Marketplace Fairness ActN

Floor Speech

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Mr. BAUCUS. Mr. President, I rise today to urge the Senate not to move forward on the Marketplace Fairness Act.

This bill forces small businesses across the country to spend time and resources they should be using to create jobs, jumping through new bureaucratic hoops. In Montana it forces our small businesses to play tax collector for other States, with absolutely no benefit to them. Instead of slapping more redtape on our small businesses, we need to be supporting their work to create jobs and get our economy going.

Let me be very clear. This bill is bad for business and bad for jobs. This bill is not ready for debate on the Senate floor. It has not been completely thought through and is full of unintended consequences that could seriously harm America's small businesses.

Supporters of the Marketplace Fairness Act claim this bill would level the playing field between Main Street businesses and out-of-State businesses by forcing both to collect sales taxes from customers. The bill's sponsors claim this is fair. The reality, however, is this legislation is anything but fair to America's small businesses. This legislation doesn't help businesses expand and grow and hire more employees. Instead, it forces small businesses to hire expensive lawyers and accountants to deal with the burdensome paperwork and added complexity of tax rules and filings across multiple States.

This is a big-box bill. This is not a downtown bill. Our vanishing downtowns are in crisis. We must find ways to revitalize Main Streets across America by supporting our small retailers. In doing so, we foster economic growth and job creation in our communities.

Let me read just one of the hundreds of letters I have received from small business owners in Montana and across America who are opposed to this legislation:

Dear Senator Baucus, at a time when the economy is just recovering, the pending Internet sales tax legislation will cost small business jobs, reduce consumer demand, [and] reduce e-commerce innovation.

As you know, TicketPrinting.com is the largest private employer in Wheatland County. ..... We expect this legislation to cost 13-20 jobs in one of the poorest counties in the United States, where a job means everything. Rather than rewarding the thousands of small businesses for their innovation and our hard work, Congress will be taxing the job engine of the economy and reducing jobs across the nation.

Sincerely, Lance Trebesch.

There are mom-and-pop businesses such as Mr. Trebesch's across the country asking for our help. Unfortunately, this bill does not provide that help. It will not solve the challenges facing Main Street. Instead, the Marketplace Fairness Act only creates new challenges that will put many of America's small businesses at a disadvantage.

This bill imposes additional burdens and compliance demands on businesses already weighed down by Federal and State tax systems that are too complex, too time consuming, and too costly to comply with.

I encourage my colleagues to look at this bill very closely. It requires America's businesses to track thousands of different tax codes in 7,500 different jurisdictions if they do online business out of State. It will force small businesses to hire expensive accountants and implement costly systems to deal with the complexity of collecting sales tax on purchases made in other States.

And who is policing all of this? The bill, as written, has no audit or enforcement protection. As a result, it opens small businesses to aggressive out-of-State tax collectors. States will be taxing businesses beyond their borders. This bill helps States target those businesses that are truly operating out of State and subjects them to the same broken, confusing State sales tax systems that are currently in place. Tell me, how does this grow our economy and how does this create jobs? The promise of simplification in the Marketplace Fairness Act is a ruse.

First of all, they provide no simplification to the businesses that already collect sales taxes in multiple jurisdictions. Those businesses are not even considered in this bill. They are left out.

Second, the bill offers no real simplification for the businesses that will now be required to collect sales taxes. It only adds complexity, with no resources for guidance.

This bill does not streamline the 7,500 different tax rates. It does not require the States to agree on definitions of taxable and exempted products. Think about that for a moment. Each State and many cities and municipalities have different definitions of what is taxable and what products are exempt. They are all different.

It does not establish standard requirements for electronic filing. Think of that for a moment, no standard requirements for electronic filing. It does not establish a central location for registration or filing. It does not offer uniform forms or paperwork. The list goes on and on. These are just a few of the problems this bill is going to create.

Even more concerning, this bill does not establish one audit system for all States. Rather, businesses will be exposed to audit by all 50 States. So any State can decide at any time it wants to audit a business beyond its borders.

This bill does not even establish any rules or procedures for dispute resolution. Got a problem with the tax collector in a State across the country? Good luck. You will have to work it out with that State's court system.

The bill's sponsors tell us not to worry. They say that computer software can calculate the sales taxes owed, collect the money due, and file the reports with the States by linking to the seller's Web site. Is offering a business the chance to pay someone else to calculate their taxes for them what passes for simplification? And those software providers cannot protect the business from exposure to audit, collection, and enforcement by 50 different States.

Still worried? Well, the bill's sponsors tell us they will exempt businesses that have $1 million or less in sales to other States where sales taxes are not being currently collected. Why this threshold?

Studies show that the burden of sales taxes on the very smallest is the highest. It costs approximately 13 percent of the tax collected for these small sellers to comply. As a result, they are not profitable tax collectors for the States. And what about the businesses with $1,000,001 in sales? Are they somehow a more efficient tax collector?

These are not just empty fears. Businesses call me, exasperated with current State law collection requirements. Last Friday I received a call from the director of a farmers cooperative. He explained that many States exempt farmers from sales tax on certain goods. But the laws vary greatly by State on what items qualify for exemptions. Businesses selling to farmers already spend a lot of time determining what qualifies for exemption and what does not. They spend even more time tracking exemption certificates.

The director then went on to explain:

If the Marketplace Fairness Act becomes law, it appears that a regional agribusiness, which might occasionally make Internet sales to farmers in states outside of its territory, would have to invest just as much time and effort into studying and complying with the sales tax laws of far-flung states, as it does in the half dozen states where it has facilities.

The burden of such compliance would clearly outweigh the benefits of occasional sales.

This legislation is ripe with unintended consequences. Let me give another example. A key loophole in this bill is that States get to decide what is and what is not taxable. A State could decide that stock trades are taxable goods or services. Then when that State's resident purchases shares through his broker, that Wall Street firm will be responsible for registering as a business for sales tax purposes, collecting the sales tax, and remitting the tax to the State. True, States have the authority to decide what is and isn't taxable--to date--even without this bill. But right now the only way to collect taxes on transactions with out-of-State businesses is through use taxes.

If States could now require out-of-State businesses to collect on their behalf, there is an incentive to expand the items that are taxable. This bill is going to make it very desirable for States to start taxing and collecting on all sorts of services--not just the financial world but also on services provided by attorneys, architects, engineers, and accountants. One can only imagine. By not asking the States to do anything to simplify their system in return for the benefit of having out-of-State business collect taxes for them, we are giving a carte blanche to States to impose even more taxes on businesses.

The act is also an abdication of the responsibility given to Congress under the Commerce Clause. We have the duty to recognize that the State sales tax systems are still too complicated and would burden interstate commerce if imposed on more businesses.

The Finance Committee is committed to tackling these issues to provide real relief to America's families and small businesses. We have held more than 30 hearings on tax reform--including one specifically dedicated to State tax issues, such as the Marketplace Fairness Act. I have affirmed repeatedly to Senators ENZI and DURBIN that the Finance Committee would work with them to mark up the bill in the next work period, and I stated that commitment a few moments ago personally to them.

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Mr. BAUCUS. Circumventing the committee process allowed this bill to come to the floor full of so many unanswered questions. Avoiding the committee process quashes any chance to improve this bill. Evading the committee process denies the chance to provide a fair playing field among businesses and reduce the heavy burden imposed by State compliance.

I know some may dismiss my concerns as coming from a non-sales-tax State. Granted, I am always proud to protect Montana businesses. But this is not a Montana-only issue, nor is it an issue just for States without sales taxes. Lance Trebesch of TicketPrinting.com and Main Street business owners across America show us that our interests are tied together. We need to stop burdening America's small businesses with more compliance costs and figure out ways to help them grow.

I urge Members to vote against cloture. Do not give small businesses in our States more regulations and more risks with more unintended consequences that have not been addressed. Do not set our Main Street businesses up to be audited by other States' tax collectors. Give the members of the Finance Committee the opportunity to make this bill work and make it fair. I urge a vote against this motion so we can do so.

I yield the floor.

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