[Congressional Record (Bound Edition), Volume 159 (2013), Part 4]
[Senate]
[Pages 5591-5594]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        MARKETPLACE FAIRNESS ACT

  Mr. DURBIN. I note Senator Enzi is on the floor. At 5:30 p.m. we are 
voting on a measure which will affect literally millions of Americans. 
I will provide some illustration about this bill.
  A close friend of mine is the mayor of Normal, IL. His name is Chris 
Koos, and he is a local businessman. His business sells bicycles, 
running shoes, running paraphernalia, and equipment. Chris has a good 
business and has done well.
  He told me that in the last 10 or 20 years things have changed. He 
said, It is not unusual for someone to come into my store, ask to see a 
pair of running shoes, try them on, look at the different colors, and 
then leave without buying anything. Sometimes they will come back 
several weeks later with shoes and they will say: Chris, we bought 
these over the Internet, and they are not what we thought they would 
be; what can we do about it?
  This is called ``showrooming'' and is happening more and more. Why 
would somebody try on the shoes, not purchase them, and then go to the 
Internet? In many instances, it is because many Internet retailers do 
not collect sales tax. In my State, this means 9 or 10 percent less 
cost to purchase an item over the Internet.
  This is the reality for most companies. Some companies, Internet 
retailers, collect a sales tax. I recently purchased a book on Amazon, 
and they charged the sales tax, which is appropriate in Illinois. Most 
companies do not collect the sales tax.
  I wish to tell another side of this story. When we are dealing with 
the collection of this sales tax, we are dealing with existing law. 
Forty-six States in America have sales tax. The States that do not are 
Montana, Oregon, New Hampshire, and Delaware. Every other State has 
either a sales tax or what they call a use tax, and the State law 
requires all of us living in those States to pay a sales tax on 
Internet purchases even if the seller didn't charge it.
  In my State, people are supposed to pay it when they file their 
annual State income tax return. There is a line: How much do you owe 
for Illinois sales tax that should have been paid on remote purchases 
or online purchases? It is really an honor system is what it comes down 
to. Though there is a legal obligation, there is no direct enforcement. 
It turns out that only 1 out of 20 people in Illinois even know this 
exists. So only 5 percent of the population know.
  As I mentioned several times, a few years ago my bookkeeper said--
when she was doing our taxes--Senator, do you want to pay the sales tax 
you owe? I said: I think I do. I did, and we have ever since. But most 
people aren't aware of it.
  So here we have businesses all around America, on Main Streets and in 
shopping malls, collecting sales tax on the things they sell and 
competing with Internet retailers who do not collect the sales tax. 
Secondly, we have individuals with an obligation to pay the sales tax, 
but most of them do not. So the bill we will consider at 5:30 this 
afternoon is going to try to resolve this problem.
  Over 20 years ago the U.S. Supreme Court said: Congress, you have to 
fix this. We are not going to fix it by court decision. The States 
can't fix it because it affects retailers from all around the United 
States. In the Quill decision before the Supreme Court, they said: 
Congress, you have to fix it.
  It was about that time my colleague, Senator Enzi of Wyoming, teamed 
up with Senator Byron Dorgan of North Dakota to fix it. Many years have 
passed and here we are today on the floor of the Senate trying to 
finally resolve this issue. We have reached a good place. I think we 
have a reasonable approach to it, and this is what it says: States have 
to decide to opt in to our system. In other words, no mandate from the 
Federal Government.
  If States opt in to what we propose in this legislation, here is what 
it means.

[[Page 5592]]

It means States will be willing to provide the Internet retailers with 
the software program so that when they sell into the State of Illinois 
and the purchaser gives the home address, the program will 
automatically calculate how much sales tax should be collected on the 
sale. This is free to the retailers, and it allows them to collect the 
sales tax and then remit the sales tax to the State of Illinois or the 
other States in which they are selling.
  We have worked with businesses--Internet businesses, obviously--and 
have the support of amazon.com, the largest Internet retailer. For 
years they have been fighting this battle State by State. As I said, 
they are now in Illinois collecting sales tax on things they sell over 
the Internet. But they have decided, and many others as well, it is 
time to put an end to these statewide court battles, statewide 
legislative battles, and finally have a national program to collect the 
sales tax.
  What it means is a lot of money for the States and localities. My 
State is struggling with terrible budget problems. We are in the red 
with deficits, our pension system is in trouble, and money that should 
be collected for sales tax is not being collected. So what we are doing 
with this bill is allowing States to have Internet retailers selling in 
those States to collect the sales tax.
  Several of my colleagues will come to the floor to oppose this, and 
they have one thing in common. Most of them--I think virtually all of 
them--live in States that don't have a sales tax. So what about those 
States? If we say Internet retailers can collect a sales tax, what does 
that mean in the State of Montana, for example? It means nothing 
changes for the people living in Montana. If there is no State sales 
tax they have to pay in their stores, this bill is not going to impose 
any new sales tax on the people of Montana.
  So, then, why are the Senators from Montana opposing it? They are 
arguing their Internet retailers should not have to collect a sales tax 
for sales made in States that do have a sales tax. My answer to that 
is, if you wanted to do business in Illinois--if you wanted to move 
your shoe store to Illinois--you would have to follow Illinois law; you 
would have to play by Illinois rules--you would have to pay your 
property tax and collect the sales tax. That is accepted. If you want 
to do business in our State or any other State, those are the rules. We 
think the same thing should apply when it comes to Internet sales.
  If a Montana Internet retailer, a State with no sales tax--Montana 
has no sales tax--wants to sell in Illinois, we are saying they need to 
collect money from the Illinois purchaser--not from the Montana 
purchaser but from the Illinois purchaser--for the sales tax and remit 
that back to the State of Illinois. If they do not want to do that or 
sell in Illinois or any State with a sales tax, that is their right. 
But if they do, for the privilege of selling in our State, we are 
saying they will pay this sales tax.
  Mr. President, I ask unanimous consent to have printed in the Record 
a column from last week, April 21, from the Wall Street Journal, 
entitled ``Tax Internet Sales, Stimulate Growth.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Apr. 17, 2013]

                  Tax Internet Sales, Stimulate Growth

                         (By Arthur B. Laffer)

       States can cut their income-tax rates if Web vendors 
     collect the sales taxes that are legally due.
       Reinvigorating the economy should be priority No. 1 for 
     federal and state leaders. After enjoying an average growth 
     rate above 3.5% per year between 1960 and 1999, Americans 
     have had to make do with less than one-half that pace since 
     2000.
       The consequences are already dramatic and will become even 
     more so over time. Overall we are 20% poorer today than we 
     would be had the pre-2000 growth rate persisted. All other 
     things being equal, less national income also means federal 
     and state fiscal problems are more intractable.
       At the state level, there are reforms that can alleviate 
     the problems associated with declining sales-tax bases and, 
     at the same time, allow the states to move closer to a pro-
     growth tax system. One such reform would be to have Internet 
     sellers collect the sales taxes that are owed by in-state 
     consumers when they purchase goods over the Web.
       So-called e-fairness legislation addresses the inequitable 
     treatment of retailers based on whether they are located in-
     state (either a traditional brick-and-mortar store or an 
     Internet retailer with a physical presence in the state) or 
     out of state (again as a brick-and-mortar establishment or on 
     the Internet).
       In-state retailers collect sales taxes at the time of 
     purchase. When residents purchase from retailers out of state 
     (including over the Internet) they are supposed to report 
     these purchases and pay the sales taxes owed--which are 
     typically referred to as a ``use tax.'' As you can imagine, 
     few people do.
       The result is to narrow a state's sales-tax base. It also 
     leads to several inefficiencies that, on net, diminish 
     potential job and economic growth.
       Exempting Internet purchases from the sales tax naturally 
     encourages consumers to buy goods over the Web; worse, the 
     exemption incentivizes consumers to use in-state retailers as 
     a showroom before they do so. This increases in-state 
     retailers' overall costs and reduces their overall 
     productivity.
       The exemption of Internet and out-of-state retailers from 
     collecting state sales taxes reduced state revenues by $23.3 
     billion in 2012 alone, according to an estimate by the 
     National Conference of State Legislatures. The absence of 
     these revenues has not served to put a lid on state-
     government spending. Instead, it has led to higher marginal 
     rates in the 43 states that levy income taxes.
       Therefore--as with any pro-growth tax reform--the sales tax 
     base in the states should be broadened by treating Internet 
     retailers similarly to in-state retailers, and the marginal 
     income-tax rate should be reduced such that the total static 
     revenue collected by the state government is held constant.
       One difficulty in imposing an Internet sales tax is the 
     existence of dozens, if not hundreds, of sales-tax 
     jurisdictions in many states, often with the tax rates and 
     tax classification of the same goods varying by jurisdiction. 
     It is overly burdensome to task companies with remitting 
     sales taxes to more than 9,500 such tax jurisdictions. 
     Instead, each state should set up a single sales-tax system, 
     making compliance as easy as possible for today's modern 
     sellers.
       Addressing e-fairness from a pro-growth perspective creates 
     several benefits for the economy. A gross inequity is 
     addressed--all retailers would be treated equally under state 
     law. It also provides states with the opportunity to make 
     their tax systems more efficient and better aligned toward 
     economic growth, as well as improve the productivity of local 
     retailers.
       The principle of levying the lowest possible tax rate on 
     the broadest possible tax base is the way to improve the 
     incentives to work, save and produce--which are necessary to 
     reinvigorate the American economy and cope with the nation's 
     fiscal problems. Properly addressing the problem of e-
     fairness on the state level is a small, but important, step 
     toward achieving this goal.

  Mr. DURBIN. There are differences of opinion about this, but here are 
several things we should make clear. This is not a new tax. The bill we 
have before us will not create any new tax. It creates a method for 
compliance or collection of an existing tax.
  Secondly, it is only fair to the businesses across America--the 
entrepreneurs who open their stores every morning and do business. If 
they are required to collect a sales tax on their sales, it is only 
fair those who are competing with them do the same.
  Also, I might add, it is naive to believe the Internet retailers are 
selling into States and not using the benefits of the State. When I buy 
a book on Amazon or wherever it happens to be, ultimately it may be 
delivered by UPS, for example. That UPS truck is going to use the 
streets of Chicago and the streets of Springfield. It will use all the 
basic infrastructure of the cities and the State of Illinois to deliver 
its product. I don't think it is unreasonable they collect taxes to 
support the State and the city where they are making their sales, and 
that is what this is about.
  I also note, Mr. President, that today the White House announced the 
President supports this bill to give States the authority to collect 
sales tax from Internet retailers. The White House spokesman said: The 
Senate bill will level the playing field for small businesses and 
brick-and-mortar retailers undercut by online retailers. Governors and 
mayors are overwhelmingly in support of this bill. They told the White 
House the bill is needed. The States are losing out on revenues that 
can go to education, law enforcement, infrastructure investments, and 
health care.

[[Page 5593]]

  We have a wide array of businesses supporting this. You can imagine. 
Retailers large and small are supporting it. Labor unions are 
supporting it as well. Business and labor have come together. They 
believe this is only a matter of fairness.
  I want to thank my colleague, Senator Enzi of Wyoming--and then I 
will yield the floor for him--for his leadership, persistence, and 
patience on this issue. It has been a long time. Senator Enzi was in 
the retail business before he came to the Senate, and he was one of the 
earliest supporters of this measure. When Senator Dorgan retired, I 
asked Mike if I could join him in this effort, and he has been a 
terrific ally.
  At this point, Mr. President, I yield the floor for my colleague and 
friend from Wyoming.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. I thank the Senator from Illinois, Mr. Durbin, for his 
interest and participation in this issue, his ability to explain it, 
and for the way he has brought a lot of people along in helping out 
with this bill. He has been a great replacement, and we have made more 
progress than we ever have in the other 14 years of working on the 
bill. So I thank him for that and for his ability to explain things so 
clearly.
  I also want to thank Senator Lamar Alexander who helped us change 
this bill in the last year from about an 80-page bill to an 11-page 
bill and made it States rights. As Senator Durbin so eloquently 
explained, this takes action by the States. This is just to clear up 
the Quill case that made it a little confusing about whether they could 
charge a tax and then challenged Congress to fix the problem.
  The solution Senator Alexander came up with condensed the bill 
considerably and made it a lot easier. But it made it a States rights 
issue so that the States have to take some action.
  I thank Senator Heitkamp as well. She is brand new to the bill but 
has more years of experience than anybody because she was a part of the 
Quill case when it came up. She was representing North Dakota in that 
case, and that is the other side of the case. She can explain the 
intricacies of that and the challenge we were given, and the number of 
reasons why it didn't happen earlier.
  One of the reasons is that 20 years ago the Internet was in its 
infancy and nobody knew what its capabilities were going to be. Most 
people didn't even know it was out there. That has changed over quite a 
period of time to where it is now one of the handy tools everybody 
uses. We have come to recognize there are apps that are available that 
will answer any question and sources of information that will provide 
us with what we need to know on virtually any subject. I think that has 
probably put some encyclopedias out of business, but it has made 
information more readily available, and it has made products available 
that people didn't have the availability of before. But it is creating 
a bit of a dilemma that marketplace fairness straightens out.
  Today we are scheduled to vote on the motion to proceed to the bill 
at 5:30, and I do strongly encourage my colleagues to vote yes. Let me 
explain why.
  As Senator Durbin said, I have been working on this sales tax 
fairness issue since joining the Senate in 1997, and I may have a 
unique perspective on the dozens of proposals that have been 
introduced. For instance, I have worked sales tax from a number of 
different aspects. I worked the sales tax issue when I was in the 
Wyoming Legislature. I know when our legislators were considering sales 
tax they didn't intend to discriminate against the people in the 
communities, those who hire the people in the communities and pay the 
property tax to the communities and participate in all of the community 
events. They definitely didn't anticipate they were going to be the 
source where people could come in and feel and touch and try on the 
product and then check the bar code with their cell phone--one of the 
advances made possible now through Internet use--and then find out if 
there is a lower price, which is usually based on no sales tax.
  I am pleased some businesses across the Nation have said that isn't 
fair and have decided to voluntarily do the sales tax. And there is no 
problem with them doing that.
  I have also been a retailer, so I know that feeling. My wife and I 
had a shoe store, so I know the feeling, again, the Senator from 
Illinois described, of people coming in, trying it on, feeling it, 
making sure it is the right size and then checking to see where else it 
is available. It is discouraging when the sales tax is the difference. 
So as a former small business owner, I believe it is important to level 
that playing field for all retailers--the in-store, the catalogue, and 
the online--so an outdated rule for sales tax collection doesn't 
adversely impact particularly small businesses and Main Street 
retailers.
  I know a lot of year books would never be published if it wasn't for 
the support of some of the local businesses. Thousands of these local 
businesses are forced to do business at a competitive disadvantage 
because they have to collect a sales tax or a use tax and remote 
sellers don't. In some States that can mean a 5- to 10-percent price 
disadvantage. We should not be subsidizing some taxpayers at the 
expense of others. All businesses and their retail sales should be 
treated equally.
  As a former mayor, I know sales taxes go to State and local 
governments to bring in needed revenue for maintaining schools, fixing 
our roads, supporting law enforcement, fire protection, those first 
responders we are always so conscious of, particularly today and 
through this last week. If Congress fails to authorize States to 
collect tax on remote sales, and electronic commerce continues to grow, 
we are implicitly blessing a situation where States will be forced to 
raise other taxes, such as income and property taxes, to offset the 
growing loss of sales tax revenue. Do we want that to happen? I don't 
think so. We need to promote economic growth, not stifle it.
  As the Supreme Court identified in the Quill v. North Dakota decision 
in 1992, the Quill decision challenged Congress to come up with a 
better system, a way of making it fair. The local brick-and-mortar 
retailers collect sales taxes, while many online and catalog retailers 
are exempt from collecting the same tax as a result of that case, and 
that was based on whether they had a nexus. The nexus has changed 
dramatically since that time. That used to be where you would go and 
actually pick up something, but now it is where you can order something 
and that can be even moved around the country virtually at will. So we 
designated some States as not having to do it. Web sites could be set 
up in that State for people to sell through from anywhere.
  So the taxes need to be collected. It needs to be fair, and right now 
it is not only fundamentally unfair to Main Street retailers, but it is 
costing States and localities billions in lost revenue. The Supreme 
Court invited Congress to address this issue, and we stalled. We know 
that early on the Internet was new, but now everything is done on the 
Internet. So now is the time for Congress to act.
  Many Americans don't realize that when they buy something online or 
order something from the catalog of a business outside their own State, 
they still owe the sales tax. I know from being a legislator that was 
part of what we put in place. There is a form in Wyoming that you can 
fill out and pay your tax. It is pretty hard to keep track of, 
particularly on smaller items, but it ought to be easier on big items. 
And I do know there are about three people who comply with that.
  For over a decade Congress has been debating how to best allow States 
to collect sales tax from the online retailers in a way that puts Main 
Street businesses on a level playing field with the online retailers. 
So on February 14, 2013, the bicameral--House and Senate--and 
bipartisan--Republicans and Democrats--put together the Marketplace 
Fairness Act that was introduced to close that 20-year loophole that 
distorts the American marketplace by picking winners and losers, by 
subsidizing some businesses at the expense of other businesses and 
subsidizing some taxpayers at the expense of other

[[Page 5594]]

taxpayers. All businesses in retail sales and all consumers and their 
purchases should be treated equally.
  The bill also empowers States to make the decision themselves. This 
is not Congress saying what has to be done or whether they collect 
them. If they choose to collect already existing sales taxes on all 
online purchases regardless of whether the sale was online or in-store, 
States will be able to if this bill passes. If they want to keep things 
the way they are, that is the State's choice. That is why this bill is 
the States rights bill.
  The Marketplace Fairness Act does not tax Internet use, it does not 
tax Internet services, and it does not raise taxes. It gives States the 
right to collect what is owed by the purchasing individuals. Some argue 
that the bill is a disguise to create taxes. It is not. Consumers are 
already supposed to pay taxes and use taxes in most States for 
purchases made over the phone, by mail, or by way of the Internet.
  Mr. President, in a couple of minutes we are going to have a moment 
of silence for the tragic events that happened. I yield the floor for 
the time to be able to do that.
  Mr. REID. Mr. President, I ask unanimous consent for a moment of 
silence and that the Senator from Wyoming then be again recognized.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________