[Congressional Record (Bound Edition), Volume 157 (2011), Part 14]
[Senate]
[Pages 19211-19213]
[From the U.S. 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.
  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

[[Page 19212]]

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 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.

[[Page 19213]]

     
                                  ____
            [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.

                          ____________________