The Marketplace Fairness Act
Address to the National League of
U.S. Senator Michael B. Enzi
March 13, 2012
Thank you for inviting me to speak with you today about the Marketplace Fairness
Act. I really appreciate the National Association of Counties’ strong support of the Marketplace Fairness Act. With your assistance, we can help counties and states solve what has become a very serious monetary fairness problem.
This bill makes it easy for consumers and easy for retailers to comply with States
sales tax laws, and it helps States without raising taxes or creating new federal spending. Your active grassroots outreach at home and with your congressional and state representatives will help us significantly to enact this important bill into law this year. Actually, it will do more than help. Without a serious effort from states, counties, retailers and others, you are going to have to continue to go without this potential revenue.
The Marketplace Fairness Act was written in the aftermath of the Supreme Court's
1992 Quill decision. The courts invited this bill. Congressional involvement is necessary because the ruling stated that the thousands of different state and local sales tax rules were too complicated and onerous to require businesses to collect sales taxes unless they had a physical presence (store, warehouse, etc.) in the purchaser’s home state.
I strongly believe that 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. This bill 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 bill.
I have been working on this sales tax fairness issue since joining the U.S. Senate in 1997. As a former small business owner, it is important to level the playing field for all retailers – in-store, catalog, and online – so an outdated rule for sales tax collection does not adversely impact small businesses and Main Street retailers. Senator Durbin, Senator Alexander from Tennessee and I introduced – with seven of our other colleagues - the Marketplace Fairness Act 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.
I want to provide you with some highlights of what the Marketplace Fairness Act accomplishes:
- The legislation would streamline the country’s more than
7,500 diverse sales tax jurisdictions and provide two options by which states
could begin collecting sales taxes from online and catalog purchases.
- States that voluntarily become Member States of the
Streamlined Sales and Use Tax Agreement would be able to require remote sellers to collect and remit sales and use taxes after 90 days. A total of 24 states have permanently changed their tax laws and implemented the requirements of the Agreement. The Agreement would help harmonize states sales and use tax rules, bring uniformity to the definitions of items in the sales tax base, reduce the paperwork burden on retailers, and incorporate new technology to modernize administrative procedures. Do not let the critics get away with saying this kind of simplification cannot be done. In the early 1990s
when the Quill decision was handed down, the Internet was still in diapers and
cell phones came with bags and looked like bricks. Cell phones, software,
computers, technology has advanced at an exponential pace. The different
rates and jurisdiction problem is no problem for today’s programs.
- States that do not wish to become members of the Agreement would be allowed to collect the taxes only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements.
- The legislation exempts sellers who make less than $500,000 in total remote sales in the year preceding the sale to qualify for an exemption and will not be required to collect the tax.
As a Republican Senator, I believe our party should oppose government policies
that favor some businesses over other businesses and some taxpayers over other
taxpayers. I believe in State and local government rights. As a former mayor and state legislator, I also strongly favor allowing states the authority to require sales and use tax collection from retailers on all sales if they choose to do so. 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 sales over the
Internet continue to go untaxed and electronic commerce continues to soar, revenues to State and local governments will plummet.
Let’s delve into this point a little more – uncollected sales taxes could be used to
pay for things your State and local governments need to pay for now. They
could be used to reduce college tuition. They could be used to pay outstanding teachers. They could also be used to reduce the sales tax rate or to reduce some other tax or prevent higher property taxes or an income tax. By balancing this collection inequity, the Marketplace Fairness Act would help states ensure the viability of the sales tax as a major revenue source for State and local government budgets. It would close
opportunities that encourage tax avoidance and let you pay for activities and programs now versus waiting on federal assistance.
It would help both consumers and States by reducing the burden on consumers and
providing a mechanism that would allow States to systematically and fairly
collect the taxes already owed to them. At a time when States are increasingly turning to the federal government for program funding, it makes sense for Congress to authorize States to collect more of their own revenue. People feel states and local governments do a better job putting the money to good use than does Washington.
The States’ dependency on federal dollars could be offset by any increased collection at the State level. But 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 or property taxes ?
to offset the growing loss of sales tax 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. We need to allow States the ability to collect the sales taxes they already require – if enacted, it would provide $23 billion in fiscal
relief for the States for which Congress does not have to find an offset.
The Marketplace Fairness Act is not about new taxes. No one should tax the
use of the Internet. No one should tax Internet services. I do, however, have concerns about using the Internet as a sales tax loophole. Sales tax collection is already required by my home State of Wyoming no matter how or where we buy something if it is not taxed by the State we get it from. The situation is very similar to that of other States.
Senators Durbin, Alexander, and I have worked tirelessly to assist sellers and State and
local governments to simplify sales and use tax collection and administration. For the past several years, I have worked with all interested parties to find a mutually agreeable legislative package to introduce. Many hours have been dedicated to finding the right solution. I think we are on the right track.
I will continue to work with all interested parties to improve on the policy issues of concern to the stakeholders. Bill introduction does not stop us from negotiating and working together to improve the final product that should be enacted into public law this year. I want to publically commend Senators Durbin and Alexander in taking a leadership role in working on this important policy issue and they, too, remain dedicated to improving the product as we move forward.
On January 31, over 200 businesses and State and national trade associations sent
a letter to Senator Baucus from Montana, Chairman of the Senate Finance Committee, asking him to cosponsor our bill and to address the inequity this year. I continue to urge the Senate Finance Committee to hold a hearing on our bill as soon as possible.
The House Judiciary Committee has already held a hearing. Their hearing on November
30 gave House Members of both political parties the opportunity to learn more
about the issue and express their support for it. I hope the Senate Finance Committee will seriously consider our request and allow Senators the same opportunity that House Members have had.
Ten years ago, the bills we considered to try to close this loophole were not adequate to solve the problem. The legislation we introduced last year does solve the problem. It is simple, it is about States’ rights, and it is about fairness. At a time when State budgets are under increasing pressure, Congress should give State and local governments the ability to enforce their own laws.
Unless the Congress acts this year, States will continue to be deprived of their right
to enforce their own tax laws and businesses will not be allowed to compete on a level playing field. What can you do to help this effort? Please continue to be vocal and help me make the case to my congressional colleagues to why this we need to act on this important public policy issue this year. Call your congressmen and senators, talk to the congressional staff, send letters to the editor expressing your support, provide Facebook and Twitter comments to support your federal officials on this issue. Ask and
encourage the right people to hold hearings and allow consideration of this legislation. Make your case to those who are blocking or ignoring this legislation. Without participation from the folks back home in every state, this is not going to happen. It really is up to you to bring this home.
Thank you again for allowing me to stand before you today to discuss the Marketplace
Fairness Act. I would be happy to answer any questions.