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Mrs. FEINSTEIN. Mr. President, I rise today in support of the Marketplace Fairness Act. This bill would level the playing field between brick and mortar retailers and their online counterparts by allowing States the right to collect sales taxes on remote Internet purchases.
The current system of collecting online sales taxes puts brick and mortar retailers at a significant disadvantage. Mom-and-pop stores invest in office space, inventory, and hire salespeople in order to provide service to their customers.
Increasingly, those efforts are falling victim to a practice known as show rooming, where potential customers enter the physical store, take up the salesperson's time, then make their purchases at home online at a discount because no sales tax is collected.
I have witnessed this firsthand. Imagine you are in the women's shoe department of a nice retail store. An attentive salesperson spends a considerable amount of time with a potential customer finding the right size, trying several pairs of shoes, and answering the customer's questions.
Then the customer pulls out their phone and orders the same pair of shoes online at a lower price, in effect bilking the salesperson for the time spent with the customer. Some people are brazen about doing this.
Effectively, brick and mortar retailers are providing services to online retailers at no charge.
This bill simply brings State sales and use tax collection into the 21st century. When the Supreme Court first considered the issue of collecting out of State online sales taxes, it was in the early 1990's and there were only a trivial amount of online sales.
The ensuing two decades have brought sweeping changes to the online marketplace and the technology that facilitates online sales tax collection.
Online sales continue to increase relative to conventional retail sales. And applications exist that allow retailers to easily collect taxes on out of State sales.
The Marketplace Fairness Act would level the playing field by doing the following:
Allow States the option to collect remote sales taxes; require States to set up a streamlined tax collection process in order to simplify remittance for online businesses, require States to provide the tax collection software to retailers free of charge, and exempt online retailers with less than $1 million in remote sales from having to collect and remit online sales taxes.
It is important to note that many States are already moving to collect sales taxes on remote sales. Just last year, California came to an agreement with amazon.com that required the online sales giant to start collecting sales taxes on purchases made in California.
Furthermore, State laws currently require the collection of online sales taxes. However, rather than the retailer being in charge of collection, it is up to individual taxpayers to calculate and remit the sales taxes they owe on online purchases.
It is estimated that only 1.4 percent of Californians actually remit sales taxes from online purchases, a number roughly in line with other States. State and local governments, which rely in part on sales taxes to fund local schools and infrastructure, are increasingly burdened by their inability to collect sales taxes on online purchases that are lawfully owed.
So this is not a new tax. It is not overly burdensome on small businesses. And it accounts for the fact that more and more retail sales will be taking place online.
The Marketplace Fairness Act puts every business on a level playing field and ensures that tax loopholes do not create unfair advantages for certain retailers. It is time that our tax policy reflects fundamental changes in the retail marketplace, and I strongly encourage my colleagues to support this bill.
I thank the Chair.
I suggest the absence of a quorum.
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