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Public Statements

Marketplace Fairness Act of 2013

Floor Speech

Location: Washington, DC

Mr. WARNER. Mr. President, I rise in support of the legislation that is on the floor, the Marketplace Fairness Act. I rise as someone who has spent 20 years in the technology business helping to fund and develop online businesses, understanding the importance they play to our economy, and applaud the enormous growth of Internet-based businesses.

But I also rise in support of this legislation, because in addition to being a technology investor, I also was a Governor and know the importance that sales tax plays in funding so many critical State and local functions. Unfortunately, under the current circumstances, we have an uneven playing field because local small businesses, oftentimes bricks and mortar, follow the law and collect sales taxes from customers who make purchases in their stores while, on the other hand, many large online businesses that may be located or domiciled in some other State do not collect the same sales taxes. I think on this floor already we have heard repeated stories of some online retailers that even encourage people to go to the brick-and-mortar store to look, go out and price a product and then go back and go online and purchase that product. Not only does that discriminate against the brick-and-mortar store, but from a public policy standpoint, if these sales taxes are not collected, it creates an unlevel playing field between the online vendor and the brick-and-mortar store.

This legislation will help level the playing field. It is about fairness. It is about having a level playing field for all types of retail outlets. Let me make clear, all it simply does is require every business to collect and remit an already legal sales tax that has been put in place at a State or local level.

Because of this unequal playing field, because of current circumstances, because there has been a failure amongst many of our online vendors to collect these sales taxes, this creates a direct and immediate impact on State and local governments. As a former Governor, I can tell you the inability of States and localities to gather uncollected revenues undermines dramatically their ability to invest in K-12 education, police and fire prevention, funding for roads and bridges, public safety, environmental causes. You name it, all the basic core services that State and local governments perform, so many of them are directly funded in a major way by local or State sales taxes.

I would also like to mention how important this bill is to the Commonwealth of Virginia. Most recently in the Commonwealth, Virginia's leadership, with a Republican Governor and a bipartisan legislature, finally enacted legislation to make significant investments in our outdated and overstressed transportation network. Many of the folks work on the Hill or those of my colleagues who happen to live in Virginia know that traffic in Northern Virginia is at an almost debilitating point. We have finally in Virginia passed a funding source to try to address the transportation needs of Virginia.

Part of this solution, though, anticipates revenue from this legislation. So if we are going to be able to solve the transportation crisis that confronts not just Northern Virginia but all of Virginia, Virginia has to have the ability to collect all of its sale tax revenue. This is a large amount. The current uncollected amount of sales tax revenue in Virginia is estimated to be $422 million over the past year.

That number is going to continue to increase as more and more vendors go online. Nationally, the amount is a staggering $23 billion. Again, as I mentioned earlier, at a time when our States and municipalities are struggling to maintain essential core services or government, I think it is irresponsible of us at the Congressional level to, in effect, interfere or not allow these States and localities to collect sales taxes that they have put in place, that are collected from vendors that are in their communities but not certain vendors who operate online.

I would like to take a moment also to address a couple of the concerns I have heard from my community in Virginia. I say there are ways to improve this bill. I am grateful the Northern Virginia technology community is generally supportive of this legislation. They have raised some concerns, concerns I would like to address.

First, there is discussion about the small seller exemption. The current legislation says that those small sellers online that have less than $1 million in sales will be exempted from this regulation. It is important that a startup business gets going online, that we do not put undue bureaucratic and other restrictions in place. There have been some suggestions that that $1 million small seller exemption is too small. I think perhaps looking at a slightly higher number may make some sense.

But there have been some who suggested we would take this number all the way up to $15 million. I have to tell you, I believe taking the small seller exemption up to $15 million per year in revenues would dramatically undermine this legislation and dramatically cut back the $422 million Virginia has left on the table and the $23 billion that is estimated to be left nationally.

So, yes, we can look at something a little larger than $1 million but to go up to $15 million would be much too high.

Second, I think there have been reasonable questions about how to make sure, where we are going to create an audit trail, and where we are going to allow those vendors to remit back, not to the literally hundreds of jurisdictions that collect these kind of taxes but to be able to simply remit to a single point of contact.

I think the legislation moves forward in this direction. I again would look at other opportunities. On the issues of remittance, the legislation does put in place a requirement that every State would have a single point of remittance, which I think strikes the right kind of balance needed to not create an undue burden.

On the question of audits, I think there is more work that can be done. I believe there is an analogy here to the telecommunications industry I used to be part of. In the early days of the cell phone industry, there were clearinghouses that were allowed to, in effect, be the settlement agencies between a variety of competing cell phone systems when we were charged roaming charges. I think we can look to some examples in that industry and others to

make sure that in a look-back basis, there is an ability to have a single point of audit so those vendors, particularly small vendors, make sure they get a fair shake.

Finally, I think we need to make sure that, particularly for these smaller vendors, we do all we can to make it easy for them to comply with the law. I am pleased this legislation requires States to make available, at no cost to retailers, common software that will basically calculate the State and local sales tax requirements for any of these online vendors, as well as kind of build in some of the administrative services. I think this is an important step to make sure we continue to allow the entrepreneurial spirit to grow online as well as in the local community.

Again, I think it is terribly important to remember that all we are doing in this legislation is making sure there is a process in place to collect sales taxes that are already due.

Two final comments before I yield the floor. During the course of this debate, some opponents of the Marketplace Fairness Act have made statements about what this bill might possibly do that I do not think are reflected in the legislation.

Among those claims, there is a claim that this bill is the first step toward a State or local transaction tax on the purchase of stocks or derivative contracts. I have reviewed this legislation closely. There is nothing in this legislation that would make it be the first step on a slippery slope toward a transaction tax. There is nothing in this bill that would prohibit that kind of tax. States already have that ability. This legislation will do nothing to take a step toward that. So I think that claim being made by some is not accurate and does not reflect the legislation.

Finally, this legislation comes about because at the beginning of the development of online sales, there was a belief, perhaps accurate at that moment in time, that this growing industry of online retailers needed an extra little benefit, an extra little head start, an ability to have this industry not be squashed at its outset. I think history has shown, as we have seen the growth of retail sales online go up dramatically, faster than the growth of retail sales in bricks and mortar, that whatever needed boost the online industry might have needed at some point, that they now have become an extraordinarily important and successful part of our economy.

I commend all those and many other companies I had the ability to help fund when I was in the private sector. I welcome their success. Online businesses continue to be one of the areas for most entrepreneurial activity. I commend those efforts. But I do believe, in 2013, we do not need to perpetuate what has become at this point an unlevel playing field.

I believe the Marketplace Fairness Act will correct that unfairness, correct this unlevel playing field. I was pleased to see the overwhelming bipartisan majority that voted to invoke cloture. I hope this week we will be able to finish considering this bill, get it passed, and get it sent over to the House.

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

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