Mr. President, I rise today with Senators Durbin and Alexander and others to discuss an amendment I am filing to the Fiscal Year 2014 Budget Resolution. The amendment establishes a deficit neutral reserve fund that allows states to enforce state and local use tax laws and collect taxes already owed under state law on remote sales. The amendment captures the policy my colleagues and I are pursuing in S. 336, The Marketplace Fairness Act.
As a former small business owner, I believe it is important to level the playing field for all retailers – in-store, catalog, and online – so an outdated rule for sales tax collection does not adversely impact small businesses and Main Street retailers. Thousands of local businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not, which in some states can mean a 5 to 10% price advantage. We should not be subsidizing some taxpayers at the expense of others.
Sales taxes go directly to state and local governments, which brings in needed revenue for maintaining our schools, fixing our roads and supporting local law enforcement. 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 tax - such as income or property taxes - to offset the growing loss of sales tax revenue. Do we want this to happen? No – we do not.
Now is the time for Congress to act. Many Americans do not realize that when they buy something online or order something from a catalog from a business outside of their own state that they still owe the state sales tax. For over a decade, Congress has been debating how to best allow states to collect sales taxes from online retailers in a way that puts Main Street businesses on a level playing field with online retailers.
On February 14, 2013, a bicameral, bipartisan Marketplace Fairness Act was introduced to close the 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 taxpayers at the expense of other taxpayers. All businesses and their retail sales and all consumers and their purchases should be treated equally. The bill also empowers states to make the decision themselves. If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in store, they can. If they want to keep things the way they are, it’s a state’s choice.
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 individual.
I want to provide you with some highlights of what the Marketplace Fairness Act accomplishes:
• The bill gives states the right to decide to collect – or not to collect – taxes that are already owed.
• The legislation would simplify and streamline the country’s more than 9,000 diverse sales tax jurisdictions and provide two options by which states could begin collecting sales taxes from online and catalog purchases.
• The bill also carves out small businesses so that they are not adversely affected by the new law by exempting businesses with less than $1 million in online or out-of-state sales from collection requirements. This small business exemption will protect small merchants and give new businesses time to get started.
Do not let the critics get away with saying this kind of simplification cannot be done. The different tax rates and jurisdictions are no problem for today’s software programs.
As a former mayor and state legislator, I strongly favor allowing states the authority to require sales and use tax collection from retailers on all sales if they choose to do so. We need to implement a plan that will allow states to generate revenue using mechanisms already approved by their local leaders. We need to allow states the ability to collect the sales taxes they already require – if enacted, it would provide approximately $23 billion in fiscal relief for the states for which Congress does not have to find an offset. This will give states less of an excuse to come knocking on the federal door for handouts and will reduce the problem of federally attached strings.
The Marketplace Fairness Act is about States’ rights, and it is about fairness.
I strongly encourage my colleagues to vote for the Enzi amendment to support the goals of states’ rights and a level playing field for all businesses.