[Congressional Record Volume 159, Number 68 (Wednesday, May 15, 2013)]
[House]
[Pages H2646-H2649]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           INTERNET SALES TAX

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 3, 2013, the Chair recognizes the gentleman from Kentucky (Mr. 
Massie) for 30 minutes.


                             General Leave

  Mr. MASSIE. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days to revise and extend their remarks and include 
extraneous material on the topic of my Special Order.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Kentucky?
  There was no objection.
  Mr. MASSIE. Mr. Speaker, I rise today to speak in opposition to H.R. 
684 and S. 743, the Marketplace Fairness Act, otherwise known as the 
Internet sales tax. Or as I call it, the interstate commerce sales tax.
  I'm concerned that this new tax on American consumers passed the 
Senate too quickly without enough debate and has the quiet support of 
several Members here in the House. Unfortunately, many of my colleagues 
opposed to the bill here in the House have taken a quiet wait-and-see 
attitude. They don't want to rock the boat, so to speak. Well, it's 
time to quit being quiet on this issue. The American public deserves a 
full and open debate on this bill before any legislative action is 
taken in this body.
  This evening, my colleagues and I will begin that debate. I'm 
confident that when Members and their constituents grasp the full 
ramifications of this onerous piece of legislation, they will oppose it 
as well.
  Many States in this country are in dire financial straits. They've 
lavished overly generous pension plans on their State employees and 
offered tax credits and financial incentives to their favorite 
businesses. They've promised more than they can deliver, while 
sometimes letting essential services go neglected. State governments 
bear the responsibility for their financial situations; yet they're 
looking to the Federal Government for a bailout. Make no mistake, this 
Internet tax is the bailout they're seeking. Without raising taxes, 
State governments can expect billions of dollars of Americans' hard-
earned money to flow to their treasuries if this bill passes. And how 
would this happen? By passing a bill that proclaims to impose fairness.
  Who else is for this bill? Large retailers. They've got lots of 
representatives up here talking to us. They're on the Internet and 
they're off the Internet, but they're for this bill. They're weary of 
competing with small and nimble businesses. And that's natural to want 
to have economic barriers to entry because it's an economic fact that 
in the absence of innovation in a market with no barriers to entry, 
profits go to zero in the long run.
  But how do we create barriers to entry in the United States? How do 
we compete? Through innovation.
  America is the country of innovation. You can invent something. You 
can make a new piece of music. You can be nicer to your employees than 
the other company is. Or you can come up with a new, more efficient way 
of manufacturing your products. But I suggest to you, Mr. Speaker, that 
sending representatives to Washington, D.C. to impose financial 
hardships on your competitors is not the American way.
  Some have said that this bill is about States' rights, and I'm a 
strong proponent of States' rights; but this bill does nothing to 
protect States' rights. In fact, this bill changes the very fabric, the 
constitutional fabric of the United States of America by subjecting 
people and businesses in one State to the taxes and regulations of 
another State. This is unprecedented. For the first time in history, 
this bill would grant States jurisdictions beyond their physical 
borders. If this bill passes, we'll have a virtual United States of 
America where borders no longer mean anything.
  Justice Marshall ruled that the power to tax is the power to destroy, 
and we were reminded last week by the IRS's admission that the power to 
tax is the power to harass.
  I urge other Members of Congress to consider the dangerous 
implications of granting individual States authority over individuals 
in other States.
  Before my colleagues get into the details of this new tax, I'd like 
to point out that no one, not a single person, has argued that this 
bill will help our

[[Page H2647]]

economy. Even proponents of this bill must concede that it increases 
taxes on American consumers and adds burdensome regulations to small 
businesses. That's where this debate will begin and end. This bill is 
bad for our economy.
  I now yield to the gentleman from Florida.
  Mr. DeSANTIS. I thank the gentleman from Kentucky, and thank you for 
your leadership on getting out ahead of this and really leading the 
charge. You're right, this will not be good for the economy. People 
will say it's not really a tax increase because some of these taxes are 
essentially use taxes that are already due. The fact of the matter is 
this will hurt consumers because they are going to have to pay more, 
and that is not the recipe for success in a high-unemployment, low-
growth economy, which is what we have now and is what we've had for a 
number of years.
  In terms of making consumers pay more in taxes, I for one am sick of 
politicians in Washington and in State capitals throughout the country 
putting the interest of government ahead of the interests of the 
people. Our job is not to extract as much money as possible from our 
fellow citizens, but it's instead to provide a framework that protects 
their freedom and liberty and allows them to pursue their dreams. This 
bill obviously doesn't help do that. In fact, it hinders it. It hinders 
it by making it more difficult on consumers, but also will make it more 
difficult on up-and-coming new businesses that do business online. This 
bill represents taxation without representation, and the reason it does 
that is because the bill would require online businesses to determine, 
collect, and remit taxes to States with which they have no physical 
connection.
  So if you have a business in Florida that does online sales and you 
sell to somebody in California, you're going to be responsible for 
determining California's sales tax, collecting it, and then sending it 
to California. The problem is if you have no physical connection to 
that State, you have no way to hold tax-happy politicians in States 
like California accountable for the decisions they make in terms of 
taxing, spending, and regulation.
  I would say also, people say that there are local stores who have to 
pay sales tax. If you sell online to somebody out of State, you're not 
having to sell the tax. We don't require any stores on a local sale to 
figure out where the consumer came from and then send the tax over to 
that State. They simply collect the tax that's due in their State, so 
the compliance requirements are completely different. Indeed, there are 
over 9,600 taxing jurisdictions in the United States.
  This bill specifically permits audits from the other States that have 
sales tax and from Indian reservations, and we have several hundred 
federally recognized Indian tribes, so this creates a huge compliance 
burden for our small businesses.
  I just don't think it is good policy to saddle small businesses in 
Florida with red tape and additional compliance costs. I mean, why on 
Earth would any Floridian want an up-and-coming business to face a tax 
audit from a State like California or Illinois?

                              {time}  1920

  And I would say, as the gentleman from Kentucky pointed out, 
especially in light of what we're seeing with the malfeasance committed 
by the IRS out of Washington, D.C., you know, the IRS is at least 
somewhat accountable to the people, at least in theory, because we can 
always vote out the administration that oversees the IRS.
  If you have an out-of-State tax audit, you don't have any political 
representation, so why would they care about your rights? They're not 
going to care about your rights. They're going to care about getting 
your revenue.
  I just want to say a thing about fairness. People say, well, you 
know, you have brick-and-mortar, local stores versus these Internet 
businesses; but I would suggest that that distinction is illusory, and 
the reason why is many companies that do business online are brick-and-
mortar companies.
  I have a business in my district in Ormond Beach, Florida. It's 
called Coastal Moto, and this is a gentleman that put his entire life 
savings into this business. They now have grown to have five employees. 
They make custom wheels for Harley Davidson motorcycles, and they ship 
them worldwide. But they have employees showing up every day to work 
there, so they are both brick-and-mortar and online. So it's 
essentially brick-and-click.
  And I would also just endorse what the gentleman from Kentucky said, 
that the tax would give large companies a competitive advantage, 
because anytime you saddle businesses with more compliance cost, that 
will create barriers to entry for smaller companies, and the big 
businesses are always able to comply more easily.
  And look, I want companies of all sizes to do well. You know, big 
businesses, if they're doing well, God bless them. I just don't want to 
tilt the playing field in favor of them and make it more difficult for 
new businesses to start and grow.
  The Internet is one of the most pro-growth, pro-opportunity 
inventions in all of human history. It literally gives anybody the 
chance to move a product. If you have an idea, you can go online, you 
can put that out, and you can be successful. It's much easier, with the 
Internet, to have a successful business than it was 100 years ago. 
You're able to get into the market more cheaply and more affordably. 
That's not something that we should try to undermine. That's something 
that we should want to continue to promote.
  And finally, I would just say, is it fair to burden Florida 
businesses in order to fund excessive spending in States that suffer 
from severe fiscal mismanagement? I mean, for example, in California, 
you have county administrators retiring with a $400,000 pension for 
life. And so we're going to put burdens on our companies to be able to 
send money over there so that they can fund that extravagance? And I 
would also note that a lot of that money goes to funding union dues 
that end up helping fund political companies. So why would we want to 
do that?
  So the bottom line is that the bill is bad for consumers; it 
represents taxation without representation; it will stymie small 
business growth; and it will create perverse economic incentives. Our 
political system right now is suffering from an accountability crisis. 
The last thing we need to do is expand government and add to this 
problem.
  Mr. MASSIE. Thank you to the gentleman from Florida. He makes an 
excellent point on the sales tax audit burden on small businesses.
  I'd like to give you two examples of companies in my district. These 
are, literally, mom-and-pop shops. One of them, the wife is the CFO and 
the husband runs the company; and in the other one, the father owns the 
company and the son works there every day. They were both subjected to 
sales tax audits in one State.
  Let me tell you how the sales tax audit begins and how it ends. So 
the way it began was with a phone call. And that, for many small 
businesses, is the worst phone call of their life, of their business 
life, because they know what they're going to have to endure.
  So let me give you the example of this farm store that underwent a 
sales tax audit. He was required to prove that every sales tax-exempt 
sale that he made in the previous years was, in fact, exempt from sales 
tax under Kentucky State law.
  The sales tax auditors will pursue you to the end of the Earth if 
they think there's another dime to be found, so they pursued him with 
much vigor. He spent weeks looking for records trying to prove that 
these were, in fact, sales tax-exempt, because if they were not, he 
owed the sales tax on all of those sales.
  How does this kind of audit end?
  It ends with a white flag. There's no way to prove, there's no way to 
find every shred of paper for every transaction that you've ever had in 
the past years, so you finally settle with the sales tax auditors.
  Can you imagine that? You'd be open to sales tax audits, which I've 
just described, in 45 different States. Now, maybe it only happens once 
every 10 years in your State; maybe that's the average. But, on 
average, you'll get 4\1/2\ sales tax audits a year, which brings me to 
the next small business in my district, where the wife is the CFO.
  This business was subjected to a sales tax audit and an IRS audit in 
the same year, in fact, this year. This business owner came to me and 
said, Can you pass a bill that would keep me from having to go through 
two audits in the

[[Page H2648]]

same year? I mean, it's just not fair. I've got a State tax audit and a 
Federal audit in the same year. This is killing my business. My wife 
can't work on anything but these audits.
  Can you imagine if that business is now subjected to 45 audits in 45 
different States? I just can't let this individual down. And what we're 
talking about, sales tax audits, it's up to the States to decide what's 
sales tax exempt and what's not, and every State has a different rule.
  And the only way to enforce these rules and to know if you've 
complied--is it for a farm? is it for education? is it for resale?--is 
for the retailer to submit all of those sales records, information, if 
you will, on the individual that purchased them to the State where the 
individual lives.
  This is ripe for corruption, just as we saw with the IRS recently. 
Now they know what music you've downloaded, what movies you've 
downloaded. Maybe you bought some gun magazines. They're going to know 
about all of this, and it's just ripe for corruption and for 
exploitation.
  I'd like to yield to my good friend and colleague from the State of 
Montana (Mr. Daines).
  Mr. DAINES. Thanks much to my good friend from Kentucky, Mr. Thomas 
Massie, for coordinating this Special Order here tonight. I appreciate 
it greatly.
  We're here tonight to share our strong opposition to the so-called 
Marketplace Fairness Act. This is a bill that mandates small businesses 
to collect sales tax on behalf of other cities and States when selling 
products over the Internet.
  The problem is this bill would fundamentally change how online 
purchases are taxed and would impose yet another burden on small 
businesses across the country, but especially like my home State of 
Montana. You see, in Montana we don't have a statewide sales tax. In 
fact, we often say you know you're a native Montanan if you voted 
against a sales tax twice.
  But I will have to say that in my home State we have a balanced 
budget requirement. And not only did our State balance its budget this 
year, we're running a surplus, and we've done that without a sales tax. 
And Washington should do the same. They should learn how to balance 
their budget, and they don't have to impose a sales tax that's imposed 
on businesses across this country.
  But even though we don't have a sales tax, under this legislation, 
Montana small businesses would be forced to collect sales taxes for up 
to 9,600 cities and States, none of which would go back to the people 
of Montana.
  Let me be clear. This isn't just a bill that hurts no sales tax 
States like Montana. It hurts small businesses in every State, 
burdening businesses that depend on Internet sales with added costs and 
more paperwork and more regulations.
  Proponents of this bill say, well, it's about fairness. They say that 
this bill will help prevent the supposedly widespread practice of 
``showrooming,'' where customers visit a physical store but then buy 
the goods online where customers can get a better price or avoid paying 
sales tax. According to proponents of this bill, this showrooming is 
destroying our brick-and-mortar businesses.
  Well, ladies and gentlemen, this is not only misleading; it's wrong. 
As the National Journal reported, a recent PricewaterhouseCoopers 
survey of 10,000 shoppers found this so-called widespread problem 
occurred less than 2 percent of the time. In fact, the survey found 
that 10 times as many consumers researched products online so they 
could go buy them at the local brick-and-mortar shop.
  Think about that. And we've all had that happen to us. You may go 
online and shop, but you may not want to pay the shipping costs. You 
may not want to have the time it takes to receive the goods. You may 
want to be buying that bike for your child, so you go downtown and buy 
at the brick-and-mortar store.
  Furthermore, the study states, and I quote, ``We also can't emphasize 
enough that the physical store remains the centerpiece of the purchase 
journey for many categories. In 9 out of 11 categories, in fact, the 
majority of consumers use physical stores for both researching and 
purchasing the products they want to buy.''
  I know that many times I'd rather head downtown to my home of 
Bozeman, Montana, to talk to folks face-to-face and purchase a product 
I've researched online so I can avoid shipping fees and avoid the wait 
time.

                              {time}  1930

  I know a lot of Montanans feel the same way. But then I also have to 
ask, what is fair about forcing a small business that relies on 
Internet sales to learn the ins and outs of 9,600 different tax 
jurisdictions or be subjected to tax audits, as the gentleman from 
Kentucky just mentioned, not just from one State but from all 46 States 
that collect sales tax?
  Imposing these unreasonable standards on online retail sales but not 
also on brick-and-mortar retail stores is not only unfair, it's 
unworkable. I've heard from Montana's small businessowners who are 
deeply concerned about what this bill means for them and how it will 
affect their ability to remain profitable. I'm concerned too.
  I've spent nearly three decades in the private sector. In fact, prior 
to having served in Congress, the last elective office I held was 
student body president in high school. So I've come from the business 
world. I've been a job creator and somebody that's had to fight the 
regulations and pay taxes. I know that if you're a small business owner 
and you're forced to comply with more than 9,000 different tax codes, 
which, by the way, most small businessowners readily admit it's next to 
impossible for any small business to do that. You are not going to be 
investing in your own business. You're not going to be hiring new 
employees, you're not going to be growing your product base or 
promoting innovation. You're now going to be spending more time and 
more capital dealing with regulations and mandates and more time with 
lawyers and accountants.
  We also can't forget the threat that this holds for principles that 
are the foundation of our Nation's tax policy, and that is that States 
must not be allowed to extend their taxation and regulatory authorities 
beyond their borders. The Internet tax would do away with the physical 
presence standard which dictates that a State can only require a 
business to collect a sales tax if it's physically present within its 
boundaries.
  Furthermore, the people don't want an online sales tax. A recent 
survey found that 84 percent of consumers were opposed to this bill and 
75 percent of small online retailers are opposed. Those numbers send a 
clear message that the American people are strongly opposed to this 
proposal.
  So I would ask my colleagues this--remember this is the people's 
House. We're here to represent our districts and our States and do what 
is best for them. The problem back in this town, in Washington, D.C., 
is that the big businesses, the big corporations, have lobbyists here 
to be the voice here on the Hill. We need to be the voice tonight for 
the small business people who don't have lobbyists here in Washington, 
D.C., because they can't afford them. Imposing a new tax burden in 
these precarious economic times is clearly not what our small 
businesses and consumers need.
  I know one of the fastest ways to slow down growth and innovation is 
to tax it and to regulate it. This bill is a $23 billion tax increase 
coming right out of the pockets of hardworking American families. So 
let me be clear. The so-called Marketplace Fairness Act is a job-
killing tax hike that hurts America's small businesses, and it hurts 
America's consumers. I promise I will continue to fight this bad piece 
of legislation.
  Mr. MASSIE. Mr. Speaker, I would like to remind my colleagues that 
Mr. Daines represents the great State of Montana, which operates with a 
lean government and has, so far, got by without a sales tax. That's the 
great thing about these United States of America. We have 50 States 
competing with different models for how to run their governments. This 
tax, as I call it, the interstate commerce tax, is more about 
harmonizing tax laws across the United States and taking away the 
competition between States.
  Now, my fair State of Kentucky has a sales tax of 6 percent. But I 
don't think it's fair that we impose a sales tax on the State of 
Montana when

[[Page H2649]]

they've worked very hard not to have one. Their businesses aren't 
subjected ever to a sales tax audit if they don't have to collect a 
sales tax. So I think he's too modest in not reminding us that he's 
coming from the State of Montana that has no sales tax.
  This Marketplace Fairness Act could be called the ``Offshore Online 
Retailers Act,'' because, while as Congressmen and Senators we can 
force the States to collect these taxes, we can't go into other 
countries and force them to collect taxes. So what will happen is a lot 
of our online retailers will move across the border where they enjoy 
the advantage of collecting those sales taxes, and there's no way to 
reach them and impose that tax upon them.
  Now, some say this is not a new tax, don't call it a new tax, while 
others say that it's not a tax increase, don't call this a tax 
increase. Well, I say if it quacks like a duck and it walks like a 
duck, it's a duck. I'm new to Congress, but if at the end of a 
transaction, I have less money in my wallet and the government has the 
money in their coffers, I call it a tax.

  Now, some will say, look, consumers already owe this tax. At the end 
of the year on April 15, they are supposed to pay the sales tax that 
wasn't collected in other States. But do you know what? That's just not 
true. They don't owe a sales tax because States long ago conceded that 
they don't have any authority to tax an event which occurs outside of 
their physical borders. They just can't do it without a physical 
presence. But States resented that they couldn't tax in other States, 
so they created something called a use tax. I say the use tax is 
actually a contrived tax. They know they can't tax an event outside of 
their borders, so they try to tax an event inside of their borders, 
which is the use of a product. But it's contrived in the sense that 
it's only owed if you didn't pay a tax on it somewhere else already.
  So what kind of a tax is that? I'll tell you what it is: it's an 
uncollectible tax. And the States haven't exerted much effort in 
collecting that tax. We are not here to become tax collectors for the 
States. I just want to remind the States that.
  Also, I want to talk a little bit more about my district. A large 
portion of my district is rural. We don't have stores to buy everything 
that we would like to be able to purchase. A lot of folks go online. A 
lot of folks are disabled and can't get to the store to go online. This 
is a regressive tax. This will punish those individuals who have the 
least mobility because they're online shopping. It also diminishes 
opportunities for businesses in rural areas by taxing those businesses 
that weren't taxed before that don't have a ready marketplace 
immediately in their vicinity.
  Look, we've heard from Big Business, we've heard from lobbyists, and 
we've heard from State governments. But there's somebody absent from 
this debate so far, and it's our constituents. I think we need to hear 
from them. And with that, and to address that issue, I yield to the 
gentleman from Florida.
  Mr. DeSANTIS. I thank the gentleman from Kentucky, and I would just 
add to your comments. You started by talking about federalism, the 
ability to kind of choose different tax laws, whatever laws, and this 
would actually facilitate higher taxes. It's a thumb on the scale in 
favor of higher taxes because it gives States the wherewithal to tax 
beyond their borders. So we should at least be trying to go in the 
other direction. I want Florida to be more like Montana, not more like 
some of the other high-tax States. And so that bears repeating.
  Here are some of the folks who have written in via Twitter with their 
thoughts. Chris writes in:

       Please tell the House that #InternetTax translates into 
     higher costs for families and consumers. A weak economy 
     cannot afford this.

  Andrew writes in:

       This will just be the 21st-century version of Smoot-Hawley. 
     Will the lunacy from D.C. never cease?

  Jay writes in and says:

       The Internet tax is an inappropriate extension of the 
     State's powers. It does not make commerce more fair.

  Another fellow writes in and says:

       It's a revenue grab, plain and simple. No taxation without 
     representation. Is that vague?

  Tiffany Lyle says:

       If you tax the Internet, it's like taxing air. We work hard 
     enough to earn what little we have.

  And then Glenn writes in:

       Remind them of how the Stamp Act went.

  I have some more, but I will yield back to the gentleman from 
Kentucky because I know you probably have some more comments, as well.
  Mr. MASSIE. Well, those comments bring up a very good point, and so 
do your comments. If this is a finger on the scale for higher taxes, 
States get to arbitrate and decide what gets taxed in their State. So 
right now we have exemptions for farm products and whatnot, but some 
States tax professional services in the transaction. And, of course, 
this bill opens up financial service transactions in one State to 
consumers in another State. But where does this end?
  Senator Baucus stated in the other Chamber that not just the 
financial world would be open to taxes on their services, but also 
possibly attorneys, architects, engineers and accountants. One can only 
imagine, by not asking the States to do anything to simplify their 
system in return for the benefit of having out-of-state businesses 
collect taxes for them, we're giving carte blanche to the States to 
impose even more taxes on business.
  Again, I think I'd like to hear a few more comments from our 
constituents.
  Mr. DeSANTIS. We do have some more.
  Cory writes in:

       I feel it may hinder an online business I've just started. 
     It's already making business pay.

  Mark says:

       #InternetTax won't help local stores, but will protect 
     online incumbents from new competition.

  Taylor Neuhaus writes in and says:

       I like the #InternetTax about as much as I like getting 
     teeth pulled.

  We have another fellow writes in and says:

       It hurts small businesses, and it's basically Walmart vs. 
     Amazon with consumers in the middle.

  Finally, I think this is a great comment from Ian Stumpf:

       An Internet tax will hurt one of the few remaining healthy 
     sectors of the economy #disastrous.

                              {time}  1940

  Mr. MASSIE. I thank the gentleman from Florida for sharing that with 
us. I think all too often we don't listen as much to our constituents 
as we should; and on this issue, it's very important because those are 
in fact the people who are going to bear the burden of this new tax. 
And I will call it a new tax. It's unprecedented in our Constitution 
and in the history of this country.
  I want to end this discussion tonight the way it began and the way I 
said it would end. No single individual who's a proponent of this tax 
has told me that it's going to help the economy. In fact, when I point 
out that it will increase taxes on consumers, when it will increase the 
burden on small businesses, and when it will apply pressure to offshore 
or online retailers, they all ultimately concede those points. This is 
not good for our country.
  The resistance to this bill comes from our constituents, and it's 
also bipartisan as well. So hopefully by bringing light to this today, 
we will begin the conversation, begin the debate that all too often 
doesn't happen out in the open and shed some light on this issue.
  I yield back the balance of my time, Mr. Speaker.

                          ____________________