Concerned with its impact on small businesses and consumers, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today introduced an amendment to S. 743, the Marketplace Fairness Act, that includes seven different components to strengthen and improve the underlying bill, including provisions that would sunset the legislation after five years, expand the exemption for small sellers, and strike the preemption provision.
"What I'm proposing in this amendment wouldn't alter the fundamental make up of this legislation. These ideas would improve the bill and make it more workable for businesses and consumers around the country. In addition, these measures would help to ensure that we do not unleash a slew of unintended consequences on the American people and on small businesses," said Hatch. "I hope my colleagues back this amendment. It addresses many of the concerns I have -- and that we all should have -- when it comes to the underlying bill."
Below are the seven different parts of the amendment Hatch introduced today:
1. Strikes the preemption provision. This is in response to concerns that this legislation still gives states too much authority to define nexus in laws that would have federal backing. The amendment would strike the preemption provision that was not included in previous versions of this legislation. Hatch is concerned that the bill grants too much federal authority to enforce state sales tax laws that have not yet been written. Concerns have been raised that this legislation could put the force of federal authority behind state laws that may function as financial transaction taxes or taxes on retirement contributions.
2. Sunsets the legislation after 5 years. Requiring reauthorization after five years would ensure Congress can revisit this issue to determine how the bill has been implemented.
3. Institutes a 3 year statute-of-limitations on state audits of remote sellers. Hatch is concerned that a small business could be audited by multiple states at the same time impeding their growth and expansion in order to comply with paperwork from multiple states. The amendment addresses that by providing a uniform rule on how far back in time audits may reach back. Three years is the current federal statute-of-limitations in situations where fraud is not alleged.
4. Calls for a Government Accountability Office (GAO) study on the costs incurred by remote sellers in complying with the legislation. The GAO would also determine if this bill would allow states to impose taxes on financial transactions or retirement contributions. This will ensure concerns raised that this bill would result in a financial transactions tax or a tax on retirement contributions are thoroughly examined.
5. Includes a carve-out for digital goods. The number of tangible goods purchased over the Internet has increased exponentially and is one of the main factors driving this legislation. But, digital goods are often consumed in places that are not the address of either the buyer or the seller and as such should not be put together with other goods. Hatch believes this policy area demands further consideration than will be possible in this bill.
6. Provides compensation of remote sellers for a limited period of time. Concerned that tax collection could become a revenue stream for online business, the amendment calls for compensation to begin at 10 percent of amounts collected for two years, 8 percent of amounts collected for two years after that, and then 6 percent of amounts collected for one year. After five years the sunset would allow for reconsideration of compensation for remote sellers. A phase-out prevents tax collection from becoming a revenue generating activity for remote sellers.
7. Increases the small seller exemption from $1 million to $10 million and indexes it to inflation. Hatch is concerned that $1 million exemption is not enough to account for this fundamental policy change. The amendment increases the small seller exemption to $10 million and indexes the number to inflation would prevent inflation from decreasing the exemption amount without congressional action.