Marketplace Fairness Act of 2013

Floor Speech

Madam President, I rise today in support of the Marketplace Fairness Act. I am pleased to join Senators Enzi and Durbin and many of my colleagues in this bipartisan effort to pass this bill that will help small businesses in my State expand and create jobs by ending a tax loophole that benefits out-of-State remote sellers. I want to particularly commend Senator Enzi and Senator Durbin for their long-time leadership on this issue. They have been relentless in trying to find an effective way to allow States to collect sales taxes on items that are actually delivered into their States.

This is a huge issue in my State of Rhode Island where businesses are having a very difficult time competing against out-of-State retailers because of, frankly, the outdated rules that require shops on Main Street to collect taxes while their out-of-State online competition does not. When you go to the stores in Rhode Island you'll see that they are facing this with increasing frequency. And small business men and women are demanding help.

When Internet commerce was in its early stages, online companies were basically exempted by what is now, by all accounts, an out-of-date Supreme Court decision, from collecting State and local sales taxes for sales in States where they do not have a physical presence--despite the fact that there was still an obligation to collect sales taxes on those purchases. That obligation was shifted to consumers, who are often unaware they have an obligation. This loophole puts Main Street businesses at a competitive disadvantage, hurts the ability of Rhode Island to keep jobs in the State, and strains State budgets all across the United States.

In order to address this inequity, the bill before us today would give States the ability to enforce their own sales tax laws and, by so doing, relieve consumers of the legal burden to report to State tax departments the sales taxes they owe on online purchases--since they would be paying sales taxes as a matter of course at the time of purchase, just as they would in a regular store.

Essentially it levels the playing field. If you walk into a store in Rhode Island and there is a sales tax charge, you would pay it. If you receive an item you ordered off the Internet, you would pay a sales tax as part of the bundled price of the item. It is what people would expect to do.

The legislation would also ensure that the rules for collecting sales tax from out-of-State retailers are clear and consistent. States can enter into an already established Streamlined Sales and Use Tax Agreement which my State and 21 other States are party to, or States can adopt a set of alternative minimum simplification standards to make it easier for online businesses to comply with their tax laws.

And this bill makes it easier for businesses--that choose to do business in a State that requires remote sellers to collect sales taxes--to comply with the law by providing software to help them calculate the sales tax.

Furthermore, this bill exempts small businesses with less than $1 million in gross revenue from having to collect sales taxes on remote sales. Those truly small businesses would not be affected by the legislation before us today.

This bill does not create new taxes or increase existing taxes. Instead, the bill will help States and cities collect billions in unpaid taxes already owed, reducing the need to raise new taxes on tax-compliant businesses and citizens. Indeed, yesterday I was with my Governor and he indicated that if we could pass this at the Federal level and allow the State of Rhode Island to collect approximately $70 million a year, he would secure a reduction in our sales taxes which would benefit all the people and businesses in Rhode Island.

This is a proposal that I think is not only necessary, it is long overdue. In 2012, as I have indicated, Rhode Island estimated it lost approximately $70 million in uncollected revenue. The revenue was legally owed but, because of this loophole, it went uncollected. This puts pressure on individuals and businesses that play by the rules. Indeed, if the Marketplace Fairness Act becomes law, Rhode Island has provisions in State law--and the Governor reiterated that yesterday--that would help lower the sales tax from 7 percent to 6.5 percent and eliminate the recent extension of sales tax to clothing purchases over $250. This would have huge and immediate benefits to the people and businesses of Rhode Island.

The other thing it could do, frankly, is it would encourage local businesses to hire Rhode Islanders. We are facing a 9.1-percent unemployment rate. We have been slowly making progress in terms of putting people back to work--but there is much more to be done. This bill would help with that recovery because one of the barriers main street businesses face in hiring locally is the unfair competition from remote sellers that do not collect sales tax. This bill corrects that.

Now some online retailers who benefit from this unfair tax advantage understand the need to correct the loophole. That is why companies such as Amazon.com, with substantial remote sales, support this legislation. Governors of every political stripe recognize the undue pressure this tax loophole puts on their budgets, businesses, and citizens, and that is why the National Governors Association supports this. Ultimately, the Marketplace Fairness Act is about revitalizing our real economy by helping Main Street businesses compete against remote sellers that benefit from this tax loophole because these Main Street businesses cannot hire workers or expand if shoppers use their stores just to browse and then make their purchases online in order to avoid paying sales tax.

Yesterday I was with a group of business leaders in Rhode Island. Among them were the Cardi brothers, Ron and Pete Cardi, who own a family furniture store. It has been in the family for generations. They are first-rate businessmen and first-rate community leaders. They tell me it is not uncommon for someone to come in the showroom, get help from one of their skilled sales personnel, order the furniture, have it shipped to their homes so they see it fits exactly right, then call up and have it returned to the store--and then a truck will show up a day or two later at the customer's house, from a remote seller with the same item because the remote seller doesn't collect sales tax. We cannot have our retailers in States such as Rhode Island simply be showrooms for remote sellers. That is one of the consequences of this loophole we have to correct. This bipartisan proposal is designed not only to allow States to keep or retain the tax that is owed, but also, in the case of Rhode Island, to allow a tax reduction; and furthermore, to give local businesses more incentive to hire.

This is legislation that makes extraordinary sense in every dimension. I hope we can get through this debate this week and successfully pass this legislation. We are all encouraged by the 75 votes this proposal received when it was made as an amendment during the budget debate and the 74 votes this bill received on the cloture motion. I am hopeful it will continue to enjoy a similar level of support moving forward.

Once again, let me thank Senators Enzi and Durbin for their extraordinary leadership, which has helped forge this bipartisan and bicameral bill, and I urge my colleagues to support its passage.

I yield the floor.

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