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Public Statements

Marketplace Fairness Act of 2013 -- Continued

Floor Speech

Location: Washington, DC


Mr. COWAN. Madam President, I rise both early and late in my Senate career in strong support of the Marketplace Fairness Act, legislation that Massachusetts-based merchants and Massachusetts municipalities tell me is long overdue.

First, let me congratulate Senators Durbin, Enzi, Alexander, and Heitkamp for their tireless efforts over many years on this issue. I strongly encourage my colleagues to vote for this measure and to continue working with the House so we can finally see it enacted into law.

As I see it, in a sense, this legislation finishes the job that was started in the House by former Congressman, now Senator, Wyden and former Congressman Christopher Cox, when they first introduced the Internet Tax Freedom Act. That law, which Congress first enacted in 1998, officially declared that the Internet and electronic commerce should not bear a higher tax burden than traditional commerce.

Standing here in 2013, knowing how commerce has evolved, how consumer behavior and expectations have evolved, and how technology itself has evolved, I am happy to report Congress largely has been successful. State tax laws do not discriminate against electronic commerce. These transactions do not need any special protection from State tax collectors. Quite the contrary. On the contrary. Now so much commerce routinely is conducted on line, the pendulum has swung in the other direction. It is time to ensure our State tax laws are uniformly applied no matter how a transaction is consummated.

For more than 300 years, New England Main Streets have been anchored by local merchants who not only offer consumers important goods and services but are key employers for our communities. Those Main Street establishments have always been and will always remain an important part of the fabric of our communities.

Today in Massachusetts, the retail sector employs 550,000 people in 60,000 locations across our 351 cities and towns. They represent 17 percent of all the jobs in the Commonwealth--an important percentage, yet one which has declined from a decade ago.

Consumers today are fortunate to have unlimited choices, meaning extremely competitive pricing from retailers and great service in order to obtain and retain customers. That is good for both the consumer and the economy, but it also means retailers necessarily must have very tight margins in order to stay competitive on price. Those tight margins mean many small businesses thrive or die on a daily basis based upon consumer trends and purchasing decisionmaking.

Those of us in government should foster consumer choice and competition but, equally important, we must also take care to prevent unfair market incentives that drive consumers to spend or not spend at certain establishments based upon government policy and decisions.

I find it interesting that many news reports about the bill we are debating now seemed to lead with the headline "tax-free shopping on the Internet is about to come to a halt.'' Let's be clear about one thing. There was never such a thing as tax-free shopping over the Internet in States such as mine and so many other States that have a sales or use tax. Under the Commonwealth's sales and use tax law--and the laws that exist in 44 other States in this Nation--if you owe a tax when you walk into a store to buy an item, then you owe a tax when you go online, buy it, and have it shipped to your house. You heard me correctly. If you live in Massachusetts or one of the other 44 States that collect sales tax, you owe taxes today on those Internet purchases already.

For 45 years, Massachusetts merchants have competed against sellers in our neighbor State, New Hampshire, which has no sales tax. Some Massachusetts consumers choose to hop in their cars and drive up Route 93 to make purchases. I understand the frustration of Massachusetts merchants, particularly since the tax is still actually due to the Commonwealth in the form of a consumer-remitted use tax.

For the past decade, the growth in competition based upon sales tax collection avoidance hasn't been from north of the Massachusetts border but, rather, from desktop and laptop computers and today from smart phones and tablets. Consumers who are reeled in by the tax avoidance marketing messages of certain sellers don't have to drive to New Hampshire. Avoiding the State sales tax takes only a few keystrokes on their phones.

Billions of sales that otherwise would go to Massachusetts employers are annually sent elsewhere. Those losses are real for our Main Streets, for our retailers, our retail employers, for all our cities and towns, and the losses are growing every year. The annual sales tax loss in Massachusetts is currently estimated to be $335 million. That number grows to $400 million when you include lost income and property taxes from declining employment and darkened storefronts. If we don't act, if we don't pass this bill, that number will grow to over $1 billion by the year 2020. Allow me to repeat that. That is $1 billion in losses to my State.

A sale is a sale is a sale. With today's technology, it shouldn't matter how it is transacted or where it is transacted. Government must be blind and be a nonfactor in our competitive consumer marketplace and in our application of taxation to that market. We understand this fact in Massachusetts. Increasingly, many online sellers recognize this reality too.

Last year I worked with Gov. Deval Patrick to negotiate with to begin collecting and remitting the Massachusetts sales tax. Amazon did the right thing for Massachusetts employers, workers, our schools, services, and for our cities and towns. Amazon recognized that they use our infrastructure, the airports, the highways, and streets to deliver goods to consumers. Furthermore, they understood that their customers who purchase from them use those very same services in Massachusetts and enjoy our vibrant downtown. Amazon and many of the other businesses that support this legislation have stores in multiple States. They have made their online presence and their brick-and-mortar presence seamless to consumers. They already collect and remit applicable sales tax and follow all the other business rules in the States where they do business. If other States want to compete for their customers in the great Commonwealth of Massachusetts, they also should play by all of our rules, including the obligation to collect and remit our sales tax.

It used to be the case that if you wanted to reach a broader marketplace, you opened a location there. You complied with all the State laws that applied in those jurisdictions because it was worth it to expand your reach and build a broader customer base. Why isn't it the same thing now? Why have we been so unwilling to apply the same rules to online businesses that we do to businesses in our States?

This is not an unreasonable proposal. Every time a business opens a physical space in my State, they set down roots there. They create jobs there. They support our communities, and they contribute to the cost of local services. That means they collect and remit sales taxes on the purchases made by the customers who enter their front door. Every open business in the Commonwealth and every consumer in the Commonwealth understands this relationship. Why should we allow an online business transaction better treatment than we provide to our own folks? Outsiders should not be treated better than insiders. Everybody should be treated equitably.

That is all this bill will do. It will allow a State government to require the same sales tax collection obligations of businesses that sell to State residents online that it does to businesses that sell to State residents on Main Street--nothing different, nothing more burdensome.

There has been a lot of misunderstanding about what this bill does, so let me try to clear it up. This bill will not create a new tax obligation for anyone who doesn't already have one. If you live in a State that already imposes sales and use taxes, online merchants will add the sales tax to your purchase in the same way the neighborhood retailer does. If you live in a State without a sales tax, nothing changes for you--nothing. If you don't pay a tax at a store on Main Street, you won't pay one on the Web. It is that simple.

This bill will not crush small businesses. When I served in State government, small business owners and their associations repeatedly called on us to beg Congress to level the playing field. Those same small business owners are the people who sent us here to represent their interests. When our bosses--the people--tell us they want us to act, they should not have to beg. We should act on the will of the people.

Let me be clear about how this bill will work. Businesses that have less than $1 million in remote sales will be exempt from compliance. States that want businesses to collect and remit the sales tax already due will be required to provide those businesses with the software to do it free of charge. The State will set up a simplified process so that businesses only have one point of contact with the State on collections and audits. No business will have to navigate the thousands of taxing jurisdictions opponents of this bill are so fond of asserting.

If a business really does not want to comply, it is easy: they can forgo the customers in that State. If they do, I assure you, those consumers--a very resourceful group--will quickly fill that void with another business that is willing to follow a State's business rules.

This bill will not impose a tax on financial transactions. I admit that when I heard this assertion, it worried me and many of my constituents, so I went back and I read the bill again. This charge is fiction.

The bill is crystal clear. I quote:

Nothing in this Act shall be construed as encouraging a State to impose sales and use taxes on any goods or services not subject to taxation prior to the date of the enactment of this Act.

I come from State government, as do several of my colleagues in this body. Trust me, budgeting on the State level is a little different from the process that plays out here in Congress. In Massachusetts we rely on a combination of income taxes and sales taxes to cover the costs of the services our citizens tell us they want and need and provide the appropriate measure of investments--in education, infrastructure, and innovation--we know is necessary for a growing and prosperous State economy. Sales tax revenues represent almost one-quarter of our total tax collections.

Sales taxes are a difficult revenue source, I understand, because they are so dependent upon broader economic conditions. As we saw during the recent recession, when people are out of work or believe their jobs are threatened, they pull back on spending. In fact, many small businesses in my State and in others, I am sure, were told by banks that lines of credit needed to be tightened because consumers were pulling back. It was an unfortunate domino effect that our Main Street businesses are still struggling to overcome. Yet, as they were trying to hang on, they also watched the customers walk into their stores, browse the merchandise, take out a cell phone, and walk out, opting to buy a product from an online retailer that could ignore the State sales tax collection. Guess what. Now there is an app for that.

Our States have limited sources of revenue and significant obligations and investments to fund. We know the reality of this situation--that no matter how much our consumers prefer to shop online rather than on the street, they do not and cannot call a virtual ambulance or an online firetruck. We need to do all we can to keep our businesses in business. We need to ensure them a level playing field in which to compete. We need to protect the integrity of our tax laws that ensure we can provide essential services to our residents.

I have listened carefully to the objections to the bill that have been raised by others here on the floor, in the correspondence sent to my office, and the many tweets on my Twitter feed. While I am sympathetic to some of the assertions made against this bill, respectfully, I am not persuaded by them. There are just too many consumers, small businesses, and struggling communities in the Commonwealth of Massachusetts that are shouldering an ever-growing burden because Congress has yet to join forces with the States to help us efficiently enforce our tax laws in a 21st-century marketplace.

I urge my colleagues to support this bill.

Madam President, I yield the floor.


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