[Congressional Record Volume 157, Number 171 (Wednesday, November 9, 2011)]
[Senate]
[Pages S7233-S7238]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MARKETPLACE FAIRNESS ACT
Mr. ENZI. Mr. President, I am going to talk about a problem I have
tried to solve for 14 years. Today, I think we have a new solution and
``the'' solution--The Marketplace Fairness Act. Our solution has to do
with sales taxes that are not being collected at the present time. It
is a loophole in the tax law.
I used to be a retailer. I never thought it was fair that I had to
collect the sales taxes but the people from out of State did not have
to collect the same sales tax. I used to be a mayor, and this bill is a
jobs bill and an infrastructure bill. A lot of people do not realize
that sales taxes help pay for schools, police and firemen. They may not
realize it pays for infrastructure, such as streets and sewers. I
always tell people it is a little tough to flush the toilet over the
Internet.
The Marketplace Fairness Act would allow States--not require States--
to be able to have the out-of-State online sellers, providing they sell
more than $500,000 in a year, to collect the State sales tax. I have
also been a State legislator, and I can tell you we never intended to
pass a law to tax the people on Main Street who buy the yearbooks and
participate in community activities to be the ones to collect the tax,
and anyone from out of State to not have to do it. This bill cleans up
that problem at the same time. Does it make much of a difference? Yes.
We are being asked as a Congress to give money to the States for
their teachers, their firemen, and their infrastructure. It is because
there is a decreasing amount of revenue going to them through sales
taxes that are owed, but are not currently being collected. People may
not realize it, but when they buy something online, if the tax is not
collected by the seller, they still owe it. This is not a new tax; it
is a tax that is already on the books. No legislator ever intended for
it to just be for Main Street retailers. If States so choose, sales
taxes should be collected by all retailers. In our attempts to fix this
problem, we have received a number of support letters for this new
bill. I hope everybody will take a look at them. They can view them
online. I ask unanimous consent these letters be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
National Conference
of State Legislatures,
November 9, 2011.
Hon. Richard Durbin,
U.S. Senate,
Washington, DC.
Hon. Lamar Alexander,
U.S. Senate,
Washington, DC.
Hon. Michael Enzi,
U.S. Senate,
Washington, DC.
Hon. Tim Johnson,
U.S. Senate,
Washington, DC.
Dear Senators Durbin, Enzi, Alexander and Johnson: On
behalf of the National Conference of State Legislatures
(NCSL) we would like to express our support and appreciation
for your introduction of the Marketplace Fairness Act, which
will provide those states that comply with the simplification
requirements outlined in the legislation, the authority to
require remote sellers to collect those states' sales taxes.
At a time when states continue to face severe budget gaps--
states closed shortfalls totaling $72 billion leading into
the FY 2012 budget process--it is essential states be allowed
to collect the revenue generated by uncollected sales taxes.
In 2012, states will collectively lose an estimated $23.3
billion in uncollected sales taxes from out-of-state sales,
with more than $11.3 billion alone from electronic commerce
transactions, according to a study by the University of
Tennessee. The amount of uncollected sales taxes will
continue to grow, especially with the unprecedented growth of
online commerce.
The enactment of the Marketplace Fairness Act is imperative
in light of the current deliberations by the Joint Select
Committee
[[Page S7234]]
on Deficit Reduction and resulting sequestration if the
``Super Committee'' is unsuccessful. Under either scenario,
states will likely face hundreds of billions in reductions in
many state-federal programs. While the $23.3 billion in
uncollected sales taxes will not match any funding
reductions, it will provide states with some fiscal relief.
In the words of Senator Roy Blunt, a sponsor of this
legislation, it is ``fiscal relief for the states that does
not cost the federal government a dime.''
The Marketplace Fairness Act is also a win for local main
street businesses throughout the country by leveling the
playing field between these main street businesses who have
to collect sales taxes and out-of-state merchants who
currently do not. Allowing some remote sellers to avoid
collecting this tax is unfair to the main street merchants
that make up the lifeblood of our local communities. The
legislation also removes the liability for businesses
collecting sales taxes, ensuring that sellers are held
harmless for calculations and collections using the
information and certified technology provided by the states
that have complied with the Act.
There will be some who claim that this is a new tax;
nothing could be further from the truth. This legislation
will not require any state to levy a sales tax on any product
or means of buying a product. It merely corrects a tax
avoidance problem that if not closed now, will only get worse
and possibly push states to seek new revenue sources to make
up for the uncollected sales taxes.
On behalf of our colleagues from across the country, we
thank you for introducing this vital legislation and in doing
so, enhancing state sovereignty and fiscal federalism.
Sincerely,
Senator Stephen Morris,
President, Kansas Senate,
NCSL President.
Senator Richard Moore,
Massachusetts Senate,
NCSL Immediate Past President.
____
Streamlined Sales Tax
Governing Board, Inc.,
November 9, 2011.
Hon. Richard Durbin,
Hon. Tim Johnson,
Hon. Mike Enzi,
Hon. Lamar Alexander,
U.S. Senate,
Washington, DC.
Dear Senators Durbin, Enzi, Johnson and Alexander: The 24
Streamline states want you to know they support your
introduction of the Marketplace Fairness Act.
Online retailers have a competitive price advantage over
brick-and-mortar retailers harming the brick-and-mortar
retailers. Many main street businesses are little more than
showrooms where consumers go to ``kick the tires'' on
products they later buy online harming the local business and
the community depending on the sales tax from that sale.
At a time when Main Street retailers face enormous
competitive challenges it is appropriate for Congress to end
this unfair treatment.
After our ten years of effort to simplify sales tax
administration we are encouraged by your effort to get
Congress to level the playing field for all retailers.
Sincerely,
Senator Luke Kenley,
President.
____
National Association of Counties,
Washington, DC, November 9, 2011.
Hon. Richard Durbin,
U.S. Senate,
Washington, DC.
Hon. Tim Johnson,
U.S. Senate,
Washington, DC.
Hon. Mike Enzi,
U.S. Senate,
Washington, DC.
Hon. Lamar Alexander,
U.S. Senate,
Washington, DC.
Dear Senators Durbin, Johnson, Enzi and Alexander: On
behalf of the National Association of Counties (NACo) and the
nation's 3,068 counties, I applaud the introduction of the
Marketplace Fairness Act. At a time when counties continue to
make the tough decisions and provide services for our mutual
constituents with fewer resources, we appreciate your
legislative efforts to both assure a simpler system of
taxation and help our members recover tax revenues due from
purchases made by remote means.
Due to the changing nature of commerce and sales and use
tax collection, your legislation responds appropriately by
establishing a path to modernize the current system.
According to a University of Tennessee study in 2009, e-
commerce sales have grown from just over $900 billion in 1999
to more than $2 trillion in 2006. That same study estimated
revenue loss for state and local government to the tune of
$10.1 billion to $11.3 billion in sales taxes in 2011 alone.
Although NACo has worked with other state and local
government representatives to champion for collection of
remote sales taxes for over a decade, there is no time better
than now for this legislation to move forward. Local
governments are facing declining revenues due in part to
rising mortgage foreclosures, and a reduction in assistance
from their states and the federal government.
While your legislation is important in moving us towards
collection of remote sales tax, it also serves the purpose of
creating equity for those businesses within our local
communities. The increasing strength of electronic commerce
creates exciting new marketplaces, but it has also put
traditional retail outlets at an unfair disadvantage because
of outdated and inequitable tax and regulatory environments.
NACo strongly supports your legislative efforts to require
collection of taxes made on remote sales, and we appreciate
that you recognize the longstanding Streamlined Sales Tax
Agreement Project (SSTA). We are also pleased that you have
excluded issues such as local telecommunications tax reform,
which should be addressed separately from collection of
remote sales and use taxes.
Thank you again for introducing this important legislation.
We look forward to working with you and other supporters of
the Act and the SSTA to see the collection of remote sales
taxes enacted to federal law.
Sincerely,
Lenny Eliason,
Commissioner, Athens County, Ohio,
NACo 2011-2012 President.
____
November 9, 2011.
Hon. Richard Durbin,
Hon. Mike Enzi,
Hon. Tim Johnson,
Hon. Lamar Alexander,
U.S. Senate,
Washington, DC.
Dear Senators Durbin, Enzi, Johnson and Alexander: As
leaders of the local government associations listed above, we
applaud the introduction of the Marketplace Fairness Act,
which will both assure a simpler system of taxation and help
our members recover tax revenues that are due from purchases
made by remote means.
Your legislation responds appropriately to the changing
nature of commerce and sales and use tax collection. While
the increasing strength of electronic commerce creates
exciting new marketplaces, it has also put traditional retail
outlets at an unfair disadvantage because of outdated and
inequitable tax and regulatory environments.
Our organizations strongly support your legislative efforts
to require collection of taxes made on remote sales, and we
are pleased that in doing so that you recognize the
longstanding Streamlined Sales Tax Agreement Project (SSTA).
We are also pleased that you have excluded issues such as
local telecommunications tax reform, which should be
addressed separately from collection of remote sales and use
taxes.
Although we have championed for collection of remote sales
taxes for over a decade, there is no time better than now for
this legislation to move forward, as local governments face
the fifth straight year of declines in revenue with probable
further declines in 2012.
Thank you again for introducing this important legislation.
We look forward to working with you and other supporters of
the Act and the SSTA to see the collection of remote sales
taxes enacted into federal law.
Sincerely,
Larry E. Naake,
Executive Director, National Association of Counties.
Donald J. Borut,
Executive Director, National League of Cities.
Tom Cochran,
CEO and Executive Director, United States Conference of
Mayors.
Jeffrey L. Esser,
Executive Director and CEO, Government Finance Officers
Association.
____
Federation of
Tax Administrators,
November 9, 2011.
Senator Richard J. Durbin,
Senate Hart Office Building,
Washington, DC.
Senator Michael B. Enzi,
Russell Senate Office Building,
Washington, DC.
Senator Lamar Alexander,
Dirksen Senate Office Building,
Washington, DC.
Senator Tim Johnson,
Dirksen Senate Office Building,
Washington, DC.
Dear Senators Durbin, Enzi, Alexander and Johnson: The
Federation of Tax Administrators (FTA) thanks you for
introducing the new version of the Main Street Fairness Act
for which we are pleased to be able to announce our support.
FTA is an association of the tax administration agencies in
each of the 50 states, the District of Columbia, and New York
City.
The Main Street Fairness Act offers a realistic framework
for both large and small states to collect sales taxes that
are already due and owing in a simplified administrative
system. We regard the ability to collect sales taxes from
remote sellers to be a matter of the highest importance. This
Act will significantly improve tax compliance for both state
and local governments while at the same time creating a level
playing field for all
[[Page S7235]]
businesses. This is because the current system disadvantages
in-state ``bricks and mortar'' stores to the advantage of
out-of-state businesses and this Act will help improve
business activities in our states and the employment these
in-state businesses generate.
We look forward to working with you during the legislative
process to enact final legislation into law.
Sincerely,
Patrick T. Carter,
President.
____
National Retail Federation,
Washington, DC, November 8, 2011.
Hon. Michael B. Enzi,
Ranking Member, Committee on Health, Education, Labor &
Pensions, U.S. Senate, Washington, DC.
Hon. Richard J. Durbin,
Assistant Majority Leader, U.S. Senate, Washington, D.C.
Hon. Lamar Alexander,
Chairman, Republican Conference, U.S. Senate, Washington, DC.
Hon. Tim Johnson,
Chairman, Committee on Banking, Housing & Urban Affairs, U.S.
Senate, Washington, DC.
Dear Senator Enzi, Senator Durbin, Senator Alexander and
Senator Johnson: On behalf of the National Retail Federation
(NRF), I am writing in support of the Marketplace Fairness
Act, which levels the playing field between local and out-of-
state merchants with respect to collection of sales taxes.
As the state of retailing evolves and internet sales become
a more prominent portion of total retail sales, it is
critical that the tax laws not discriminate between similar
businesses based on how their products are distributed. The
Marketplace Fairness Act will eliminate this discrimination
by removing the constitutional limitation on your State's
authority to collect sales and use taxes from remote sellers.
Over a quarter trillion dollars will go uncollected in the
next decade unless this legislation is enacted.
As the world's largest retail trade association and the
voice of retail worldwide, NRF's global membership includes
retailers of all sizes, formats and channels of distribution
as well as chain restaurants and industry partners from the
United States and more than 45 countries abroad. In the U.S.,
NRF represents an industry that includes more than 3.6
million establishments and which directly and indirectly
accounts for 42 million jobs--one in four U.S. jobs. The
total U.S. GDP impact of retail is $2.5 trillion annually,
and retail is a daily barometer of the health of the nation's
economy.
The Marketplace Fairness Act will bring fairness to large
and small retailers alike and provide a business climate in
which these retailers have a better opportunity to grow and
create jobs. Our members look forward to working with you to
help this legislation become law.
Sincerely,
David French,
Senior Vice President,
Government Relations.
____
Retail Industry
Leaders Association,
Arlington, VA, November 9, 2011.
Hon. Mike Enzi,
U.S. Senate,
Washington, DC.
Dear Senator Enzi: On behalf of the Retail Industry Leaders
Associations (RILA), and the millions of Main Street
retailers throughout the country, we would like to express
our strong support for the Marketplace Fairness Act. This
legislation levels the playing field for Main Street brick-
and-mortar businesses by closing a loophole that puts them at
a competitive disadvantage to the online retail giants. RILA
and our membership are grateful for your leadership on this
important issue and we are committed to helping make this
legislation law this Congress.
By way of background, RILA is the trade association of the
world's largest and most innovative retail companies. RILA
promotes consumer choice and economic freedom through public
policy and industry operational excellence. Its members
include more than 200 retailers, product manufacturers, and
service suppliers, which together account for more than $1.5
trillion in annual sales, millions of American jobs and
operate more than 100,000 stores, manufacturing facilities
and distribution centers domestically and abroad.
Because of a decades-old loophole that pre-dates the
Internet, online-only companies can achieve as much as a 10-
percent price advantage over brick-and-mortar retailers by
not collecting state sales taxes. This special treatment has
the effect of the government picking winners and losers in
the marketplace, and main street businesses simply cannot
compete over the long term with online giants that enjoy a
government-sanctioned competitive advantage.
This loophole is costing jobs on Main Street while
shortchanging state budgets by an estimated $23 billion in
uncollected state sales taxes annually, a figure that will
only increase as Internet commerce continues to grow. Few
Americans know that their state requires them to pay the
sales tax on purchases made online if the vendor does not
collect it at the point of sale, leaving consumers vulnerable
to penalties, interest and increased scrutiny from state
auditors. If enacted, the Marketplace Fairness Act would
remove this burden from your constituents and in the process
empower states to address their budget deficits without
having to raise taxes--all without any cost to the federal
government.
In closing, we strongly support the Marketplace Fairness
Act to eliminate this antiquated loophole and view it as
critical to preserving Main Street businesses and the jobs
they provide. Thank you again for your leadership on this
important issue.
Sincerely,
Katherine Lugar,
Executive Vice President,
Public Affairs.
____
International Council
of Shopping Centers, Inc.,
Washington, DC, November 7, 2011.
Dear Senators Alexander, Durbin and Enzi: On behalf of the
more than 42,000 members of the International Council of
Shopping Centers (ICSC), I would like to thank you for your
leadership on the Marketplace Fairness Act. We strongly
support this bipartisan legislation that will level the
playing field for community-based retailers by offering long-
overdue sales tax fairness.
ICSC was founded in 1957 and is the premier global trade
association of the shopping center industry. Its members
include shopping center owners, developers, managers,
marketing specialists, investors, retailers and brokers, as
well as academics and public officials.
Under the current system, not all retail sales are treated
equally. While brick-and-mortar retailers must remit sales
and use taxes, many remote sellers, such as catalog and
online vendors, are exempt from such requirements. Our
current sales tax policy unfairly impacts local retailers--
many of whom have also been hit during the recession--and
places an impractical legal burden on taxpayers and
consumers, costing state and local governments billions in
much-needed revenue.
The Marketplace Fairness Act would eliminate the present
system's lopsided manner of taxing community-based retailers,
remove the liability currently being pushed onto consumers,
and promote community investment. More importantly, it would
provide support for local businesses and necessary revenue to
states without adding to the federal deficit, establishing
new taxes or increasing existing taxes. This bill is a true
stimulus for our states and local communities.
It is time for the federal government to allow states to
enforce their laws and promote sound policy that will allow
community-based and internet retailers to thrive in the 21st
Century marketplace.
Thank you again for the dedication and strong leadership
that was required to create this important legislation.
Sincerely,
Betsy Laird,
Senior Vice President,
Office of Global Public Policy.
Mr. ENZI. Some of the groups include: One is from the National
Conference of State Legislatures, one from the National Association of
Counties, the National League of Cities, the Federation of Tax
Administrators, The National Retail Federation, the Retail Industry
Leaders Association, the International Council of Shopping Centers, and
the Governing Board of the Streamlined Sales and Use Tax Agreement.
I want to read one from Amazon.com because they are one of the
world's largest online sellers. In the past, they have opposed previous
versions of the bill, but they think we have this one right.
The letter states:
Thank you very much for your legislation on interstate
sales tax collection.
Amazon strongly supports enactment of your bill and will
work with you, your colleagues in Congress, retailers, and
the states to get this bipartisan legislation passed. It's a
win-win resolution--and as analysts have noted, Amazon offers
customers the best prices with or without sales tax.
If enacted, your bill will allow states to require out of
state retailers to collect sales tax at the time of purchase
and remit those taxes on behalf of customers, and it will
facilitate collection on behalf of third party sellers. Thus,
your bill will allow states to obtain additional revenue
without new taxes or federal spending and will make it easy
for consumers and small retailers to comply with state sales
tax laws.
Amazon is grateful for your hard work on the issue, and we
look forward to working with you and your colleagues in
Congress to pass this legislation.
We have a number of other supporters in addition to the others I just
mentioned. We are appreciative of their support and look forward to
working with them to get this bill enacted.
The Marketplace Fairness Act is a bipartisan bill. The original
cosponsors on it are five Republicans--Senators Alexander, Boozman,
Blunt, Corker, and me and five Democrats--Senators Durbin, Tim Johnson,
Reed, Whitehouse, and Pryor. A key person in this debate has been the
Senator from Illinois, Mr. Durbin, who introduced a previous version of
the bill. We encourage our colleagues to take a look at Senator
Durbin's previously introduced
[[Page S7236]]
bill and the Marketplace Fairness Act to see the differences--I think
our bipartisan bill is a very passable bill.
At this point, I would ask Senator Durbin if he has any comments he
would like to share as he has been an integral part of making the bill
a strong bipartisan product and realizing the plight the retailers and
the state and local governments are in.
Mr. DURBIN. I thank my colleague, Senator Enzi. I want to give fair
warning to all who are witnessing the debate that bipartisanship is
about to break out on the floor of the Senate, and you can witness it.
We have a bipartisan effort led by Senator Enzi, who has really been
dedicating his life in public service, as a former retailer, to being
sensitive to the needs of Main Street and small business. For years, he
worked with our former colleague, Senator Byron Dorgan of North Dakota,
and they did their best to pass this legislation. When Senator Dorgan
retired, I approached Senator Enzi and said: I would like to join you
in this effort. I am honored to be on the floor with him and our mutual
friend, Senator Alexander, in this combined bipartisan effort to deal
with an issue I think is essential to fairness in our economy and
helping small businesses thrive, which is the key to economic
revitalization.
If you ask the small businesses in my home State of Illinois what
they want, it is not a big handout from Washington, nor any special
attention. Frankly, they ask for a level playing field: Let them
compete. What Senator Enzi has said is that many retailers in my State,
his, and every State are finding it more difficult to compete because
they have to rent a building or buy one. They have to pay the property
taxes. They, of course, have to pay utility bills and local taxes that
might be generated because of their sales either to the State or local
government. In each instance, they are investing back into the
community and State in which they live. That is part of the basic
understanding we have in this country, that we are in this together and
we need to cooperate. The businessman down the street who is selling
something in a store is also at the same time supporting the local
community to make sure it has traffic lights and make certain it has
police protection and utilities and streets and curbs and gutters and
everything that goes with it.
But there has been a new phenomena in the American marketplace over
the last several decades, and now it is in full throat, and that is the
Internet. Internet sales are an amazing entity--we can literally click
a mouse and buy a product that will arrive several days later at our
home or business place. It also has invited an inequity, an unfairness
that we address in this bill.
We are not creating any new taxes in this bill. I say to my friends
on both sides of the aisle, that is not our intention, nor does this
bill do that. What it does is it provides a mechanism to collect
existing taxes that are owed under existing law, period. We do this in
a fashion--which Senator Alexander will describe in a moment--that
capitalizes on the technology and software available today to make this
a process that is not burdensome and does not slow down commerce in any
way.
I recently went to Bloomington, IL, and a number of other communities
in my State and sat down with local retailers and had them tell their
stories--in many cases, depressing stories--about what they are going
through. In one instance, this fellow sells camping gear, outdoor wear,
some snorkeling equipment, and ski equipment, and it is not unusual for
him and for others who are selling that type of sporting equipment to
have local customers come in and look for the product they want,
actually get a fitting to make sure they get the right size, and then
leave to order it on the Internet so they can escape any sales tax
liability. Well, that isn't fair to the local merchant, and it
certainly wasn't the intention of Illinois or any other State to impose
a sales tax just on those businesses that physically exist in our
States.
This bill, the Marketplace Fairness Act, applies this sales tax
across the board to sales across the United States, and it is
voluntary. States have to decide they want to move into this field and
use this opportunity. I think that is the way to approach it. Some 24
States, if I am not mistaken, have already signed up for this
streamlined coalition which allows them to make this happen. Other
States, by complying with this law and passing a local State law, can
do the same. It is their option. We don't impose it or demand it. It is
their option, if they choose it, to use existing sales tax and to take
the initiative at the State level. As Senator Alexander has reminded me
many times, it is a States rights issue, as it should be, and that is
what we are focusing on in this legislation.
I think it is an issue of fairness, and I think it goes beyond what
we are facing today in terms of the disparity between Democrats and
Republicans. We are coming together. We are coming together on behalf
of tax fairness, coming together on behalf of States rights, coming
together to make certain that small businesses across America have the
resources they need to prosper, be profitable, and, we hope, to expand
their workforce. We need to create more jobs, and I don't think it is
unreasonable to expect that to happen as these local retailers become
more competitive and more profitable.
I might also add that the States that decide to opt in to it will
have a source of revenue that will be helpful to them in difficult
times. Again, it is their decision.
I will not recount all of the groups that have endorsed this; Senator
Enzi already has. It is a pretty impressive array. One of the most
impressive supporters he has read a letter from is Amazon--to think
that one of the largest if not the largest online retailer in America
endorses this bill. When I think back on all of the battles that have
been fought in all of the States by Amazon when each State tried to
address this, I believe it is telling that they have stepped forward
and said: Here is a solution that can work. And if the largest online
retailer in America--or one of the largest--feels that way, it should
encourage many colleagues who don't want to destroy that part of our
economy, and I certainly don't either.
This is a positive step in the right direction. I thank Senator Tim
Johnson, Senator Boozman, Senator Jack Reed, Senator Blunt, Senator
Whitehouse, and many others who are going to join Senator Enzi, Senator
Alexander, and myself in this effort to pass this bipartisan bill.
Let's get this done. Let's work together on a bipartisan basis to solve
a problem that has haunted us for over a decade and do it in a fair
fashion that does not create any new taxes but gives to the States the
right to collect those taxes that are already on the book.
I yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee. The minority has
20 seconds left.
Mr. ALEXANDER. I ask consent to extend the colloquy into Democratic
time.
The PRESIDING OFFICER. Is there objection?
Mr. DURBIN. No objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALEXANDER. I wish to congratulate Senator Enzi and Senator Durbin
and say how pleased I am to join as a cosponsor of their legislation.
Here is what I want to congratulate them for. Senator Enzi said he came
to this as a former mayor, as a former shoe shop owner, and as a former
legislator. I come as a former Governor.
In our constitutional framework, I have always thought it was our
business in Tennessee to decide what services we wanted to provide and
what taxes we wanted to levy to pay for them. For example, we have a
high sales tax, but we have no income tax. That is different from most
States. We have a low overall tax burden. For me, this is, as Senator
Durbin and I have discussed, a matter of States rights.
I think the most important thing I could say today is that they have
solved the problem with this legislation. This problem has been there
for a long time. It has had the opposition of conservatives worried
about taxes. It has had the opposition of Amazon and other online
sellers.
Twenty years ago, when technology for businesses to compute and
collect taxes was not nearly as innovative as it is today, the Supreme
Court said that without congressional approval, states could not
require out-of-state businesses to collect sales taxes because this
created too much of a burden on interstate commerce. Senator
[[Page S7237]]
Enzi and Senator Durbin, with this legislation, in my opinion, have
solved the problem, and this is going to happen.
I am not presumptuous enough to predict what the Congress will do and
what the President will sign, but I think I have been around long
enough and I have watched Congress enough to say this is going to
happen. And if I were Governor, if I were an online retailer, or if I
were a catalog retailer, I would make my plans to conduct my business
in this way. Why do I say that? Well, for one thing, times have
changed.
This morning, I got up and looked up the weather in my hometown. So I
went online and put in weather, 37886--that is my ZIP Code--and back
came the information. Under the bill Senator Durbin and Senator Enzi
have proposed, the State would create a system for Amazon, let's say as
an example, an online seller. All they would have to do, if I buy a
$300 or $400 television set, is they put my name in, they put in my ZIP
code, and the software the State has provided will tell them what the
tax is and will even electronically transfer the tax money back to the
State. In other words, Amazon will do the same thing the appliance
store in Maryville, TN, will do, and that is what we intended to
happen.
I mean, when we passed a sales tax in Tennessee--I wasn't around
then, but I was around when it has been raised--we didn't intend to
exempt some people over others. We didn't intend to subsidize some
businesses over others. We made a general decision that when we buy
things in Tennessee, all sellers would collect the sales tax. We have a
local sales tax and we have a State sales tax, and that is our right to
decide.
Some of the opposition in the past has come from conservative groups.
It was important, just yesterday, to see the chairman of the American
Conservative Union write a very strong article in support of a House
version of this same bill. I talked with him yesterday, Mr. Al
Cardenas, a businessman from Florida, and he is reviewing our bill.
Ten years ago, William F. Buckley wrote about this problem and said
that it was a loophole that needed to be solved and when States decided
to subsidize some taxpayers over others and some businesses over
others, that was not good conservative philosophy.
So when you have Amazon supporting in a strong letter that Senator
Enzi read, and when you have the chairman of the American Conservative
Union on the same day announcing his support for the same principles, I
think you have solved the problem.
As Amazon just said in their letter, they are in business to compete
and they can sell their goods, they claim, cheaper online than they can
buy them in Senator Enzi's store in Gillette, WY. Maybe they can, maybe
they can't, but at least they will have a level playing field, and both
the store in Gillette, WY, and the online seller will do the very same
thing. They will collect the sales tax that is already owed from the
purchaser and they will send it directly to the State, which has been
the way things have worked for a long time.
This is an issue about preserving the States' right to collect or not
to collect their own sales tax. It is about closing a tax loophole. It
is about stopping the subsidization of some businesses over others, of
some taxpayers over others.
I will conclude my remarks in a moment, but first here is what
William F. Buckley said about it:
The mattress maker in Connecticut . . . does not like it if
out-of-State businesses are, in practical terms, subsidized;
that's what the non-tax amounts to. Local concerns are
complaining about traffic in mattresses and books and records
and computer equipment which, ordered through the Internet,
come in, so to speak, duty free.
Of course, Governors and legislators are up in arms as well. This
loophole costs States $23 billion. Tennessee could use this money to
ward off a State income tax which we don't have and we don't want.
Wyoming could use the revenue to reduce its property tax. Other States
might reduce rising college tuitions, or they might reward outstanding
teachers.
This has been a problem for the last 20 years, but Senator Enzi and
Senator Durbin, with their legislation, have solved the problem.
I will stop where I started. This is not a new tax, it is an existing
tax. It is not a tax on the Internet; it is on all sales. Senator Enzi
and Senator Durbin, with their legislation, have solved the problem,
and I predict that because of the voluntary agreements and the ease of
out-of-State vendors doing the same thing Main Street vendors do, that
very soon we will eliminate these subsidies and close this loophole. I
congratulate them for their years of work in this area. I am happy to
join 10 Senators--5 Republicans, 5 Democrats--in cosponsoring this
legislation.
Mr. President, I ask unanimous consent to include for the Record the
article by Al Cardenas, the head of the American Conservative Union;
the essay by William F. Buckley; and a letter from Governor Bill Haslam
of Tennessee, endorsing the Enzi-Durbin legislation.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From National Review Online, Nov. 8, 2011]
The Chief Threat to American Competitiveness: Our Tax Code
(By Al Cardenas)
More than three years after America's financial system hit
a crisis point, the state of our economy remains in turmoil.
As our nation's leaders grapple with immediate challenges
through dueling jobs plans and the Joint Select Committee on
Deficit Reduction tries to come to agreement on a trillion
and a half in reductions, we must also consider long-term
measures to strengthen our economic security. As it stands
now, the number one threat to the future of American
competitiveness isn't other countries. It's our tax law.
The United States Tax Code is difficult to understand and
even harder to navigate, for families and businesses alike.
Title 26 has been patchworked, reformed, and tinkered with
for decades, giving us an antiquated mess of laws rife with
inequities. Our corporate tax rate is among the highest in
the world. We refuse to shift to a Territorial Tax System
that would stop punishing our companies for bringing earned
overseas income back to the U.S. for reinvestment. Tax rates
for small businesses remain high and inconsistent.
A robust free-market system requires a level playing field,
where the government doesn't get to pick the winners and
losers. We should require the same of our system of taxation.
We need a simpler, fairer, flatter tax code that removes
loopholes, subsidies, and credits, one that lowers rates
across the board and expands the percentage of Americans
paying their fair share of taxes.
When it comes to sales tax, it is time to address the area
where prejudice is most egregious--our policy towards
Internet sales. At issue is the federal government exempting
some Internet transactions from sales taxes while requiring
the remittance of sales taxes for identical sales made at
brick and mortar locations. It is an outdated set of policies
in today's super information age, when families every day
make decisions to purchase goods and services online or in
person. Moreover, it's unfair, punitive to some small
businesses and corporations and a boon for others.
This is why the American Conservative Union applauds Rep.
Steve Womack for his sponsorship of the Marketplace Equity
Act of 2011, one of the first sincere attempts to modernize
our tax policy for the 21st century.
As conservatives we know that governmental power can be
used to destroy entrepreneurship, innovation and the free
market. There is no more glaring example of misguided
government power then when taxes or regulations affect two
similar businesses completely differently.
Over time, the company that has to comply with a tax or a
regulation will lose market share to its competitor who is
carved out from this government interference. In these cases
the winner is not the company who outcompetes, but the one
who gets special privileges from the government.
At its inception, the Internet was everyone's darling, the
latest example of American innovation and ingenuity. Internet
sales represented a miniscule portion of the total retail
market, and the novelty led to tax loopholes and unintended
consequences. Now, according to Forrester Research, Internet
sales account for nearly 10 percent of all sales of products
and services in America, with an annual growth rate of about
9 percent.
If we do not confront this issue, state and local
governments dependent on sales taxes will need to look for
other sources of revenues as Internet sales continue to
expand. Policy which allows for both online and brick and
mortar retailers to be susceptible to the same taxes will--
and should--allow for commensurate reductions in sales tax
rates. For instance, if Internet sales tax revenues will add
10 percent in revenue to a governing body's coffers, then, at
a minimum, a corresponding overall reduction in rates should
apply.
The current system is also inconsistent with states'
rights, and the Congress ought to carefully consider enacting
revenue neutral tax reform policies consistent with the Tenth
Amendment.
The free-market system can only operate effectively on a
level playing field of free and
[[Page S7238]]
fair competition. Whether it's the Department of Energy's
disastrous Solyndra project, or levying sales taxes, or a
multitude of other policy decisions that impact the private
sector, the government picking winners and losers is a
perversion of the free market system. Lawmakers on Capitol
Hill--especially conservatives--ought to at least acknowledge
this when deliberating important reforms to the tax code. As
we consider wholesale reform, exempting Internet sales can no
longer be justified.
The Marketplace Equity Act of 2011 begins this
conversation. It's not a perfect bill, but it's a critical
beginning to this dialogue and should spark bipartisan
support for revenue neutral reforms. Rest assured, we will
not be party to or stand for Trojan Horse legislation that
claims to strive for equity in the law merely to serve as a
cloak for secret tax increases.
We have a great opportunity to drastically lower rates,
especially corporate rates, and eliminate esoteric tax
preferences to stave off the next massive financial crisis. A
flatter, fairer, simpler tax code is the key to ensuring
American competitiveness for generations to come. Our leaders
in Congress are obligated to thoughtfully consider measures
to achieve this.
____
[From National Review Online, Oct. 19, 2001]
Get That Internet Tax Right
(By William F. Buckley Jr.)
Congress is up against it: what to do about Internet
commerce?
To return to an example given earlier in this space, you
have a mother living in Hartford, Connecticut, looking for a
new mattress and spotting one on the website of a producer in
Massachusetts. The feel of it is right, and so is the price,
so the $500 order is placed. The mattress crossing the border
is not taxed, because writing the Constitution in
Philadelphia in 1787, it was decided: no tariffs within the
13 states. Interstate commerce would be regulated only by
Congress.
Which is all to the good, but Connecticut takes the
position that the family living happily in Hartford has to
pay its share of the cost of government, which entitles the
treasury to a use tax. If the mother in Hartford who sent out
for the mattress in Massachusetts were a perfect citizen, she
would write a check for $30 (6 percent) to the State of
Connecticut and sleep at complete ease with her conscience.
What she does do, is sleep at complete ease with her
conscience without sending in the check for $30. The reason
for it is that taxes of that order are pretty well
uncollectable. An uncollectable tax is one which would cost
more to exact it would yield in profit. There is, in
addition, the political question. People wouldn't like it
when Big Brother stared into every out-of-state package,
inquiring whether there is something in it for city hall.
So that one part of the pressure building on Congress is
collectivist: to let states come in with a transfer tax. But
a second pressure is from merchants who see themselves
affected by untaxed transactions. The mattress maker in
Connecticut is willing to compete with the company in
Massachusetts, but does not like it if out-of-state
businesses are, in practical terms, subsidized; that's what
the non-tax amounts to. Local concerns are complaining about
traffic in mattresses and books and records and computer
equipment which, ordered through the Internet, come in, so to
speak, duty free.
Three years ago, Congress voted to continue until 2001 the
tax-free character of interstate commerce. This meant not
only a prospective loss of tax to the affected states, it
meant also something on the order of a benediction on a
staggering development in technology. The Internet is the
happiest intellectual, journalistic, and educational
development in history, and the thought of letting the weeds
of prehensile government crawl about it struck some as on the
order of enforced shutters on sunlight, or taps on
waterfalls.
But, sigh, that was three years ago, which in the Internet
business is three millennia ago. The estimated commerce done
by the Internet in 1998 was $9 billion. Last year it was $26
billion. Which means we have to come to earth, and face
homespun economic truths. If the advantage of tax-free
Internet commerce marginally closes out local industry,
reforms are required.
The mechanics of reforms call on holding not the buyer, but
the seller, responsible. It still won't be possible to target
the mother in Hartford directly when the mattress arrives,
but the exporter of it in Massachusetts can be required to
add $30 to the cost of the mattress, and send the check off
to Connecticut Internal Revenue. It is, finally, impossible
for Congress to wrestle with the problem without yielding to
legitimate demands of the states spending the money on
education, police, and fire departments, and deprive them of
revenue.
The question has not come up in the current welter of
proposals, but we have to watch carefully to prevent the
United States Postal Service from getting into the act. The
most calamitous exposure of the postal service since the days
of mail-train robberies is of course fax and the Internet.
These are, for all intents and purposes, absolutely free
transactions. One hundred messages can be sent out, or for
that matter one thousand, for less than the cost of a first-
class postage stamp. A rumor swept about the medium, a year
or so back, that a proposal was making way that would charge
five cents for every communication sent out on the Internet.
The very idea is heretical, like charging for Communion
wafers. To tax the Internet for the benefit of the postal
service is unsupportable reasoning. The postal service needs
to survive from its own revenues. If there is a shortfall,
the government can come up with it, as required, on the same
principle as rural free delivery. But to attempt to relieve
its problems by contaminating the Internet is something that
any congressman who has taken an oath to right reason is
bound to oppose.
____
November 8, 2011.
Senator Lamar Alexander,
U.S. Senate, Dirksen Senate Office Building, Washington, DC.
Dear Senator Alexander: I am writing to thank you for your
leadership in helping to advance a federal solution to a
problem states need Congress to address: the preservation of
their own right to enforce their own tax laws and returning
fairness to the marketplace.
The Marketplace Fairness Act will bring much needed, and
long overdue, relief to the State of Tennessee. Tennessee and
other states are currently unable to compel out-of-state
businesses to collect sales taxes the same way local
businesses do. It is important for states to determine their
own tax policy and have the ability to collect the revenues
they are already owed. This is why your legislation is so
important.
The Internet has changed the way we do business and
provides small businesses the opportunity to grow, but we
need our laws to adapt to this new marketplace. Our state
relies on sales taxes for the majority of its revenue, and
each year we are losing hundreds of millions of dollars that
could be used to benefit Tennessee. What cannot happen is for
Congress to do nothing, which will prevent states from
enforcing their own laws.
Your legislation gives states the flexibility to determine
what works best for them, and I am grateful that you are
putting states' rights first and closing this online sales-
tax loophole. The Marketplace Fairness Act strikes the right
balance for Tennessee, and I fully support your efforts.
Warmest regards,
Bill Haslam,
Governor, State of Tennessee.
Mr. DURBIN. Mr. President, would the Senator from Tennessee yield for
a moment?
Mr. ALEXANDER. Oh, yes.
Mr. DURBIN. I wish to go on the record on behalf of myself and, I am
sure Senator Enzi, in saying that Senator Alexander doesn't give
himself enough credit. He has been an integral part of putting together
this bipartisan bill. We wouldn't be here without him. I want to thank
him for facilitating the bipartisan effort to put this bill together. I
share his feelings. I think we have finally found that sweet spot, and
we can pass this bill.
Mr. ALEXANDER. I thank the Senator from Illinois.
Mr. ENZI. Mr. President, we yield the floor.
The PRESIDING OFFICER (Mr. Bingaman). The Senator from Rhode Island.
Mr. REED. I ask unanimous consent to return to morning business.
The PRESIDING OFFICER. The Senate is in morning business.
Mr. REED. Mr. President, let me also commend Senator Enzi and Senator
Durbin and Senator Alexander because I too am a cosponsor of this
legislation, and I think it does represent a remarkably thoughtful and
bipartisan approach to the problem of providing resources to local
States and communities so they can carry out the very challenging
issues of local governments. I am not surprised that Senator Alexander
is a key element in this product. Both Senator Enzi and Senator Durbin
deserve to be complimented. I thank them for their leadership.
____________________