In an effort to support jobs in Rhode Island and create a level playing field for Rhode Island businesses, U.S. Senator Jack Reed, Governor Lincoln Chafee, and independent retailers today urged Congress to pass the Marketplace Fairness Act. This bipartisan legislation would end an unfair tax disparity that harms many local small businesses and benefits large out-of-state e-retailers.
The Marketplace Fairness Act would require online retailers and catalogue sellers to follow the same rules as businesses on Main Street and collect state sales taxes. One study found that Rhode Island lost out on an estimated $70.4 million in uncollected sales tax revenue last year because of the inability to collect from online and catalog sellers, according to a non-partisan report by the National Conference of State Legislatures.
The bipartisan bill gives states the ability to enforce their own sales and use tax laws and relieves consumers of the legal burden to report to state tax departments the sales taxes they owe on online purchases. The bill does not create new taxes or increase existing taxes. Instead, the bill will help states and cities collect billions in unpaid taxes already owed, reducing the need to raise new taxes on tax compliant businesses and citizens.
"The reason there is broad bipartisan support for the Marketplace Fairness Act is because this is an issue of simple fairness. Whether they are located online or on the corner, all retailers should be treated equally under the law. We need to put Rhode Island-based businesses and workers on a level playing field so they can compete against out-of-state retailers that unfairly benefit from tax loopholes. The Marketplace Fairness Act will help restore competitive balance and gives states the flexibility to opt in or out," said Senator Reed. "Establishing clear and consistent rules for the collection of sales taxes on all purchases will support jobs here in Rhode Island and help the state strengthen its finances. Helping communities better collect unpaid taxes that are already owed will also help reduce the need to raise new taxes."
"I have long advocated for passage of Marketplace Fairness legislation," Governor Chafee said. "As I travel across Rhode Island talking to bricks-and-mortar business owners, this topic of fairness often comes up. The Marketplace Fairness Act will help Rhode Island businesses by leveling the playing field between Main Street stores and online retailers, and it will bring valuable revenue to our state."
Governor Chafee has been a leading voice on this issue since taking office in 2011. In July of that year, in advance of the National Governors Association's summer meeting, Governor Chafee and U.S. Senator Lamar Alexander (R-TN) collaborated to send letters to each of the nation's Governors urging them to lobby their respective Senate delegations to support Marketplace Fairness legislation. Governor Chafee also submitted supportive written testimony to the U.S. Senate Committee on Commerce, Science, and Transportation in August 2012.
Senator Reed is a cosponsor of the bipartisan Marketplace Fairness Act, introduced by Senator Mike Enzi (R-WY), which would encourage states to simplify and streamline their tax rules and supply the necessary software to online retailers.
Rhode Island is part of a consortium of over 22 states nationwide that have already agreed to be part of the "Streamlined Sales Tax Agreement," an agreement between states and online retailers which, among other steps, ensures states that collect sales tax online adopt uniform tax definitions; require a single tax return from businesses; and have a single entity administer the system. Other states taking similar steps include: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
To address the concerns of small on-line retailers, the legislation exempts companies that have under $1 million in Internet sales from the collection requirement.
The Senate is expected to open debate on the measure this evening. When a non-binding version of the Marketplace Fairness Act was offered as an amendment to the Senate fiscal year 2014 budget resolution last month it passed 75 to 24.
Leading sponsors of the bill include U.S. Senator Mike Enzi (R-WY), U.S. Senator Dick Durbin (D-IL), U.S. Senator Lamar Alexander (R-TN), Senator Reed, and U.S. Senator Tim Johnson (D-SD). The Marketplace Fairness Act has also been endorsed by 29 Governors (17 Republican, 11 Democrat, and 1 Independent), and a number of diverse groups and businesses of all sizes, including: Amazon.com; AFL-CIO; American Conservative Union; Barnes and Noble, Inc.; Buy.com; Cardi's Furniture; National Governors Association; National League of Cities; the Rhode Island Retail Federation; and the U.S. Conference of Mayors.
SUMMARY: The Marketplace Fairness Act
The Marketplace Fairness Act would allow local Main Street retailers to compete on a level playing field against out-of-state Internet retailers, give states the ability to enforce their own sales and use tax laws reducing the need to raise taxes, and relieve consumers of the legal burden to report to state tax departments the sales taxes they owe on online purchases. This bill does not create new taxes or increase existing taxes.
The Supreme Court held in its 1992 Quill that only Congress has the authority to regulate interstate commerce under the Commerce Clause and the current maze of state and local sales tax rules is too complicated to require remote retailers to collect sales taxes. The result is that states and local governments are prohibited from enforcing existing sales and use tax laws on the growing number of out-of-state sales.
The Marketplace Fairness Act allows states and local governments, if they so choose, to enforce existing state and local sales and use tax laws if they simplify sales and use tax administration and collection and exempt small online retailers from collection requirements. The bill would level the playing field for Main Street businesses that are currently at a competitive disadvantage because they must collect sales and use taxes while a growing number of remote retailers do not. It would provide a pathway for states and localities across the country to collect an estimated $23 billion annually in uncollected tax revenue to balance their budgets by collecting taxes already owed instead of increasing taxes or cutting vital services.
The bill provides states the authority to enforce existing sales and use tax laws, if they choose to do so, by adopting one of the following options:
Streamlined Sales and Use Tax Agreement (SSUTA): Allows any state that is a member of SSUTA to require remote retailers to collect state and local sales and use taxes.
Alternative Minimum Simplification Requirements: States that are not SSUTA members may require remote retailers to collect state and local sales and use taxes if they adopt minimum simplification requirements as outlined in the bill.
Small Seller Exception: The legislation would prohibit states from requiring remote sellers with less than $1 million in annual nationwide remote sales to collect sales and use taxes.