[Congressional Record Volume 157, Number 188 (Thursday, December 8, 2011)]
[Senate]
[Pages S8446-S8448]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MARKETPLACE FAIRNESS ACT
Mr. ALEXANDER. Madam President, we hear a lot about tax breaks and
tax loopholes around the Senate. I wish to talk about a tax loophole, a
big one, that is on its way out. It is a $23 billion tax loophole. It
is not a loophole in the tax code of Washington, DC. It is a loophole
in virtually every State in the country. It is a loophole that prefers
some taxpayers over other taxpayers. It subsidizes some businesses over
other businesses. Because of that loophole, it causes tax rates in
States to be higher, and it causes States to have less money to fund
the universities or the State parks or the schools or the other
expenses that are legitimate in the operation of a State.
I say it is a tax loophole that is on its way out because after 10
years, Senator Enzi of Wyoming and Senator Durbin of Illinois have
produced a piece of legislation that is rare in Washington, DC. It is
only 10 pages long. It is very simple. It is a States rights piece of
legislation that gives each State the right to decide for itself how to
collect its State sales tax from everybody who owes it, whether that
person buys a pair of cowboy boots in Nashville or whether that person
buys a pair of cowboy boots online.
Senator Enzi and Senator Durbin introduced the Marketplace Fairness
Act 4 weeks ago. It has five Republican sponsors and five Democratic
sponsors. I am one of those sponsors. This is the bill that solves the
problem of the online sales tax loophole, the one I described a little
earlier. I mentioned cowboy boots. Let me describe what I am talking
about in practical terms.
I called the owner of the Nashville Boot Company a couple weeks ago.
His name is Frank Harwell. He sold boots online, and he sells them to
people who walk into his store in west Nashville. When he started the
company, almost all of his boots were sold online. Here is what he says
is happening to him today: People come into the store in Nashville and
they try on cowboy boots. They find a pair they like and then they go
home and buy the cowboy boots online in order to save the State sales
tax.
They owe the sales tax. Many people don't know they owe it. They owe
the sales tax as much as if they had bought the boots at the cowboy
boot store in Nashville. They don't pay it. Why is that? Under the
State law, when Frank Harwell sells a pair of cowboy boots in his store
in Nashville, he collects the sales tax and sends it to the State.
But under the law, the Supreme Court said 20 years ago, the State of
Tennessee or the State of Missouri or the State of Washington could not
require an out-of-State seller to collect the same sales tax. They had
a reason for doing so, and it was a good reason. They said it was so
complicated to do that it put a burden on interstate commerce. But at
the same time, the Supreme Court invited the Congress to fix the
problem. By fixing the problem, that means the Congress could act in
order to create a fair way for States to require retailers that are
out-of-State to collect the same sales tax retailers on Main Street
collect.
Over that 20 years, the online sales tax loophole got to be a big
loophole. It subsidizes some businesses at the expense of others and,
as I said earlier, prefers some taxpayers at the expense of others.
Last week, the Hudson Institute, a generally conservative
organization, released a new report that explains how the subsidizing
of out-of-State sellers works and how the Federal Government--those of
us in Washington--are keeping States from closing this loophole. Hudson
concludes that this online sales tax loophole is distorting the
marketplace, and I urge my colleagues to take a serious look at the
Hudson Institute report.
Governors and legislators are up in arms because they are being
deprived of the right to enforce their own sales tax law. This is a
little different loophole--actually, a little worse one. Usually,
loopholes are written into the law. Those are the kind we are trying to
change in our tax reform proposals in Washington. This is a tax that is
already owed. This is a tax that is already owed that Governors and
legislators want to collect. It is used to pay for the things States
need to pay for or reduce a tax. In the State of Tennessee, which has a
very high sales tax, if the State was allowed to collect sales tax from
out-of-State retailers the same way it does from Main Street retailers,
then we might postpone the day of a State income tax, which are
probably three of the most hated words in the tax vocabulary in
Tennessee.
I said, when Senator Enzi and Senator Durbin introduced their bill,
that I believed they had solved the problem and that if I were an out-
of-State retailer or an online retailer, I would begin to make plans to
collect sales tax the same way Main Street collectors collect it today,
and many have. For example, Amazon--which had opposed for a long time
this kind of legislation because, in their view, it was too complicated
for them to figure out what the tax might be--changed their mind, and
said the Enzi-Durbin bill is a good bill and Amazon now supports it.
That is not all. Mississippi Gov. Haley Barbour, a strong conservative
Republican Governor and former chairman of the Republican Governors
Association, wrote a letter on November 29 which I wish to quote:
In the early days of the Internet, the complexities of
collecting State sales taxes across thousands of State and
local sales tax jurisdictions were major obstacles. The
technology simply didn't exist to expect startups to comply
with the various tax compliance rules in every part of the
country. But today, e-commerce has grown, and there is simply
no longer a compelling reason for government to continue
giving online retailers special treatment over small
businesses who reside on the Main Streets across Mississippi
and the country.
Governor Barbour continues:
The time to level the playing field is now, as there are no
effective barriers to complying with state sales tax laws.
Here is what Governor Barbour is saying: Twenty years ago we didn't
have the kind of software and information we do today. If I want to
know what the weather is in Maryville, TN, where I live, I put in
``weather'' and my ZIP Code, 37886. Under this new bill and under the
technology that exists today, States will be required to give out-of-
State retailers or online retailers the software that will permit them
to do the same thing. If I order a pair of cowboy boots, they can put
in my name, the cost of the boots, and the ZIP Code, and the software
will compute the tax and even find a way to send it on to the State. It
will be just as easy, or maybe even easier, for the out-of-State
retailers to collect the sales tax that is owed as it will be for a
cowboy boots store selling it out of the front door in Nashville.
The National Governors Association sent a letter last week saying
that the Enzi-Durbin bill represents a commonsense approach that will
allow States to collect taxes they are owed, help businesses comply
with different State tax laws, and provide fair competition between
retailers that will benefit consumers.
Last week, the Judiciary Committee in the House of Representatives
held an oversight hearing to discuss all three bills that have been
introduced to address this issue and there was a lot of good
discussion. I wish to share a few things that were said and I hope we
can have a similar hearing in the Senate soon.
[[Page S8447]]
Mike Pence of Indiana, one of the leading conservatives in Congress
and a fellow who knows a tax when he sees one, said:
I don't think Congress should be in the business of picking
winners and losers. Inaction by Congress today results in a
system that does pick winners and losers.
Congressman Pence also talked about something I want to make sure my
colleagues understand. The Enzi-Durbin bill is not talking about taxing
the Internet. It is not talking about creating a new tax. As far as the
Internet access tax goes, the Senate debated that a few years ago. I
was in the middle of that debate and I was in the middle of the
solution that imposed a moratorium on the Internet access tax. That law
is still there. We are not talking about an Internet access tax.
Neither are we talking about a new tax. We are talking about the plain
old State sales tax that already exists. It is very hard to imagine how
anyone can say collecting a tax that is already owed is a new tax.
Governor Barbour and Congressman Pence are correct; 20 years ago the
technology didn't exist. Today it does. About the only ones complaining
are the taxpayers and businesses that enjoy being subsidized by other
taxpayers and other businesses, and that, in our opinion, is not
correct tax policy.
As Republicans, I believe our party should oppose government policies
that prefer some taxpayers over others or some businesses over others.
As Republicans, I believe we should support States rights, and our bill
does that by giving the State the right to make the decision about how
to collect its own taxes: Do you want to collect taxes from everybody
who owes the tax, or do you not want to? Do you want to prefer some
out-of-State businesses over in-State businesses, or do you not want
to? Do you want to collect the tax, reduce tax rates, or spend the
money on services? That is up to the States.
These sentiments are also shared by the late William F. Buckley and
Al Cardenas, chairman of the American Conservative Union. Ten years ago
William Buckley, who many people see as the father of the modern
conservative movement, wrote in the National Review:
The mattress maker in Connecticut is willing to compete
with the company in Massachusetts, but doesn't 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.
That is William F. Buckley.
Then Al Cardenas, the chairman of the American Conservative Union, a
distinguished man from Florida, and the head of an outfit that is
arguably as strong and influential as any conservative organization in
Washington, said in his recent essay:
There is no more glaring example of misguided government
power than when taxes or regulations affect two similar
businesses completely differently.
As I have said many times before, I believe the Enzi-Durbin
legislation solves the problem. I believe it is going to happen. I hope
that out-of-State sellers and online sellers will move ahead to work
with States to make voluntary agreements as, for example, Amazon has in
Tennessee, and begin to allow States to enforce their tax policy
properly.
Our bill is a remarkable feat in Washington, DC. I have mentioned it
before and I wish to emphasize it again. It is only 10 pages long. It
is only about allowing States to make a decision about whether they
want to close a tax loophole. It is about stopping the subsidization of
some taxpayers over others. It is about stopping the subsidization of
some businesses over others. I am glad others are starting to share
this view, and as more Senators learn about the Marketplace Fairness
Act and look at the options it gives each State, I hope and I believe
we will have more cosponsors.
Ten years ago the bills introduced weren't adequate to solve the
problem. Fortunately, today, Senator Enzi and Senator Durbin have
solved the problem. I agree, Democratic Senators agree, the chairman of
the American Conservative Union agrees, a former chairman of the
Republican Governors Association agrees, Congressman Mike Pence agrees:
It is a matter of marketplace fairness.
I ask unanimous consent to have printed in the Record the letter to
which I referred from Mississippi Governor Barbour, a letter from the
National Governors Association, and the National Journal article
published last week regarding the House Judiciary Committee hearing on
this subject.
There being no objection, the material was ordered to be printed in
the Record, as follows:
State of Mississippi,
Office of the Governor,
Jackson, MS, November 29, 2011.
Hon. Mike Enzi,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Hon. Lamar Alexander,
Senate, Dirksen Senate Office Building, Washington, DC.
Dear Senator Enzi and Senator Alexander: I am writing to
congratulate you on the introduction of the Marketplace
Fairness Act and offer my support for its timely passage.
Fifteen years ago, when e-commerce was still a nascent
industry, it made sense to exempt startups like Amazon.com
from collecting and remitting sales taxes in states where
they had no facilities. As chairman of the Republican Party,
I was there when discussions surrounding the Internet
commerce tax moratorium took place, and this was only to last
until e-commerce had truly taken root. I supported this
effort then, because I believed this budding industry needed
every opportunity to thrive and grow. Looking back, I think
it's clear we made the right call as America is home to the
largest and most dynamic e-commerce companies in the world.
In the early days of the Internet, the complexities of
collecting sales taxes across thousands of state and local
tax jurisdictions were major obstacles. The technology simply
didn't exist to expect startups to comply with the various
tax compliance rules in every part of the country. But today,
e-commerce has grown, and there is simply no longer a
compelling reason for government to continue giving online
retailers special treatment over small businesses who reside
on the Main Streets across Mississippi and the country. The
time to level the playing field is now, as there are no
effective barriers to complying with states' tax laws.
As Governor of Mississippi, I value the important role that
our Main Street retailers play in our communities. Failure to
level the playing field threatens to, and in fact has, run
many of them out of business, taking with them jobs and the
sizable contribution they make to not just our community
culture, but to the Organizations who have long benefited
from their charitable involvement.
States should not be deprived of their right to establish
and collect taxes as they see fit. I've stood for lower taxes
and smaller government my entire career in public life, but
I've also stood for the authority of states to devise their
own tax laws without being overridden by the federal
government for no existing purpose.
Finally, government shouldn't be picking winners and
losers. In this area, at least, the Marketplace Fairness Act
will end that practice, and that's something conservatives
should be proud to support.
I again applaud you for addressing this important issue and
I look forward to working with you to end the special
treatment for online retailers and give everyone the
opportunity to compete fairly.
Sincerely,
Haley Barbour,
Governor.
____
National Governors Association,
Washington, DC, November 28, 2011.
Hon. Richard Durbin,
U.S. Senate, Washington, DC.
Hon. Tim Johnson,
U.S. Senate, Washington, DC.
Hon. Michael Enzi,
U.S. Senate, Washington, DC.
Hon. Lamar Alexander,
U.S. Senate, Washington, DC.
Dear Senator Durbin, Senator Enzi, Senator Johnson and
Senator Alexander: The National Governors Association
applauds your efforts to level the playing field between Main
Street retailers and online sellers by introducing S. 1832,
the ``Marketplace Fairness Act.''
As you know, years ago the Supreme Court opinion in Quill
Corp. v. North Dakota stated that Congress has the authority
to require out-of-state sellers to collect sales taxes. At
present, states are unable to collect more than $22 billion
in sales taxes annually from remote sales made through
catalogues or over the Internet. This also creates a price
disparity between goods bought from the corner store and
those bought online, effectively giving a continuing and
growing subsidy to Internet sales.
Since the Quill ruling, at least two facts have changed:
(1) the proliferation of computers to calculate taxes due on
sales--just as shipping costs are determined based on Zip
Code--and (2) a state agreement on streamlining and
simplifying sales taxes so that it is easier to collect and
remit sales taxes wherever a company does business.
The Marketplace Fairness Act recognizes these changes and
uses them to grant authority to states that simplify their
tax systems to make it easier to do business. This common
sense approach will allow states to collect the taxes they
are owed, help businesses comply with different state laws,
and
[[Page S8448]]
provide fair competition between retailers that will benefit
consumers.
NGA looks forward to working with you as you work to enact
the Marketplace Fairness Act and create a more level playing
field for all sellers and consumers.
Sincerely,
Governor Bill Haslam,
Tennessee.
Governor Christine O. Gregoire,
Washington.
____
[From the National Journal Daily, Nov. 30, 2011]
States Tell Congress Online Tax Loophole Costly
(By Juliana Gruenwald)
State officials and some retailers urged Congress on
Wednesday to finally close a loophole that they say benefits
online retailers by allowing them to avoid collecting sales
taxes from out-of-state customers.
The issue the House Judiciary Committee examined relates to
a 1992 Supreme Court decision in Quill v. North Dakota that
found catalog and other retailers do not have to collect
sales taxes from customers in states where they do not have a
physical store or other facility. Since then, online
retailers have exploited the loophole to the tune of billions
in lost tax revenue, according to state officials.
``It is estimated that currently in the state of Texas
between $600 million and $800 million is not collected on
out-of-state sales. . . . That points out to me the unfair
competition that my storefronts are competing against,''
Texas state Rep. John Otto, a Republican, told the committee.
Even some tax-averse lawmakers such as Rep. Mike Pence, R-
Ind., said congressional action is warranted.
``I don't think Congress should be in the business of
picking winners and losers,'' Pence said. ``Inaction by
Congress today results in a system today that does pick
winners and losers.''
State calls for congressional action on the issue got a big
boost earlier this month when Amazon, after years of battling
efforts to address the loophole, endorsed bipartisan online-
sales-tax legislation introduced by Sens. Michael Enzi, R-
Wyo., Dick Durbin, D-Ill., and others. That bill would
authorize states that meet certain minimum standards to
require online retailers to collect sales taxes from
customers even in states where those firms have no facility.
A similar bill has been introduced in the House by Reps.
Steve Womack, R-Ark., and Jackie Speier, D-Calif.
Mr. ALEXANDER. Madam President, I yield the floor, and I note the
absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DURBIN. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Ms. Klobuchar.) Without objection, it is so
ordered.
Mr. DURBIN. Madam President, I ask unanimous consent to speak as in
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________