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Ms. AYOTTE. Mr. President, yesterday I came to the floor to oppose the cloture motion on the motion to proceed to the so-called Marketplace Fairness Act. I, of course, would like to, I think properly, name it the Internet Tax Collection Act because that is what it is. I strongly oppose this bill which has very serious flaws to it and very serious ramifications for not only businesses in my State, online businesses where we have seen great growth, but also online businesses across this Nation.
I strongly disagree with the decision to fast-track this bill, to skip the regular markup process of the Finance Committee. Both the chairman of the Finance Committee, Senator Baucus, and the ranking Republican on the Finance Committee, Senator Hatch, had opposed going to this bill without the committee doing its work.
Why? There are a number of concerns that have been raised about this bill by Members on both sides of the aisle. At a very minimum, we believe these concerns warrant a thorough vetting through the regular order. That is why I, along with Senators WYDEN, TESTER, SHAHEEN, RUBIO, LEE, and CRUZ wrote a letter to the majority leader expressing these concerns, asking again for regular order for this bill. But here we are. Cloture was invoked and I suspect the supporters of this bill certainly do not want to go through the markup process so here we are again without regular order.
This bill is wrong for a great area of growth for our country, which is online businesses. Small business owners get hit the worst under this bill. Small business owners from my State of New Hampshire have told me--and large businesses from my State of New Hampshire that do business online have told me--this legislation would make it harder for them to do business. During the recent Senate work period, I held two roundtable discussions in New Hampshire, one in Manchester and one in Portsmouth. It was a great opportunity to hear directly from those on the ground what the implications of this bill will be to business owners in my State. I would like to share a sampling of the feedback from businesses in New Hampshire about this bill.
Russ Gaitskill, who is the president and CEO of Garnet Hill, in Franconia, NH: ``It's going to be a nightmare.''
He sent to my office an example of what he would have to do. Understand what this will make online businesses have to do in this country. They now become the tax collectors for other States, even though they do not rely on the services in those States, they do not use the roads in those States, they don't get to vote for the Representatives in those States. Taxation without representation, that is what this bill is about. They now have to collect for the rest of the Nation's 9,600 tax jurisdictions of different not only State sales taxes but local and county sales taxes.
I want to use one example of what this is like and what an administrative nightmare this is for businesses. This is 1 page of a 40-page sales tax manual that is an example of what any online business across the Nation could have to face. In New Hampshire, if there is a customer from Illinois who chooses to buy from an online business in New Hampshire--here we are. If the person lives in Grand Prairie, it is a 6.5-percent rate. But if the person is from Colona or Collison, a 6.5-percent rate or if you live in Dow, it is a 7-percent rate.
There are 9,600 different tax jurisdictions across this Nation and the people pushing this bill, the proponents, say: Oh, no problem for these businesses. Just use software. Every business has this software. It is going to be easy as pie.
So when Dow changes their tax rate half a percent, the whole program changes. Yes, that burden is put on the business. Talk about an administrative nightmare. Do you know why. Because States are in a position where they want to use that as a cash grab to make other States and online businesses do their work of tax collecting for them instead of them doing it themselves. I cannot believe my colleagues are going to go along with this and those who are pushing it.
I think it is especially odd there are Republicans who want to create this kind of complicated tax mess. I hear from my colleagues on this side of the aisle all the time about how we are going to cut through regulations, we are going to make it easier for businesses. A lot of my colleagues on the Republican end are pushing this notion that a business--oh, just let them purchase some software and then let them try to collect for almost 9,600 tax jurisdictions in the Nation. What could possibly go wrong for an online business? Many of them, smaller businesses in this country, are trying to thrive, trying to grow through a difficult time in our country.
I also heard from E&R Laundry and Dry Cleaners, a small business founded in 1921 in Manchester. About 70 percent of E&R's sales are now Internet based. The company's president said he would not have the resources to calculate, collect, and deliver sales taxes for thousands of jurisdictions across the country.
A bakery in my hometown of Nashua echoed that sentiment. Susan Lozier Roberts of Frederick's Pastries--and anybody who has been there, yum. I can understand why people across the country would want to get some Frederick's pastries. Susan said it would create mass confusion, keeping up with all the individual State tax codes.
I heard the same from one of the most prominent maple sugar producers in the State. In New Hampshire, we are a State that prides itself on its maple sugar products. Peter Thomson--his father was the late Gov. Mel Thomson, a wonderful figure in the history of our State--said it would be a burden we just couldn't afford.
Ken Smith, the owner of Maine-ly New Hampshire, said: I physically don't have the manpower or the hours to be able to handle something like this.
Jenn Coffey, another business owner, said: If I had to become a tax collector on top of what I am already trying to do as a startup--we all know how hard it is so start your own business, by the way--she said: I would be out of business.
I also heard widespread concerns about the threat from faraway audits that this legislation would bring. That is the poster board I had up there, with all these tax rates. In every single one of those jurisdictions, if we divide it by county or we divide it by State, when a business in another State, in New Hampshire, for example--if they are selling to a customer in Illinois, they can then, if their computer program that everyone is saying is so easy doesn't calculate it right, they can be hauled in for an audit in another State where they do not have any physical presence. What do they do? They have to get a lawyer in another State. They have to deal in a court system in another State or with auditors with a department of revenue. Whom do they deal with? Talk about administrative nightmare, to be dragged into another State for potential audits, to have
to hire lawyers in other States--what an administrative mess this bill will create.
It is truly shocking to think that people actually want to say this somehow is going to level the playing field or make it more fair, when it puts this great burden on businesses.
Travis Adams, with whaddy.com, based in Nashua, said: One tax audit from another State or jurisdiction would completely crush us.
Ben Baker, an online retailer in Barrington, said: Small businesses like mine just can't handle that kind of accounting burden. If I have to hire a bookkeeper or pay my current offsite accountants significantly more per month to track all this, you can bet my plans to expand my business in the next 6 months are a lot less likely.
Paul Ford, an online dealer in Portsmouth, perhaps summed it best when he said: The last thing we need is legislation like this.
I would also like to mention a comment from Joel Maloy, a friend of mine, a great business owner in New Hampshire, president of Polaris Direct. He said: This is not about making Main Street more competitive. It is about passing new taxes on to consumers. That is consistent with what other business owners have told me from across New Hampshire, and I have certainly also heard it from businesses across the Nation. They know this is not about competitiveness. It is about helping States get more money to spend on programs they cannot afford.
That is what the Wall Street Journal said this week. The paper called the Marketplace Fairness Act an online revenue raid. They said this is a bill--of course, do you know who is pushing this bill? Big business, big retail business. Do you know what it does, according to the Wall Street Journal--and I fully agree with them on this--``..... big business and big government are uniting to pursue their mutual interest in sticking it to the little guy.''
``[B]ig business and big government are uniting to pursue their mutual interest in sticking it to the little guy.'' Haven't we had enough of that in our Nation? The paper concluded that ``the new revenues will merely fund larger government.''
Some of my conservative colleagues have tried to justify their support for this big government bill on the notion that their States will be able to reduce their income or sales tax. I think we all understand there is no requirement in this bill that States have to reduce some other tax burden if they collect taxes in this way. This is just about spending more money.
Let's talk about the Constitution. By imposing collection requirements on businesses that have no physical presence outside their home State, I also fear this is going to trample on existing State sovereignty. Under current Supreme Court precedent, in the absence of an actual sufficient nexus, a State cannot reach beyond its borders
to compel out-of-State Internet vendors to collect taxes on a particular transaction. That is the Quill decision.
By usurping and changing the standard, it would undermine an important limitation in the commerce clause, the nexus requirement. So now your nexus with a State is a click; instead of a physical presence in a State. If an online business in New Hampshire has to collect and remit sales taxes for online customers from Massachusetts, what is to prevent Congress from later expanding the commerce clause even further to require New Hampshire brick-and-mortar businesses to collect the Massachusetts tax, because Massachusetts has already tried to do this to New Hampshire. In fact, when I was attorney general of the State, we brought a case to the Massachusetts Supreme Court because there were customers from Massachusetts who came over to buy some tires in New Hampshire and the Massachusetts DRA tried to get New Hampshire businesses to collect that tax.
That is exactly what we are doing with this bill. It actually places an unfair burden on online businesses versus brick-and-mortar businesses that are in that situation that now do not have to collect that. But I worry that will be the next step for businesses in my State of New Hampshire and other States across this Nation that do not have a sales tax.
What about stores that sell through catalogs. Their customers are frequently older and less likely to have transportation or be online. Will catalog vendors also have to collect and remit State sales taxes?
Finally, what about other unintended consequences on consumers, retirees, and investors? That is the type of information we would have talked about in a committee hearing that we did not have on this bill before the Finance Committee. There was a hearing, but there was no markup. A markup is when we try to improve and deal with unintended consequences to a bill.
Could this bill open the door to taxes on financial services or transaction taxes? Some of the financial organizations have raised that issue. In my home State of New Hampshire, it is a matter of pride that we do not have a sales tax, and this bill tramples on that choice for the State of New Hampshire.
That is because we know it gives our retailers, yes, an advantage in a competitive marketplace, but we also know low taxes are the result of low spending. This legislation threatens to trample on retailers in all States, forcing them to become tax collectors for other States--nearly 9,600 tax jurisdictions, as I have mentioned.
I said it before, and I will say it again. This truly is taxation without representation because businesses in New Hampshire or online businesses in other States can now be subject to doing the business of governments in other States, of collecting their taxes, when they don't elect the representatives there, when they don't rely on the roads there or the services there. Here we have it--the ultimate in taxation without representation. I say to my conservative colleagues, why would they want to support such authority given by the Federal Government?
Supporters of this amendment argue that they have created an exemption for small businesses of $1 million for small sellers, but this amount is not indexed to anything. What about the business that is $1 million and $1 in sales? Then they have to do it, and it is going to discourage businesses from growing.
Also, this limit is far lower than the SBA--the Small Business Administration--actually defines a small business.
Even with this exemption, trust me, once this exemption is in place and the States don't get all the revenue they want, they will be back. They will be back before this body to say: We didn't get enough money, so the Senate needs to authorize us further. Get rid of the exemption. We have a right to collect from those businesses as well or have them collect for us as well because that is what it is--requiring them to collect for us.
A broad coalition of groups is opposed to this far-reaching legislation. Let me talk about a few of them.
No. 1, Americans for Tax Reform. Americans for Tax Reform said:
This legislation grants states new tax collection authority without removing equivalent taxing authority elsewhere. Therefore, this legislation can only be viewed as a tax increase.
The Financial Services Roundtable said:
This legislation has the potential for unintended consequences. It's important for Congress to explore all possible outcomes and costs of this proposal, especially the impact on consumers.
A transaction tax on financial services products will hurt retail investors, retired Americans, and small businesses, effectively making it more expensive for them to invest and plan for the long term. Without hearings, these implications and others will not be properly addressed.
Again, the Securities Industry and Financial Markets Association has raised similar concerns, saying that this could lead to a financial transaction tax which will hurt all of us.
TechNet opposes this, saying:
Imposing a new Internet sales tax regime is a tremendously complex issue that should be addressed through regular order, starting in the Senate Finance Committee, and done in a thorough and deliberative manner.
That has not been done here.
We should not rush a proposal that is riddled with holes and, most importantly, does not provide enough protections for small businesses, the back bone of our economy.
Americans for Prosperity opposes this. Americans for Prosperity says:
This bill would not level the playing field; it would burden online retailers in a way that brick-and-mortar stores are not. Complying with the internet sales tax would be a considerable administrative burden for companies, particularly for small businesses.
Freedom Works opposes this as well. Heritage Action for America opposes this. The National Taxpayers Union opposes this. The Competitive Enterprise Union opposes this. Competitive Enterprise Institute opposes this, as well as the Council for Citizens Against Government Waste. These are groups that are committed to low taxes, less government, and free enterprise so we can have a strong economy.
Again, I encourage my colleagues on both sides of the aisle--especially my colleagues on this side of the aisle--to listen to the red flags these groups and several of my other colleagues have raised.
I will conclude by once again restating the serious concerns I have about this legislation. I have concerns about the impact on small business owners in my State and in States across the Nation. I have concerns about the impact on online businesses that have been such an area of growth for this country.
The concerns about the administrative application of this bill--I showed my colleagues all the tax jurisdictions. To put that burden on businesses is absolutely wrong. It is wrong for creating jobs in this country, and it is absolutely wrong to put such an administrative burden on people who are working so hard in starting their businesses and thriving and making sure they grow.
I believe we are opening Pandora's box with this bill, and this shouldn't be done in the manner it has been--without regular order. We are talking about a massive reorganization on how sales taxes are collected in this country. What will be next? What will the States ask us for the authority to tax next? That should be a very big question for our colleagues.
I strongly encourage my colleagues to put the brakes on this bill and to think about the harm this legislation would do to small online retailers across America. When consumers and online retailers in the States of my colleagues find out what is actually in this bill and they don't understand why their Senators would support an online sales tax bill, I know they will raise many concerns to my colleagues when they have the administrative burden and the nightmare of trying to collect for 9,600 tax jurisdictions in this Nation.
I urge my colleagues to oppose this bill. Thank you.
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