December 21, 2005
Washington, D.C. – U.S. Senator Mike Enzi, R-Wyo., introduced legislation recently that will level the playing field for all in-store, catalog and online retailers so each has the same sales tax responsibilities as well as help states collect more revenue from the sales.
The “Sales Tax Fairness and Simplification Act,” S. 2152, would help states efficiently and fairly collect sales and use tax revenue that is being lost because remote sellers do not have to remit sales and use taxes on catalog and Internet purchases. Main Street retailers collect sales taxes, while many online and catalog retailers are exempt from collecting the same taxes. This is costing states and localities billions in lost revenue.
Enzi’s bill would encourage tax simplification by requiring states to implement and maintain measures before they can require any seller to collect and remit sales and use taxes. “Simply put, if Congress continues to allow remote sales taxes to go uncollected and electronic commerce continues to grow as predicted, other taxes, such as income or property taxes, will have to be increased to offset the lost revenue to state and local governments. I want to avoid that,” said Enzi.
The legislation would streamline the country’s more than 7,500 diverse sales tax jurisdictions by permitting states that become voluntary members of the Streamlined Sales and Use Tax Agreement to require remote sellers to collect and remit sales and use taxes. A total of 19 states have already enacted legislation to change their tax laws and implement the requirements of the agreement. The Agreement would help harmonize states sales and use tax rules, bring uniformity to definitions of items in the sales tax base, reduce the paperwork burden on retailers, and incorporate new technology to modernize administrative procedures.
“The states have acted. It is now time for Congress to provide states that enact the Streamlined Sales and Use Tax Agreement with the authority to require remote retailers to collect sales tax just as Main Street retailers do today,” said Enzi.
Enzi’s bill would not increase taxes or allow duplicate taxes by different states.
The bill has been referred to the Senate Finance Committee.
Sales Tax Fairness and Simplification Act
Senator Michael B. Enzi
December 20, 2005
Mr. ENZI. Mr. President, I rise today to introduce the Sales Tax Fairness and Simplification Act, a bill that will level the playing field for all retailers – in-store, catalog, and online – so each retailer has the same sales tax collection responsibility. All retail sales should be treated equally. The bill will also help states begin to recover from years of budgetary shortfalls.
This bill is not a disguised attempt to increase taxes or put a new tax on the Internet. Consumers are already supposed to pay sales and use taxes in most states for purchases made over the phone, by mail, or via the Internet. Unfortunately, most consumers are unaware they are required to pay this use tax on purchases the retailer does not choose to collect sales tax on at the time of purchase.
That means consumers who buy products online are required to keep track of their purchases and then pay the outstanding use tax obligation on their state tax forms. This has proven to be unrealistic, but what is real is most people do not know this or do not comply with the requirement. As such, states are losing billions of dollars in annual revenue. This legislation will help both consumers and states by reducing the burden on consumers and providing a mechanism that will allow states to systematically and fairly collect the taxes already owed to them.
This bill is not about new taxes. Simply put, if Congress continues to allow remote sales taxes to go uncollected and electronic commerce continues to grow as predicted, other taxes B such as income or property taxes B will have to be increased to offset the lost revenue. I want to avoid that. That is why we need to implement a plan that will allow states to generate revenue using mechanisms already approved by their local leaders.
This bill is about economic growth. Sales and use taxes provide critical revenue to pay for our schools, our police officers, firefighters, road construction, and more. It will bring more money B money that is already owed B into rural areas that are struggling economically. It will also help businesses comply with the complicated state sales tax systems. That means the business resources that have historically been spent on tax compliance could be used, among other things, to hire new people and buy new equipment.
This bill is about tax simplification. As the Supreme Court identified in the Quill versus North Dakota decision in 1992, the complicated state and local sales tax systems across this country have created an undue burden on sellers. The Quill decision stated that a multitude of complicated and diverse state sales tax rules made it too onerous to require retailers to collect sales taxes unless they had a physical presence in the state of the buyer. Local brick-and-mortar retailers collect sales taxes, while many online and catalog retailers are exempt from collecting the same taxes. This is not only fundamentally unfair to Main Street retailers, but it is costing states and localities billions in lost revenue.
The bill will help relieve this burden by requiring states to meet the simplification standards outlined in the Streamlined Sales and Use Tax Agreement. Working with the business community, the states developed the Agreement to harmonize state sales tax rules, bring uniformity to definitions of items in the sales tax base, significantly reduce the paperwork burden on retailers, and incorporate new technology to modernize many administrative procedures. This unprecedented Agreement will increase our nation's economic efficiency and facilitate the growth of commerce by dramatically reducing red-tape and administrative burdens on all businesses and consumers. However, most importantly, the Agreement removes the liability for collection errors from the retailer and places it with the state. This historic Agreement was approved by 34 states and the District of Columbia on November 12, 2002.
The states have made tremendous progress in changing their state tax laws to become compliant with the Agreement. Already, 19 states have enacted legislation to change their tax laws and implement the requirements of the Agreement. On October 3, 2005, the Streamlined Sales and Use Tax Agreement became effective.
This bill requires states to implement and maintain these simplification measures before they can require any seller to collect and remit sales tax. The Streamlined Sales and Use Tax Agreement includes dramatic simplification in almost every aspect of sales and use tax collection and administration, especially for the sellers who sell their products in more than one state. Areas of simplification include exemption processing, uniform definitions, state level administration of local taxes, a reduced number of sales tax rates, determining the appropriate tax rate, and reduced audit burdens for sellers using the state certified technology.
While the states have made great progress, the Quill decision held that allowing states to require collection is an issue that, "Congress may be better qualified to resolve, and one that it has the ultimate power to resolve." The states have acted. It is now time for Congress to provide states that enact the Streamlined Sales and Use Tax Agreement with the authority to require remote retailers to collect sales taxes just as Main Street retailers do today.
Congress needs to level the playing field for all retailers in-store, catalog, and online so each has the same sales tax collection responsibility. All retail sales should be treated equally. I believe Congressional action is needed to provide states that implement the Streamlined Sales and Use Tax Agreement with the authority to collect sales and use taxes from remote retailers. Adoption of the Agreement and Congressional authorization will provide a level playing field for brick and mortar and remote retailers.
Senator Byron Dorgan of North Dakota and I have worked tirelessly to assist sellers and state and local governments to find true simplification in almost every aspect of sales and use tax collection and administration. I want to thank Senator Dorgan for working with me on this policy issue for so many years. We have been successful in moving this issue forward from discussing it at the federal level with Members of Congress to the drafting of the Streamlined Sales and Use Tax Agreement to approving the Governing Board this year to push forward with implementation.
For the past eleven months, Senator Dorgan and I have worked with all interested parties to try to find a mutually agreeable legislative package to introduce this year. Many hours have been dedicated in trying to find the right solution to address all concerns. I appreciate everyone’s hardwork on this piece of legislation and believe it is time to introduce the bill before the end of the year.
Senator Dorgan and I will be introducing two separate bills this year, but will continue to work with each other and all interested parties to find compromise on the outstanding policy issues of concern to the stakeholders. Some of the issues that will be further discussed include, but are not limited to, modifications to the small business exception language, inclusion of tribal governments language, and modifications to the language about transactional taxes on telecommunications services. Bill introduction does not stop us from negotiating and working together to improve the final product that should be enacted into public law. I look forward to working with Senator Dorgan and all interested parties to produce a compromise bill in 2006 that addresses all concerns raised over the past year.
The Sales Tax Fairness and Simplification Act provides states that implement the Streamlined Sales and Use Tax Agreement with the authority to collect sales or use taxes equally from all retailers. Adoption of the Agreement and Congressional authorization will provide a level playing field for brick and mortar and remote retailers.
I respectfully request unanimous consent for my statement and bill to be entered into the official record. I yield the floor.