Marketplace Fairness Act

Floor Speech

Mrs. SHAHEEN. Madam President, I really came down to the floor today to continue my opposition to the Internet sales tax legislation that is before us.

The proponents of this legislation claim it is about ``fairness,'' but when you really think about it, this bill is anything but fair. In fact, it creates an unfair situation for small businesses in a number of ways.

First, the legislation is particularly unfair for businesses in my State of New Hampshire and in the other four States in this country that do not collect a sales tax.

I filed amendments, as I know a number of my colleagues have--my colleague from New Hampshire, Senator Ayotte, has filed a number of amendments--that I hope can help address this issue. But I think it is important for everyone here, especially those who are concerned with creating new redtape, to understand how this legislation is going to affect small businesses.

This proposal is going to put new regulatory burdens on small companies across the country, not just in New Hampshire. As a result, it is going to put those small businesses at a disadvantage, making it harder for them to compete with large online retailers.

As a former small business owner myself, I understand how time-consuming regulations and compliance requirements can be. Make no mistake, the bureaucratic nightmare we are going to be creating for small businesses under this legislation is real. I think it is worth talking for a minute about what that process is going to look like for the small online retailers.

In a recent piece for the Daily Beast, writer Megan McArdle went through what the process would be like for a small business. She pointed to the SBA guidebook for small businesses when they collect sales taxes in multiple States. The guidebook tells small businesses:

Generally, states require businesses to pay the sales taxes they collect quarterly or monthly. You'll have to use a special tax return for sales taxes, and report all sales, [all] taxable sales, [all] exempt sales and amount of tax due. Not paying on time can result in penalties. As always, check with your state or local government about the process in your location.

McArdle points out that, despite claims from the proponents of the Marketplace Fairness Act that tax collection will be easy and streamlined, the bottom line for a small business is that ``you've still got to keep fifty states worth of records and file 40-odd states worth of returns.''

McArdle went on to say:

For Amazon--the actual target of these laws--this is trivial. Their staff of crack accountants can probably roll these things out before their Monday morning coffee break. For a small vendor, however, that's a whole lot of paperwork.

And that is what this legislation is really about--those small business owners who are working hard to grow their companies. They do not need an additional paperwork burden to distract them from running their companies.

Let me provide one example. There is a small company in the town of Epsom, NH. It is called Michele's Sweet Shoppe. Michele's sells popcorn and other gourmet treats both at their brick-and-mortar store in Epsom and online. This is a small business that is growing, and it wants to create jobs. They sell locally in New Hampshire at their brick-and-mortar store, but a big part of their future strategy for growth is taking advantage of new markets through the Internet.

Under this legislation, however, there is an arbitrary ceiling on this company's growth because as they get closer to $1 million in online revenue--as they have said to me--they are going to have to ask themselves, is it worth going through the bureaucratic nightmare of complying with 46 different States' sales taxes? Unfortunately, for them and for too many other businesses, the answer is more than likely to be no.

For Amazon and online retailers, this is not even a question. This is exactly the reason why this bill is good for big businesses and bad for small businesses. It makes it harder for small mom-and-pop stores to compete.

Small businesses--certainly in New Hampshire and in most of the country--are really the economic engine of our economy. Two out of three of the new businesses that are going to be created are going to be created by small business. We should really think twice before we pass this kind of legislation that will keep them from growing and that is really designed to help those big businesses.

I support a number of amendments to this bill. I would like to see them at least voted on. I hope some might be adopted because I think they would make the legislation fairer for small businesses. One of those is a bipartisan amendment we have worked on with Senator Toomey to raise the threshold for small businesses under the legislation. I have also filed an amendment to address a fundamental flaw in the legislation that I think must be addressed because this legislation is anything but fair to States such as New Hampshire, States such as Alaska, Montana, the other States in this country that do not collect a sales tax.

This is a proposal that fundamentally violates State sovereignty. It enables one State to impose the enforcement of its laws on the 49 other States and territories without their approval, and it provides zero benefit for the non-sales tax States while it creates an additional and unnecessary burden on our small businesses. That is why I filed an amendment to create an exemption for businesses in States such as New Hampshire. States will be able to force New Hampshire companies to collect sales taxes--especially when our States get no benefit whatsoever--and this amendment is designed to prevent that.

I am disappointed this evening that it does not look as though we are going to be allowed to vote on any of these amendments, although I am still hopeful that we might get a hearing.

I urge my colleagues, again, to think twice about this legislation. I urge them to look at the amendments when they are filed--if we are able to get an amendment process--and to think about supporting those amendments so the legislation really could live up to its billing as the Marketplace Fairness Act because right now it certainly does not meet that standard for the State of New Hampshire and our small businesses.

Thank you very much, Madam President.

I yield the floor.

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Mrs. SHAHEEN. My friend from Alaska and I, as she pointed out, represent States neither of which has a sales tax. Would the Senator agree with me that if this passes it sets a dangerous precedent that says at any point this Congress could impose on States such as ours, despite what we have chosen to do in our home States, a tax we may totally disagree with, and that that is a very dangerous precedent for us to set?

Ms. MURKOWSKI. I would absolutely agree. As the Senator points out, it is Alaska, Oregon, Montana, Delaware, and New Hampshire that are in this situation. Basically, if this legislation were to pass, the message to those within these States is it does not make any difference what your State laws are with regard to a State sales tax. It does not make any difference, because we have made this directive back here that there is going to be uniform application. I have a tough time with that. I think our States may be somewhat similarly situated in the sense that there is a real sense of States rights, State sovereignty. I believe your motto is ``Live Free or Die.'' We feel pretty independent up North as well. I do feel this is a hard push against States' rights and their ability to impose local taxes within their State boundaries.

I am very concerned about the direction we have taken. I note again, for the States without sales tax and use taxes like these five States my colleagues and I have been talking about, and that are not members of the Streamlined Sales and Use Tax Agreement, this legislation creates an inherent unfairness.

Again, I do think it is somewhat ironic that the bill's sponsors chose to call it the Marketplace Fairness Act. We have noted here on the floor what the requirements under this legislation would mean. Senator Shaheen from New Hampshire has indicated exactly what it means to a small business. A remote seller in Alaska who makes an online sale to someone in Vermont who is a member of the Streamlined Sales and Use Tax Agreement will have to comply, collect, and file a return in the State of Vermont. The seller otherwise has zero connection to Vermont.

So it does beg the question, is this fair? I would contend not. Does it present a burden on interstate commerce? Absolutely. The drafters of this bill will argue it creates no new taxes, but I would also respectfully disagree. This bill essentially forces States such as ours to adopt its requirements to ensure parity. Currently no State can impose its local sales tax on another, short of meeting constitutional nexus requirements. So we have made clear that you cannot do that.

This legislation again scoops in everybody. States that wish to enter into agreements with other States for this purpose are able to do so. Let those individual States decide whether they want to participate in the Streamlined Use and Tax Agreement but do not mandate it. That is what this measure would do. Only 24 States could agree to do this.

You have to ask, is 24 States a mandate for Congress? I do not think so. Again, it begs the question, is this fair? Absolutely not. This law presents a backdoor mandate to States such as Alaska, such as New Hampshire, to effectively adopt a sales tax. I think Congress has to respect a State's right to determine how to implement and how to enforce its tax laws and not impose how it must do so.

The Senator has mentioned the burden on small business owners, and the Senator spoke to an article that detailed some of the concerns. This is an issue that has generated considerable interest in my State. I have had over 600 constituents who have written to me in opposition to this bill.

Here are a couple of the examples of the mail I am getting. I have a constituent in Fairbanks, AK, who says:

I am a small business woman selling books off of my Web site. I do not want to be a tax collector for other States. I especially do not want my customers running off to other non-tax parts of the world.

I have got another constituent who owns a business in Anchorage who writes:

I do not support a measure that would allow individual States to collect sales taxes on any on-line purchases regardless of which State an on-line retailer is located. As a small business owner, this legislation will affect me, because I often have clients that start our transaction out of State, and we do not have the staff to handle collecting taxes for 50 States.

Then, finally, a constituent from Eagle River writes:

As a former small business owner, I am very aware of the constant and increasing burden that government subjects our businesses to. Requiring on-line businesses to collect local sales taxes would be a horrendous administrative burden that would undoubtedly cause many businesses to fail. Governments at all levels should be trying to encourage businesses to succeed, rather than trying to squeeze every last dollar of revenue out of the businesses and their customers.

These are three examples of some of the correspondence I have received from folks who are worried about the burden it is going to inflict on our small business owners. Of course, we hear this from all of the other States, certainly heard it just now from the Senator from New Hampshire.

The communities I mentioned we have been hearing from are all on the road system, as we call it in Alaska, are bigger communities. But in many of our rural communities, for those that are offroad, where economies are very limited, there is no major business, there are no big stores. We have been encouraging folks in our villages to use the Internet to bring the world marketplace to your door, and to sell their products on line, and to sell--whether it is arts and crafts or whatever it may be. So we are encouraging them to do this.

Now the concern we are hearing is, I do not want to be the one who is the tax collector for California taxes. I am trying to get myself up and going and make a business, make an economy in a very small area.

I know there is a carveout or an exemption for the smaller businesses. I think that is critical. That is important. That is going to help the very small mom-and-pop operators. But I think we recognize it will have a burden on our small businesses, not only in Alaska but around the country.

The ability of a small business owner to comply with the reporting requirements that will be required by this bill, which would include the 50 States plus the District of Columbia and the U.S. territories, I think deters new startups. I think it acts as a hurdle, if you will. I do not think our businesses need that, particularly now. We already have regulatory burdens that our small businesses are concerned and worried about. I do not think we need to impose that on these States that have, again, made that determination that they would not apply a sales tax within their State boundaries.

So for these reasons, as well as so many of the reasons that have been outlined by others on this floor earlier, I cannot support this measure. We will see whether we have got the opportunity to have any amendments in the week following our recess. Again, I feel it was important to express the concerns of many of the individuals I represent in the State of Alaska.

I yield the floor and I suggest the absence of a quorum.

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