Marketplace Fairness Actby Senator Richard J. Durbin
Posted on 2015-12-15
DURBIN. Mr. President, 2 years ago Members of the Senate did
something that doesn't happen very often. We broke through the gridlock
and came together to pass meaningful bipartisan legislation that was
called the Marketplace Fairness Act. Senator Mike Enzi, a Republican
from Wyoming, has been the leader on this issue from the start. Senator
Lamar Alexander, a Republican from Tennessee, has been an invaluable
ally. Senator Heidi Heitkamp, a relatively new Member of the Senate but
a person with extraordinary knowledge of this field, joined me and 65
others to pass legislation that would level the playing field for Main
Street businesses all across America and allow States and localities to
collect sales and use taxes that are already owed under the law.
Since that time--that glorious time 2 years ago--what has happened? Nothing--the bill passed the Senate, went to the House, and disappeared.
In the face of this obstruction, a bipartisan group of Senators have said we will oppose any long-term extension of legislation that would take away a State's right to collect taxes on accessing the Internet unless we give States the ability to collect taxes on Internet sales that are already owed.
The Internet Tax Freedom Act is a law which is going to expire with the continuing resolution--which I would support--and it says that States and localities cannot impose a tax on access to the Internet. I think that is sound policy. But what we are asking in return is to allow those who use the Internet to make retail purchases to pay the sales taxes they already owe for their purchases. It is that simple. It is not fair to tie the hands of States and localities to collect the revenue they need to fund law enforcement, public schools, infrastructure, and other vital services without providing a path for States and localities to replace the revenue if they choose.
The Marketplace Fairness Act levels the playing field for retailers by allowing States to treat all retailers--whether it is a brick-and- mortar store or online--the same when it comes to collecting sales and use taxes. It is not a new tax. We are talking about existing taxes and their collection. In Illinois we have a quaint way of dealing with this. I recall a few years ago, when I was doing my State income tax returns, the bookkeeper called and said: Do you want to declare your [[Page S8649]] Internet purchases and pay the sales taxes you owe? I said: Of course I want to pay the taxes I owe. How do you do that? Well, you declare them on your State income tax return in Illinois. There is no proof. It is your word, and the fact that you sign is what the State goes by. I estimated my Internet purchases that had not been subject to sales tax and paid the appropriate tax in Illinois. It turns out that very few people in my State who actually do make retail purchases over the Internet pay this tax. We are trying to change that. The change is very simple: If you are an Internet retailer, such as Amazon--the largest in the United States--and I make a purchase for the holidays and I declare my ZIP Code at the end of my address, Amazon then knows by my ZIP Code how much to be collected in sales tax. They assess me that with the purchase, take that amount and send it back to the Illinois Department of Revenue for distribution. It is so simple that there is basic software available, at a very modest cost, that any retailer can use to make that same calculation. There is nothing exotic or difficult in the process, but that is what is missing.
Amazon--I use them as an example--actually collects sales tax, and they support our marketplace fairness bill, as do many other Internet retailers. The difficulty we have run into, though, is there is a resistance to giving fairer treatment to stores across America that are collecting sales taxes every day against retailers on the Internet that may or may not collect those taxes themselves.
What difference does it make? I have talked to some of the people who run big chain stores, and they say it has reached a point that something has to be done. Consumers come into a store, a major store, and they ask to see certain products--running shoes, bicycles, flat- screen TVs. They pick the one they like the best, write down all the information about it, and they are never seen again. Some of them do have the nerve to return at a later date when they make their purchase over the Internet to the bricks-and-mortar store when they are dissatisfied with the product. Of course the bricks and mortar store had nothing to do with the sale of the product. They are being asked to provide some consumer relations on a product they didn't even sell.
What is happening? Take a look at the last Thanksgiving holiday weekend--one of the biggest retail weekends of the year. Early reports suggest that the stores on Main Street and shopping malls across America had flat sales compared to last year. How about Internet retail sales for that weekend? They were up significantly across America.
What we are looking for is parity and some equality. It is not fair to say to the store down the block that is paying the rent, paying the property taxes, and collecting the sales taxes that we are going to put them at a disadvantage to their Internet competitors. Internet retailers benefit under our current system, sadly, because they don't charge for sales tax--many of them don't. They have a 5-percent or 10- percent advantage over Main Street competitors. When you ask many of these Internet retailers whether they want to continue the current system, they say: Of course, it gives us a break.
It is not fair, it is not right, and it should be changed. Products sold online seem cheaper when sales and use taxes are not collected at the point of sale, but we all know that tax is still owed by the customers. Thousands of Main Street businesses have worked hard to grow their businesses. They employ local people. Now they have become nothing but show rooms because of this unfairness. Examples: Steve Sahli from Play It Again Sports in Naperville, IL, knows this issue of showrooming all too well. For more than 20 years, Play It Again Sports has been serving the Naperville, IL, community. People come into the store, they try out big-ticket items, use their phones sometimes to take a picture, walk out the door, and buy the item online.
Soccer Plus in Palatine, IL, is an example of what happens when it becomes too difficult to compete with online retailers because of their price advantage. Two years ago, Soccer Plus went out of business. We lost good-paying jobs in Palatine, and Palatine lost a business that was paying its property taxes, employing all the people, and sustaining the services of that good city. There is nothing we can do for Soccer Plus now, but we can still help other retailers avoid that same fate.
Even with countless stories like these, the House of Representatives has refused to address this issue. Numerous requests to the chairman of the House Judiciary Committee to mark up e-fairness legislation from ranking members and other members have not resulted in any action whatsoever. The chairman of the House Judiciary Committee is calling for regular order when it comes to e-fairness legislation but has refused to even hold a legislative hearing on the only e-fairness legislation to be introduced in the House. That was by Representative Jason Chaffetz, a Republican from Utah. He introduced the bipartisan Remote Transactions Parity Act. We have worked on a bipartisan basis in the Senate with Congressman Chaffetz, Congressman Womack, and others to come up with a bill that we think is fair that can pass. All we are asking for is a day in court--a legislative hearing, a markup, and bring the matter to the floor of the House. The chairman of the House Judiciary Committee has refused to work with us on this legislation. He has his own approach. I disagree with it, but let's have the debate. Let's have the vote. Isn't that what Congress is supposed to be all about? These calls for regular order are nothing more than veiled attempts to delay and obstruct in the House. Let's have regular order. Let's bring up the Chaffetz measure. If the chairman of the Judiciary Committee in the House has his own alternative, let him offer that as well.
While House leadership calls for regular order on legislation to level the playing field for Main Street retailers, they bypassed regular order by airdropping a permanent extension of the Internet Tax Freedom Act into a totally unrelated bill. It was a bill in Customs relating to trade agreements. At the very last minute, they dropped in this provision for the permanent Internet Tax Freedom Act.
The same Members of Congress calling for regular order on e-fairness legislation skipped regular order when it came to the Internet Tax Freedom Act. Last week, the Customs reauthorization conference report, which reformed some of our Customs and trade law, was released. Many were surprised to find deep in the bill on page 381 a brand new provision that had nothing to do with Customs, nothing to do with trade, has not had a recent hearing in the Senate and was dropped in at the last minute in this bill--the permanent Internet Tax Freedom Act.
This provision wasn't in the bill that passed either the House or the Senate. It is what happens toward the end of the legislative session when things go bump in the dark. Internet Tax Freedom Act hasn't even been considered by this body. Yet there it was in a conference report meant to resolve differences that had been debated for months.
I do not support the permanent extension of the Internet Tax Freedom Act in the conference report. I am going to oppose any other attempt to move anything longer than the remaining 9-month extension of the Internet Tax Freedom Act until September 30, 2016. I support the merits of the legislation, but it is grossly unfair to speed this through with an airdrop in a conference report without any hearing and to do it at the disadvantage of retailers and businesses across America.
A long-term extension of the Internet Tax Freedom Act should be paired with the Marketplace Fairness Act. We can make them both permanent law. Let's do it and do it together. Let me explain why. We should not cut off States and localities at the knees by preventing them from collecting tax revenues, by reducing Federal funding, and without also providing State and local governments the authority to collect the taxes already owed. The Federal Government has cut funding for States and local governments over the last several years in an attempt to put the Federal Government on the right fiscal path. Tough decisions have had to be made. Many States and local governments are struggling, even in my State. In a one-two punch, some in Congress want to increase this burden by permanently [[Page S8650]] preventing States and localities from imposing certain types of taxes while denying them the authority to collect sales and tax revenue that is already owed to them.
In 2015 alone, my State of Illinois will lose at least $390 million under the Internet Tax Freedom Act. Chicago will lose $197 million. Springfield will lose $6 million. How do we expect States and localities to fund first responders, firefighters, emergency services, 911 dispatch, health care services, local road maintenance, and all the other services that support our community? Unlike the Federal Government, States and localities can't run deficits to continue these services. The only option they have is to raise other taxes, such as property taxes, or to cut vital services.
There is a reasonable path forward. Congress should pass both a long- term extension of the Internet Tax Freedom Act--which says we will not impose State and local taxes on access to the Internet--and pass the Marketplace Fairness Act, which allows States to opt in so Internet retailers selling in their State will collect the sales tax due and remit to the States and localities.
I hope my colleagues in the House will work with me to do that. I welcome the opportunity to have a serious dialogue about how to move both pieces of legislation forward in an expeditious manner.
Mr. President, I yield the floor.