. Ten thousand people in Indiana--and 1994 is the latest figures 
we have--paid some kind of a use tax for buying stuff from mail-order 
houses in another State. But what they collect is just nothing. In 
1994--again, the last year we have figures for--if mail-order catalog 
houses in this country had collected sales taxes on all the merchandise 
they sold into these States, they would have paid the States, counties 
and the cities in the neighborhood of $3 billion. My guess would be 
that 4 years later, that is in the vicinity of $4 billion-plus, because 
retail sales have skyrocketed since 1994.
  But, look, in 1994--as I say, the last time I debated this subject 
was in 1995--in 1994, my State lost $19.6 million, California lost $482 
million, Illinois lost $233 million. That is the reason the National 
Governors' Conference, National Conference of Mayors, and the National 
Association of Municipalities favor my amendment. I have a list of the 
various organizations that support my amendment.
  I ask unanimous consent that I be permitted to have printed in the 
Record a list of organizations that favor my amendment.
  There being no objection, the list was ordered to be printed in the 
Record, as follows:

            Organizations supporting the Bumper's amendment

       The International Council of Shopping Centers.
       Marine Retailers Association of America.
       National Home Furnishing Association.
       North American Retail Dealers Association.
       World Floor Covering Association.
       National Conference of State Legislatures.
       National Governors' Association.
       National League of Cities.
       National Association of Counties.
       United States Conference of Mayors.
       International City/County Management Association.
       Council of State Governments.

  Mr. BUMPERS. Senator Graham and I are going to offer this amendment, 
if we get a chance, on this bill.
  What brought all of this about? Well, first of all, it was about 
1967, the Supreme Court, in a decision commonly referred to as the 
National Bellas Hess case, a big mail-order house. I forget where they 
are located. The Supreme Court said: You States, you cities, and you 
counties may not charge a use tax on mail-order sales coming into your 
State from another State unless that mail-order house has a physical 
presence in your State. Eddie Bauer used to be just a mail-order house. 
Now Eddie Bauer has outlets in just about every State in the Nation.
  For example, if you order something out of the Eddie Bauer catalog 
and you are a Maryland resident, they will charge you sales tax. You 
can't buy it without paying the sales tax because they have a physical 
presence in Maryland. But most of these people like Lands' End and L.L. 
Bean don't have a physical presence in your State and they don't 
collect sales taxes. But the Supreme Court said in the National Bellas 
Hess case, you can't charge sales tax or use tax on mail-order sales 
because it violates the due process clause, and it is a violation of 
the interstate commerce clause. That sounds like the end of the story.
  However, in 1992, the State of North Dakota challenged the Bellas 
Hess decision. They went to the Supreme Court and said we think the 
case was wrongly decided, and lo and behold, the Supreme Court agreed 
with them on 50

[[Page S11016]]

percent of it. They said it was no longer a violation of the due 
process clause for a State to require a mail-order house in another 
State to collect sales taxes for them. But the Court found that there 
was still a violation of the interstate commerce clause. The Supreme 
Court throughout its history has been very, very zealous in making sure 
that we didn't pass any laws, or that no State passed a law, that 
interfered with interstate commerce.

  In that decision 25 years later, Quill versus North Dakota, the 
Supreme Court said requiring companies to collect use taxes was still a 
violation of the interstate commerce clause unless Congress gives the 
states permission to collect these taxes. So that is what I am 
attempting to do.
  Senator Wyden is a dear friend, and one of the finest men to ever 
serve in the U.S. Senate, in my humble opinion. However, his bill 
prevents the states from passing any taxes on the Internet for a two 
year period. My amendment would not exempt the Internet. My amendment 
would make it possible for the states to require out-of-state companies 
to collect use taxes whether the products were sold over the Internet 
or via mail order catalog.
  I chaired the Small Business Committee for a long time. I made 
speeches about being a small businessman a lot of times on the floor of 
the Senate. But you tell me, is it fair for a Main Street merchant to 
collect sales taxes on every single thing he sells, from a loaf of 
bread on up, to support the fire department, to support the police, to 
support the local schools, to support everything under the shining sun 
in that community, that county, that State--is it fair for a Main 
Street merchant who is there with the people, contributing to 
everything that comes down the pike--is it fair to make him collect the 
sales tax, but his competitors, who are selling $300-plus billion worth 
of things over the Internet by the year 2002 and over $100 billion a 
year on mail-order sales, not collect a dime?
  I stand corrected. There are a very, very few who do charge sales 
taxes, just because they are good citizens.
  Let me digress a moment to tell you who one of those good citizens 
is--none other than our distinguished Senator from Utah, Senator 
Bennett.
  Senator Bennett and some of his colleagues a few years ago started an 
office supply business. He told me that as they sat around discussing 
various aspects of that business and how they were going to form it, 
and so on, the question came up: What are we going to do about sales 
taxes? He said they talked about it and they concluded that they would 
be a lot better citizens and would feel a lot better about it if they 
just voluntarily collected taxes on all of the office equipment that 
they sold.
  Incidentally, this business has some retail outlets here in 
Washington and in Maryland. They would now be required to collect the 
sales tax because they simply have a physical presence. But they did it 
long before they were a physical presence; at one time they were a pure 
mail-order house.
  Senator Bennett joined the Small Business Committee when I was 
chairman of that committee. In a hearing one day, he said, ``Don't let 
them tell you how complex this is and how difficult it would be for 
them to collect taxes in every State for every State municipality and 
every county in the country.'' Senator Bennett says it is the easiest 
thing in the world. At the end of the month, they push a button on 
their computer and the checks go out.
  One thing Senator Graham and I would do would be to give companies 
the option of collecting a blended rate which covers all state and 
local taxes. By giving the companies this option, we can reduce the 
burden on remote sellers when local sales taxes vary within a state.
  But the point I am trying to make is, Senator Bennett told me it is 
not complicated to collect use taxes. When the debate begins on this 
amendment, if and when it ever does, I hope my colleagues will take 
stock of the fact that one of their own colleagues says that is a 
bogus, specious argument.
  Madam President, sometimes these mail-order houses say, ``Well, we 
don't ask for any services. We don't need police protection. We don't 
need fire protection. Our kids don't go to school in your State. So why 
should we be penalized and be required to pay taxes when we are not a 
burden in your community and in your State?''
  With these mail-order catalogs, one of the biggest problems States 
and municipalities particularly have is disposing of the waste in their 
landfills. You ask them: What is one of the biggest problems you have 
in your landfills and operating your landfills? They will tell you it 
is the unbelievable, staggering tonnage of mail-order catalogs. If I 
throw 10 of them a day away, multiply that by the people of this 
country who get those things every day, then call your mayors back home 
and ask them why they are for the Bumpers-Graham proposal. I will tell 
you exactly why they are for it. They are for it because they have to 
dispose of that stuff. They are for it because they don't believe it is 
right to penalize Main Street merchants by making them collect all the 
taxes and these people mailing things through the mail every day are 
getting a free ride.
  Back to Senator Wyden. As I said a moment ago, I don't know of any 
Senator--certainly not many Senators in the Senate--for whom I have as 
much respect as I have for Senator Wyden. But I don't agree with his 
bill either. When you consider the fact that I have been fighting the 
battle for years--this losing battle, I might add--for years I have 
been fighting that losing battle with mail-order houses, which have 
increased their sales to well over $100 billion a year, and the States 
are getting whacked, because they are not collecting the taxes on it. 
But I say that is just a pittance compared to Internet sales and what 
they are going to be 3 years from now.
  According to an article in Time magazine--the most comprehensive 
article I have read was in Time magazine dealing with this very subject 
of Internet sales. You can buy an automobile on the Internet. You can 
buy tapes. You can buy movies. You can buy anything on the Internet.
  Amazon Books I don't think has ever made a dime, and their stock is 
just shooting through the roof. What do you think about Main Street 
bookstores in the country that are paying taxes for the books they sell 
in Washington, DC, Maryland, and Virginia, but not Amazon? And Amazon 
sales are soaring.

  But the final point I want to make is that sales of merchandise over 
the Internet, that you would otherwise buy from a Main Street merchant, 
are calculated by the year 2002, no later than 2003, to be $300 
billion. Now, 5 percent of that in sales taxes, which is about the 
average, is $15 billion a year that the States are not collecting--$15 
billion in taxes that the Main Street merchant is not getting, and it 
is a travesty.
  You should never say on the Senate floor, ``I don't think my 
amendment is going to pass.'' Considering the fact that in 1995 I did 
not get one single Republican vote, I think it is fair to say I 
probably ``ain't'' going to pick up a bunch of them next time. But you 
know something. Somebody asked me one time, ``Why are you quitting? Why 
are you not running again?'' And I said, ``Because I have tackled too 
many losing causes. I don't enjoy it. I don't enjoy losing anymore than 
Notre Dame enjoys losing a football game, and the few victories I get 
and I have had in the Senate are simply not enough to offset the trauma 
of the many losses I have sustained.''
  And that is not to denigrate anybody. We are all independent here. We 
think freely. We are supposed to be representing our constituents back 
home. And I guess most people just look at this differently.
  So I may not win this one either, in fact I probably won't. And that 
does not dampen my enthusiasm for what I am talking about, nor does it 
dampen the meritorious nature of what I consider a meritorious cause. I 
am going back to the beginning because I used to be a small town 
merchant. I had to compete with big companies. I had to compete with 
mail-order houses even back then, in the 1950s and 1960s. And I did not 
enjoy a minute of it. I was on the school board. I was president of the 
chamber of commerce. I was chairman of the annual banquet of the 
chamber. I was chairman of the Christmas parade. I did all of those 
things. And yet I had to compete with people who did not have any of 
those responsibilities and did not contribute one red cent to my 
hometown or my home State. And

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yet for some reason or other, as meritorious as it seems to sound right 
now, I don't know how other people justify their vote against this 
when, as I say, the mayors, the Governors, the city councilmen, 
municipalities, everybody under the shining Sun charged with the 
responsibility of making their hometown and their home State function, 
favors mine and Senator Graham's amendment.
  Madam President, I yield the floor and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. HUTCHISON. Madam President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER (Ms. Collins). Without objection, it is so 
ordered.

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