Mr. President, I rise today to speak in support of the Marketplace Fairness Act. I was a cosponsor of this important legislation in the 112th Congress and I’m proud to be a cosponsor again in the 113th Congress – because this is a matter of fairness.
The Marketplace Fairness Act will allow local, Main Street brick-and-mortar retailers to compete in a fair way against out-of-state Internet sellers. And it will provide much needed financial relief to state budgets that have been cut to the bone in recent years and are facing even more cuts in federal assistance thanks to the disastrous results of sequestration.
MORE THAN JUST TALKING ABOUT HELPING SMALL BUSINESS
Mr. President, this bill isn’t a Washington handout to businesses. This isn’t special treatment. This isn’t a new tax. This is leveling the playing field. And every day we don’t act to pass this bill is another day we risk another small business closing its doors in West Virginia and around the country.
There’s always a lot of talk in Washington about helping small businesses – and rightly so, because small business is the backbone of our economy. More than 60 percent of all private sector, non-farm jobs in the United States come from small businesses.
The Marketplace Fairness Act is a chance to do more than just talk – it’s a chance to show we really care about small businesses. It levels the playing field and gives our Main Street businesses a fighting chance in competing with Internet vendors that are not required to collect sales tax. Product quality and customer service, not tax loopholes, should determine success.
Mr. President, business owners in West Virginia tell me all the time how unfair it is to watch their online competitors offer lower prices on the exact same products because they do not have to collect sales taxes.
It’s called “showrooming” – customers come into stores, try out the latest products and then go home to buy it online at a lower price by avoiding taxes. And it doesn’t happen just in West Virginia – it happens all over the country.
That’s why the Marketplace Fairness Act has broad bipartisan support, not just here in Washington but throughout the country. Twenty-two governors – 15 Republicans and seven Democrats – support what we are proposing here.
DETAILS OF THE BILL
This isn’t a complicated piece of legislation. It’s just 11 pages – which is pretty short compared to most of the bills we see here in the Senate.
Basically, it allows states to collect sales tax for out-of-state sales provided those states streamline their tax codes. A state wishing to collect sales tax from online retailers or remote sellers must do one of two things.
They must either voluntarily adopt the measures in the Streamlined Sales and Use Tax Law, which 24 states have already done, including West Virginia. In fact, in 2000, West Virginia was one of the first states to adopt these measures to make our tax code fair.
Or, a state can meet five mandates: 1) notify retailers of rate changes, 2) create a single organization for collecting sales tax, 3) establish a uniform tax base, 4) use destination sourcing for sales tax rates, and 5) provide free software and hold harmless protections for retailers using that software for sales tax compliance.
The beauty is that if a state without sales tax doesn’t want to participate, they don’t have to. But a business crossing state lines to make a sale, online or otherwise, should not be able to undercut local retailers. That’s just not fair.
CRITICS ARE DEAD WRONG
I know all the arguments against this legislation, but they are all dead wrong.
Some critics say this is a tax increase. Wrong. This bill does not create one new penny in taxes. It simply allows states to require merchants who sell products online or across state lines to collect taxes on sales to customers in that state – just like the brick-and-mortar stores do.
Few people know that they are already required to pay sales tax on online purchases—except it’s the responsibility of the consumer to report their online purchases and write a check to the state. Obviously, few consumers do, and compliance is extremely low. This bill just allows for those taxes to be collected right away online.
Some critics say online services don’t use the local services that are paid for by sales taxes so they shouldn’t be required to collect the sales tax. Wrong. Whatever product you ordered online – say, a book from Amazon or shoes from Macy’s or towels from Target – it was delivered to your door, using airports and roads and other infrastructure paid for with state tax dollars.
And it’s also important to remember that this bill won’t in any way burden our small businesses—small shops and vendors with less that $1 million in out-of-state sales are completely excluded from the bill.
STATES LOSE $23 BILLION A YEAR
The fact is that brick-and-mortar and online retailers sell identical products and use the same infrastructure to deliver their products. And collecting taxes that are owed on a purchase at the point-of-sale rather than relying on consumers to pay that tax voluntarily – as some critics have proposed – would mean $23 billion per year in badly needed revenues for the states.
If West Virginia could have collected sales tax on out-of-state sales during fiscal year 2012—not new taxes, just those already owed to the state--that would have put $103.2 million more in the state’s budget. And $103.2 million per year would allow the great state of West Virginia to do any of the following – and do it every year:
build a 412 mile two-lane paved road;
hire 2,000 school teachers;
build 5 high schools;
build 7 middle schools; or
build 10 elementary schools.
And judging by the growth of e-commerce, the bill will mean even more revenue for states in the future.
In 2000, the U.S. economy supported $27.6 billion in e-commerce, which constituted only 0.9% of all retail sales. Over the next 12 years, e-commerce grew ten-fold, totaling $224 billion in 2012, which is equal to 6.9% of all retail sales.
One market analysis projects that online retail sales in the United States will grow by 10 percent annually through 2017, from $224 billion in 2012 to $370 billion over the next four years.
Just look at how Internet use has soared in the United States since 2000. Some 240 million Americans are online today, compared to half that amount when the century began.
As broadband speeds grow, home and mobile Internet users will spend more time online, and that means more time online shopping. We should cherish and celebrate this growth in e-commerce, but we must recognize that laws must be updated to account for changes in our economy.
Google researchers have found that already 97% of Americans look for local products online. So, clearly the businesses back home are at a huge disadvantage in competing with online retailers if tax requirements are unequal. State governments are losing billions of dollars in uncollected sales tax that could build the infrastructure that is the lifeblood of a modern economy.
SUPPORT IN WEST VIRGINIA
Mr. President, I’ve heard from so many businesses back home in West Virginia, and I can tell you there is overwhelming support for this legislation.
I would like to share the comments my office received just today from a small business owner named Parween Mascari, and I quote:
“I own a small business that encourages people to support local West Virginia artists. Because we sell from a physical storefront, we must collect and remit sales tax from our customers. Online merchants do not currently have to collect or remit a comparable tax on sales they make online. This is not only fundamentally unfair, but seriously impairs our ability to be competitive in the market when we have to charge our customers a tax that they don't have to pay when they shop online.”
Mr. President, I want to commend Senators Durbin and Enzi for their leadership on this important issue and for introducing the Marketplace Fairness Act. I believe this legislation restores fairness and balance to our tax system, strengthens our businesses, revitalizes our downtowns, creates jobs, and helps states struggling to provide the services their citizens expect.
This measure has broad support in both parties and is backed not only by mom and pop stores and Main Street merchants but also by giant online retailers like Amazon. And I urge the Senate to act without any further delay.