[Congressional Record (Bound Edition), Volume 159 (2013), Part 5]
[Senate]
[Pages 6178-6180]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           ORDER OF PROCEDURE

  Mr. DURBIN. Mr. President, I ask unanimous consent that the 20 
minutes prior to the vote, which is scheduled at 5:30, in relation to 
amendment No. 741 be equally divided between the proponents and 
opponents, with proponents controlling the final 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. Thank you, Mr. President.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. CRUZ. Mr. President, I rise today to speak out against the so-
called Marketplace Fairness Act. In my view, during a time of economic 
challenge, as we are in today, the very top priority of every elected 
official, whether Republican or Democrat, should be to restore economic 
growth, to get our economy moving, to get back to the economic 
dynamism, the economic strength that has lifted so many millions out of 
poverty and toward the American dream. This bill, if enacted into law, 
would hurt economic growth and would be a mistake.
  First of all, more taxes will hurt economic growth, and this bill, if 
enacted, would in effect create a national Internet sales tax. It would 
subject small online retailers to paying taxes in 9,600 different 
jurisdictions all across this country. At a time when so many are 
hurting, we should be discussing how to reduce regulatory burdens on 
small businesses and how to reduce tax burdens on small businesses, how 
to reduce the complexity of taxes on small businesses, and this bill 
goes in exactly the opposite direction.
  In particular, those who will be hurt the most by this bill if it is 
passed are small mom-and-pop retailers online. The threshold for this 
bill is $1 million in gross online sales. That is not profit; that is 
$1 million in total sales, gross sales, and $1 million for a starting 
business is not a terribly high threshold for their gross, not their 
profits. That has to cover the costs and all expenses of the business. 
It has to cover any salary, any rent, any Web costs, communications, 
travel, accounting, legal services, plus the costs of goods sold. These 
small- and medium-sized businesses would suddenly find themselves 
subject to 46 different States and 9,600 local jurisdictions. They 
would find themselves having to pay tax filings, potentially, in all 46 
States monthly or quarterly and to be subjected, potentially, to audits 
from each of these local counties, each of these local municipalities.
  I have with me here today a listing of all of the tax rates of these 
9,600 different jurisdictions. It is truly indecipherable, that you can 
look and pick any State and get the county and see the different tax 
rates. Indeed, in a lot of counties--for example, I just opened this at 
random. In Colorado--which I happened to open it to--if you look in 
Taylor Park, if it happens to come from the 81210 ZIP Code, the tax 
rate is 4.5 percent, but if it is in the same county that comes from 
the 81230 ZIP Code, the tax rate is 8.25 percent.
  Small businesses--a small mom-and-pop just getting started on the 
Internet would be required to comply with all of these taxing 
jurisdictions, to send the taxes to all of these taxing jurisdictions, 
and to be subject, potentially, to audits from 9,600 taxing 
jurisdictions. That makes no sense.
  I wish to point out also that this is not fundamentally about 
fairness. The proponents of this act point to small mom-and-pop stores 
that are their bricks-and-mortar retailers. But those are not the main 
proponents of these bills. A small bricks-and-mortar retailer right now 
is losing sales primarily to two different sources: No. 1, big-box 
bricks-and-mortar retailers. They are losing a lot of sales to big-box 
large retailers. This bill does nothing about that. No. 2, they are 
losing substantial sales to large online retailers, the giant 
corporations.
  But here is an interesting statistic. Nine of the ten largest 
Internet retailers are already paying sales taxes in all 46 States that 
have sales taxes. Why? Because they have a physical presence in the 
State.
  What the Supreme Court has said is, if you are physically in a State, 
the State can force you to collect its tax. But if you are not 
physically there, the Constitution does not let you haul someone in 
from a distant State and force them to collect your taxes because you 
do not have any accountability to those individuals in a distant State.
  In terms of the small mom-and-pop retailers, they are losing their 
sales to the big-box and big Internet retailers, all of whom are 
already paying these taxes.
  So what do we have here? We have a bipartisan coalition, 
unfortunately, that it appears is going to pass this bill in this 
Senate. But the coalition is driven by the fact that you have big 
business united. You have the big business bricks-and-mortar companies 
and the big business online retailers all together because the impact 
of this bill is

[[Page 6179]]

to hammer the small business online retailers, to make it harder for 
the little guys to compete. So you see a strange alliance here in 
Washington, but one that I think is exactly backwards of what we ought 
to be doing.
  I think it is fundamentally unfair to ask a Texas business to collect 
taxes for California Governor Jerry Brown or for New York City Mayor 
Bloomberg and a nanny State, in particular, because they cannot hold 
those politicians accountable. They do not have a presence there. They 
do not vote there. They do not have influence there. But yet they are 
being dragooned into collecting those taxes. I think that is 
fundamentally not right.
  Let me give you an example of how this will hurt small businesses. 
There is a woman in Texas named Ann Whitley Wood who wrote a letter to 
our office. She lives in Dallas and had created an online consignment 
store. Even though it is largely a one-person operation, she may come 
close to doing $1 million in sales--which, keep in mind, are not 
profits; those are gross sales. Her letter said:

       Legislators must understand that it is both possible and 
     common for a small seller like me to reach about $1 million 
     in sales with a near-one person operation.

  She estimates it could take her 6 weeks a year to comply with the 
sales tax procedures for all of the collecting States. That impact on a 
small business is crushing. A giant corporation has accountants, has 
lawyers, has people designed to deal with that. For a small business, 
it hits them in particular.
  I point out even more fundamentally, the Internet has been this 
incredible haven of entrepreneurial freedom. It has enabled people to 
start businesses with nothing, out of their garage, and sell all over 
the world. It has transformed the ability for single moms and Hispanics 
and African Americans and people with nothing to go and start a 
business. Because it used to be that you needed this big distribution 
network, you needed warehouses, you needed trucks, you needed all of 
this, so it was difficult for someone to start a small business.
  The Internet has transformed all of that. There are 2.3 million 
Hispanic small business owners. The Internet has been critical to their 
being able to open those small businesses because it lets them 
communicate with the world and get their products out.
  I believe the Senate should treat the Internet as a safe haven, that 
it should be treated as free from taxes and regulations that would 
hamper the entrepreneurial spirit and make it harder for the little 
guy, for small business to be created, to grow, and thrive. When they 
become gigantic corporations, they will have a physical presence in the 
State, and then they will be subject to the taxes. But do not hit them 
when they are getting started on the Internet. I think it would be 
absolutely foolish to do anything to impinge on the entrepreneurial 
freedom of the Internet.
  In conclusion, I want to say three very simple things.
  No. 1, in my judgment, we should not be taxing the Internet, period. 
No. 2, we should not be increasing the burdens on small businesses, 
particularly at a time of economic challenge, period. And, No. 3, we 
should not be favoring politicians and big business at the expense of 
the little guy, at the expense of the single mom trying to start a 
small business to feed her kid, at the expense of the Hispanic 
immigrant trying to start a small business and work toward the American 
dream.
  We should not be standing with politicians looking for more tax 
revenue and big businesses looking to make it harder for their 
competitors to survive. Instead, we should stand up with the little 
guy, the small business, with the American people.
  I urge the Senate to reject this bill. If the Senate does pass it, I 
would urge the House to listen to the American people and reject the 
bill as well.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I think we only have 2 or 3 minutes before 
the 20-minute period that has been reserved equally for both sides. I 
wish to use those 3 minutes to respond directly to my colleague from 
the State of Texas.
  The first thing he says is, do not tax the Internet. Good news. I 
just went through the entire bill. There is no tax on the Internet in 
the bill, none. So we have taken care of point No. 1. In fact, we 
wanted to add the Internet Freedom Act here, which would have said 
expressly: We will continue the prohibition against tax on the 
Internet, and it was objected to by one of the opponents of this bill.
  The second thing he says is, do not put a burden on small businesses. 
I would say to my friend from Texas, what about the small business that 
does not have Internet sales?
  You have just put a burden on them because they cannot compete with 
Internet retailers that do not collect sales taxes.
  I might say also, when it comes to small business exemptions, we 
exempt those with sales of $1 million or less in the previous year. 
That exempts 99 percent of all Internet retailers. The small 
businesses--the Hispanic and non-Hispanic businesses--collect sales 
taxes in Texas on the first dollar of sales. We exempt $1 million in 
sales for their competitors in Internet retail.
  The final thing the Senator says is, do not favor large businesses. 
The coalition supporting this bill includes the smallest businesses, 
the mom-and-pop businesses. Of course, it includes the big-box stores 
and the big chains. But it goes all the way down the line. They are all 
in competition.
  What we have put in here, with this exemption, exempts 99 percent of 
all online retailers. When the Senator says he looks at 9,600 different 
taxing jurisdictions and cannot figure out how in the world we are ever 
going to figure this out, I refer him to page 3 of the bill. Please 
start reading at line 14 through 24, where you will see that we 
expressly provide there must be a single entity within the State 
responsible for all State and local sales. So you are not going to have 
9,600. You are going to have, at most, 45 separate entities--the 45 
States with sales taxes--as well as audits; one audit from the State, a 
single audit.
  We do not want to put a burden on any businesses--large, small, 
Internet or not--but we do want to level the playing field.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Under the previous order, there will now be 20 
minutes of debate equally divided.
  Who yields time?
  If no one yields time, the time will be charged equally.
  The Senator from Illinois.
  Mr. DURBIN. Parliamentary inquiry: I believe the order suggests that 
the time is equally divided between the opponents and proponents, and 
the opponents have the first 10 minutes and the proponents the final 10 
minutes. So I would ask the Chair to clarify his ruling.
  The PRESIDING OFFICER. The Senator is correct.
  The Senator from New Hampshire.
  Mrs. SHAHEEN. Mr. President, I come to the floor again this afternoon 
to continue my opposition and concerns about the Internet sales tax 
legislation that has been submitted.
  I appreciate that we are going to vote on this bill in a few minutes, 
and I appreciate that I am probably going to lose. But I do think it is 
important to raise these concerns again because I think we have to take 
a look at the issues that have been raised and see if there are any 
ways to address them.
  There are a number of problems with the bill that in my State of New 
Hampshire--which has no sales tax--makes it anything but fair. In fact, 
it creates an unfair situation for small businesses in a number of 
ways.
  First, it is unfair for businesses in my State of New Hampshire and 
the four other States in this country that do not collect a sales tax. 
We did not have an opportunity to address this issue through 
amendments. I think it is not fair for us to pass a bill out of the 
Senate that fundamentally makes an impact on businesses in States where 
we have no ability to address the imposition of these taxes.
  I also think we should not pass a bill that is going to create 
unnecessary

[[Page 6180]]

new redtape for small companies across the country. One of the real 
benefits of the Internet has been the innovation and the job creation 
it has spawned. What this legislation does is put in place redtape that 
is going to put small companies that sell online at a severe 
disadvantage, making it harder for them to compete with large online 
retailers.
  As a former small business owner myself, I know how time consuming 
regulations and compliance can be. Make no mistake about it, we are 
creating a bureaucratic morass for small businesses under this 
legislation. Small companies will be looking at complying with 46 
different State laws. They are going to face audits or lawsuits, 
potentially, in some of these States.
  Small business owners, who are working hard to grow their companies, 
do not need additional paperwork to distract them from running their 
companies. I fear that is what this bill will create. I urge my 
colleagues to take another look and see how we can address those 
concerns.
  I yield the floor.
  Mr. LEVIN. Mr. President, the Marketplace Fairness Act is designed to 
address a simple problem--a significant loss in States' sales tax 
revenues arising from e-commerce.
  Generally, retail businesses are required to collect and remit sales 
and use taxes on qualifying merchandise or services. While most States 
require consumers to remit use taxes for purchases from out-of-State 
vendors, compliance is extraordinarily low as States cannot legally 
mandate the collection and remittance of taxes by a business unless the 
business has a physical presence in the State.
  This restriction, which was articulated in the 1992 Supreme Court 
case, Quill Corp. v. North Dakota, went so far as to invite Congress to 
address the issue. It is time we do that.
  In an era of unprecedented e-commerce, Congress's failure so far to 
address this problem unfairly deprives State treasuries of much-needed 
tax revenue because Internet-based retailers are not required to charge 
sales tax to their out-of-State customers. As you might imagine, a 
large number of State governments have asked for this legislation to 
fix that problem, including the current Republican Governor of 
Michigan. In fact, Michigan governors of both political parties have 
asked Congress to pass this important piece of legislation, and I agree 
with them.
  The Governor of Michigan says that passing this law will help the 
State of Michigan collect more than $800 million over the next 2 years. 
Those are revenues that the State desperately needs.
  I also think it's important to keep in mind some of the things this 
bill doesn't do. This bill does not authorize the States to create 
State-level financial transaction taxes, as some have erroneously 
argued. In fact, the Marketplace Fairness Act does not create, endorse, 
or recommend new Federal, State or local taxes of any kind.
  This bill gives States the option of pursuing collection authority by 
simplifying their tax structure, but States can also choose to do 
nothing differently than they do today. The Marketplace Fairness Act is 
about more equitably collecting taxes that are already owed.
  Over the past decade, many States have worked together to develop a 
framework to harmonize sales and use tax collection and remittance, 
known as the Streamlined Sales and Use Tax Agreement. Michigan is 1 of 
the 24 States that currently participate in that agreement. But, in 
order for the agreement to be legally enforceable, Congress would need 
to enact legislation granting States the authority to require out-of-
State merchants to remit sales and use taxes. This bill would do that.
  I support this effort to simplify and improve sales tax collection, 
and I am a cosponsor of this bill. This bill will level the playing 
field between on-line retailers and those with ``brick and mortar'' 
stores, ensuring that we do not give an unfair tax advantage to one 
type of retailer over another. This is about ensuring that our States 
have the ability to collect the taxes they need to fund schools, and 
law enforcement, and other key priorities.
  I will vote for this bill, and I urge my colleagues to do the same.
  The PRESIDING OFFICER. The Senator from Illinois.

                          ____________________