Small Business Jobs and Tax Relief Act -- Motion to Proceed
Floor Speech
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Mr. ENZI. Mr. President, the Senator from Tennessee, Mr. Alexander, is far too modest. Yes, I have been working on this since I got to the Senate, but he is the one who got it shortened down to 11 pages and made it a States rights bill. The States are realizing their rights anyway, and there are attempts at making changes in the sales tax law in order to cover this huge loss of revenue they are experiencing, but it doesn't work unless we do what the Supreme Court urged us to do when they issued the Quill decision back in the 1990s, which is to pass a national law that clarifies how this tax would be collected if the States choose to do it.
I am very pleased Senator Durbin joined us on this issue. Practically every State is losing money because of the tax that is only being collected for people who buy instate, and when they buy out of State, they are used to it being collected and it isn't collected. So half the time the State is not getting its money, and we need to change that before States come to the Federal Government and say we need some money for this project and then that sometimes gets worked into a bill. We are out of money at the Federal level. We have eliminated earmarks, so we can't do what we used to do, and we probably shouldn't have done it then. At any rate, we are borrowing 42 cents on every $1 we spend, so we don't have any money to give to the States.
But the States do have this authority, an authority to do a sales tax. Of course, they didn't anticipate they were just going to tax the businesses that were in their State that were paying a property tax and were hiring local people
and were participating in all the community events and telling everybody out of State they didn't have any responsibility in it. There has always been an effort to get their responsibility too. I am glad we have this opportunity to discuss the small business jobs and tax bill, but in this amendment to it--which would be known as the Marketplace Fairness Act--we are talking about fairness. We do expect everybody will be treated fairly.
So let's start with a common-day practice that is happening in our Nation's retail markets today. If someone buys the book ``The Hunger Games'' at the local bookshop in town, they will pay more for the book from the brick-and-mortar store than if they bought the book online. There is nothing different about the brick-and-mortar store's book versus the book purchased on the Internet except the sales tax they have to pay. If they choose to do so, States should have the flexibility and the ability to fix this inequality.
Sales taxes go directly to State and local governments. They bring in needed revenue for maintaining our schools, fixing our roads, and supporting our law enforcement. As I like to add, have you ever tried to flush your toilet on the Internet? If sales over the Internet continue to go untaxed and electronic commerce continues to soar, revenues to State and local governments will plummet. But if Congress fails to authorize States to collect tax on remote sales and electronic commerce continues to grow, we are implicitly blessing a situation where States will be forced to raise other taxes, such as income or property taxes, to offset the growing loss of sales tax revenue. Do we want this to happen? No, we don't.
The Marketplace Fairness Act was written in the aftermath of the Supreme Court's 1992 Quill decision. Congressional involvement is necessary because the ruling stated the thousands of different State and local tax rules were too complicated and onerous to require businesses to collect sales tax unless they had a physical presence--store, warehouse, et cetera--in the purchaser's home State.
The Supreme Court essentially stated Congress needs to decide how to move forward. I strongly believe now is the time for Congress to act. Many Americans don't realize when they buy something online or order something from a catalog from a business outside their own State, they still owe the sales tax. For over a decade, Congress has been debating how to best allow States to collect the sales taxes from online retailers in a way that puts Main Street businesses on a level and fair playing field with the online retailers.
The Marketplace Fairness Act empowers States to make the decision themselves. If they choose to collect already existing sales taxes on all purchases, regardless of where the sale was--whether it was online or in a store--they can. If they want to keep it the way they are, the States can do that.
I have been working on this sales tax fairness since joining the Senate in 1997. As a former small business owner, it is important to level the playing field for all retailers--in-store, catalog, and online--so an outdated rule for sales tax collection does not adversely impact small businesses and Main Street retailers. As a State legislator, I know we never passed a law, as I said, that discriminated against the instate people. We never put a burden on people who pay the property tax, who hire local residents and participate in the community events while telling those out of State we want them to have our money, but they do not have to do anything in return. We never intended to give the out-of-State businesses a free ride. That is what the local legislators are all concerned about.
On November 9, 2011, Senators Durbin, Alexander, Tim Johnson, and I introduced, with six of our other colleagues, in a very bipartisan way, the Marketplace Fairness Act to close this 20-year loophole that distorts the American marketplace by picking winners and losers, by subsidizing some businesses at the expense of other businesses and subsidizing taxpayers at the expense of other taxpayers. All businesses and their retail sales and all consumers and their purchases should be treated equally and fairly.
I wish to provide some highlights of what the Marketplace Fairness Act accomplishes:
The bill gives States the right to decide to collect or not to collect taxes that are already owed. The legislation would streamline the country's more than 9,000 diverse sales tax jurisdictions and provide two options by which States could begin collecting taxes for online and catalog purchases. The bill gives States two voluntary options that would allow them to collect the State sales taxes that are already owed if they choose.
The first option is the Streamlined Sales and Use Tax Agreement, supported by 24 States that have already passed laws to simplify their tax collection rules. The second option puts in place basic minimum simplification measures States can adopt to make it easier for out-of-State businesses to comply.
The bill also carves out small businesses so they are not adversely affected by the new law by exempting businesses with less than $500,000 in sales online or out-of-State sales from collection requirements. It is very important there is an exemption for startup and small businesses if they have less than $500,000 of sales in 1 year. Once they reach the $500,000, then the next year they have to begin collecting the tax. This small business exemption will protect small merchants and give new businesses time to get started.
Don't let the critics get away with saying this kind of simplification cannot be done. In the early 1990s, when the Quill decision was handed down, the Internet was still in diapers and cell phones came with bags and looked like bricks. Cell phones now have Internet capability, and software, computers, and technologies have all advanced at an exponential pace. The different rates and jurisdiction problem is no problem for today's programs.
As a former mayor and State legislator, I also strongly favor allowing States the authority to require sales and use tax collection from retailers in all sales, if they choose to do so. We need to implement a plan that will allow States to generate revenue using mechanisms already approved by their local leaders. We need to allow States the ability to collect the sales taxes they already require, if enacted. This would provide $23 billion in fiscal relief for the States for which Congress does not have to find an offset. This will give States less of an excuse to come knocking on the Federal door for handouts and will reduce the problem of federally attached strings. It will give States a chance to reduce property taxes or other taxes.
The Marketplace Fairness Act is not about new taxes. No one should tax the use of the Internet. No one should tax Internet services. I do, however, have concerns about using the Internet as a sales tax loophole. Sales tax collection is already required by my home State of Wyoming no matter how or where we buy something, if it is not taxed by the State we get it from. We are supposed to fill out our own form and submit the information. Nobody is used to filing that kind of form or doing that kind of tax collection, and they never know whether the tax is owed or how much it is, particularly on small purchases.
It is always collected at the stores by the stores in state. We have to make the system simpler so they don't have to fill out forms. Under Wyoming law, online purchases are already subject to a sales tax; it just can't be collected and given to our State. The situation is very similar to that of other States.
Senators Durbin, Alexander, and I have worked tirelessly to assist the sellers, States, and local governments to simplify sales and use tax collection and administration. We have worked with all interested parties to find a mutually agreeable legislative package to introduce. Many hours have been dedicated to finding the right solution.
I want to publicly commend and thank Senators Durbin and Alexander for taking a leadership role in working on this important policy issue.
Ten years ago, the bills we considered to try to close this loophole were not adequate to solve the problem. Marketplace Fairness does solve the problem. It is simple. It is about States' rights. It is about fairness. At a time when States' budgets are under increasing pressure, Congress should give State and local governments the ability to enforce their own laws. I strongly encourage my colleagues to support amendment No. 2496, known as the Marketplace Fairness Act, and get it enacted into public law this year.
Mr. President, I yield the floor.
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