Marketplace Fairness Act of 2013
Floor Speech
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Mr. DURBIN. Mr. President, I thank my colleague from Tennessee for coming to the floor. He has been here with some frequency together with the Republican Senator from Wyoming to discuss the matter which is pending before the Senate.
What is pending before the Senate is known as the Marketplace Fairness Act. It is a measure which Senator Enzi of Wyoming has been working on for 12 years and one on which I have worked with him for several years. It is an interesting issue because it is one where the Supreme Court challenged Congress 20 years ago. The States went to the Supreme Court and said: We want those who are not physically present in our State, but sell in our State, to collect sales tax. At that time the Supreme Court in the Quill decision said no; this is up to Congress. Congress needs to take action.
Here we are 20 years later and the conversation has changed dramatically. What used to be sales by mail or catalog are now Internet sales, and they are growing in volume by the day. States are finding themselves in a challenging situation.
States pass sales taxes. Senator Alexander was Governor of Tennessee. The State decided on a State sales tax. They say to every business in the State--as Senator Manchin understands because he was Governor of West Virginia--every sale you make over the counter collects sales tax for West Virginia, Tennessee, or in the State of Illinois. Those merchants understand their legal responsibility, their civic responsibility, and they collect the sales tax, remitting this amount back to the State.
The problem they now have discovered is what is known as showrooming. Store owners have described this as a situation where a customer shows up and requests to look at running shoes--this happens at Chris Koos running sports shop in Normal, IL. The customer will say: These look good, but do you have them in a different color? Staff goes back and gets another box of shoes for the customer who tries them on. Then they will say: This looks great but do you have a wider one? Yes, that is perfect. That is the shoe I want. Let me write down the information about the shoe.
The customer will then turn around, go home, and order the shoe on the Internet. The local merchant who did all of the work, who displayed the merchandise, pays the rent, pays the taxes, receives nothing. The person buys it over the Internet because many Internet retailers do not collect sales tax.
In my State this might be 8, 9 or 10 percent difference. Chris, my friend, the mayor of Normal, told me it is not unusual 2 weeks later for them to come back in with the shoes purchased over the Internet and say: These didn't turn out right. He reminds them they didn't buy the shoes in his store.
This is a story repeated over and over. The brick-and-mortar retailers, the shops on Main Street, and the malls feel they are at a great disadvantage. If their competition on the Internet is not collecting sales tax and they are, it puts them at a competitive disadvantage.
In all of the States with a sales tax, approximately 46 States, if I am not mistaken the purchaser over the Internet has a legal responsibility to pay the sales tax. Most people don't know this. In my State of Illinois people are supposed to pay it when they file their State income tax. There is a line: How much do you owe for sales tax and use tax for remote purchases on Internet purchases?
Several months ago I was reminded by my bookkeeper this line was on the form. I said I should take a quick look to see what I owe.
One in twenty people in Illinois fill out this line. We have about 95 percent of the taxpayers in my State who put zero. We know it is more than 5 percent of the people living in Illinois who are purchasing over the Internet. This tax is not paid.
What this bill says is we don't create any Federal tax; no, none at all. We don't create any new State or local tax, none at all. What we do say is States can give the software to these Internet retailers to collect the tax when people make the purchase.
I recently bought a book on amazon.com, put in my address, ZIP code, and they calculated instantly how much I owed in sales tax on that purchase. I paid it and the money was emitted to the Illinois Department of revenue. They are doing this even though there is no legal obligation for them to do so. More and more companies such as Lands End--I called them. They said: We collect sales tax.
More and more companies are doing so, but this would make it uniform. We wrote this law understanding there are some small Internet retailers who perhaps sell several hundred or several thousands of dollars' worth of goods in the course of a year. We exempt them. They don't have to collect the sales tax if their revenues from the previous year are below $1 million. We exempt them. That is to put no hardship on the small retailers but to go after the 1 percent with sales in excess--revenue in excess of $1 million. We go after them to make them pay what they should.
This is what is pending before the Senate. It has been a long time coming. We have been working with retailers across America to accomplish this. They have said this will give them a level playing field when it comes to sales. The same sales tax is collected over the counter which is collected over the Internet. This is the way it works and at no expense to the retailer.
The States need to provide the software for the collection. They are not going to be held responsible if the State gives software which is imperfect. They can't be held responsible for it. If they use the software given to them, they have met their legal obligation. This is what is before us.
We have had two votes now: one a symbolic vote on the budget and another a procedural vote to move forward on this measure yesterday, which 74 Senators voted for, which is pretty substantial in a body of 100 Senators. All but 5 of the Democratic Senators support it, and a substantial number, 24 or 25 Senators, from the Republican side support this, more than half of their caucus.
We are on this measure now. I have said to my colleagues, and I believe Senator Alexander said to his Republican colleagues: If you have an amendment which is relevant and material to this bill, bring it to the floor. Let's get into a debate. Let's talk about these amendments. Let's vote on these amendments, and then let's move to final passage.
Those who will witness this will see a rare occurrence on the floor of the Senate--perhaps an actual debate and vote on an amendment. It doesn't happen very often around here. So you may wish to stay tuned. I encourage all of my colleagues interested in this issue who believe they would like to offer some form of an amendment to please bring it to the floor as soon as it is ready, which I hope will be today.
This is our last week in session before we break for a week. We want to get this bill done. We started early in the week--on Monday, yesterday--and we want to get it done by Friday. If we have to stay over, we will stay over--Saturday, whatever it takes. We want to get this done before this break, and it now depends on my colleagues.
Those who are sitting on an idea, it is time to let it hatch. Bring it to the floor, and let's have a vote on it or let's talk about it. It may be something we can accept. If it is, we will try. If it isn't, we will bring it up for a vote and let the Senate decide. We want to act as a Senate because we have a good bipartisan measure, Senator Heitkamp of North Dakota and I, joining on the Democratic side along with quite a few others, Senators Enzi and Alexander on the Republican side.
I urge my colleagues and staff who are following this debate, now is the time. If you have an amendment, bring it to the floor today, right now. We will be here to receive those amendments and to work on them.
Mr. President, I yield the floor.
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Mr. DURBIN. I thank the Senator from Tennessee for posing that question, and through the Chair I would say to him that I am in a tough position here facing two former Governors--Governors of West Virginia and Tennessee--but I am sure they agree with what I am about to say.
In this circumstance, the decision was made by the State of Tennessee--and West Virginia as well--as to what the sales tax would be by the people living in the State and making purchases in the State. We don't change that at all. That is up to the States to decide.
As I mentioned, four States, maybe five States, when it comes to sales tax, have no sales tax. What we are putting in this bill will not change that in any way. If you live in Oregon, you will pay no sales tax because of this bill for what is sold over the counter or over the Internet.
Our friends from Delaware are supporting this bill because they think because they are a no-sales-tax State surrounded by Pennsylvania and New Jersey and Maryland, they are going to have an advantage. They believe people will cross the borders to buy in Delaware. So they have calculated this actually helps them.
But we are respecting the decisions made by each State as to the taxes that will be imposed. We are doing it on a fair and equalized basis for those who have brick-and-mortar stores as well as those over the Internet. And I would say that is consistent with the 10th Amendment and consistent with States rights in this area.
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Mr. DURBIN. Responding to the Senator from Tennessee through the Chair, he is right. And this has been controversial. I can remember that in the last debate--and
it was a few years ago--the argument being made was that we should have free access to the Internet. I don't quarrel with that. The Internet has been a powerful force in our economy. It is going to grow as a force in our economy, and I don't believe we should tax access to the Internet. There are also a myriad of bills related to services over the Internet and whether they should be taxed. We do not get into that in any way whatsoever. What we are talking about are taxable goods by State law subject to State sales taxes as they currently exist. We don't change those taxes in any way.
A point that was raised in our press conference is an important one. Some States treat food differently, prescription drugs differently. The State has to basically tell the retail community what the State standard is going to be for the categories of goods that are being sold. So we make it as easy as humanly possible for the Internet retailers, providing at the expense of the State the software they need to make this work.
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Mr. DURBIN. I would say to the Senator from Tennessee through the Chair that there are two possibilities:
We continue under this current system, which works a disadvantage on the Main Street stores and shopping malls and denies to those units of government the revenue that would otherwise be coming from the sales tax. That would be one outcome.
The second outcome is--and Senator Heitkamp has mentioned it--this case may return to the Supreme Court. If it returns to the Supreme Court, it is quite possible it won't be written as mercifully as our version. We have exempted--we have exempted Internet retail sellers with revenues the previous year below $1 million. We have tried to lean toward an accommodating approach. I don't know if the Supreme Court would reach the same decision when it comes to sales tax liability. I believe it is better for us to accept their challenge, even 20 years later, and get this done.
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Mr. DURBIN. Responding to the Senator from Tennessee through the Chair, I listened to the speeches of our critics, and they were swooning over the notion of being subjected to 9,600 taxing districts, taxing entities. What the Senator from Tennessee has described is our answer. This bill avoids that problem. This bill simplifies that situation.
We are down to 46 States with the defined goods and the defined sales tax. That is more reasonable for the retailers than running the risk, as the Senator suggests, that this goes back to the Supreme Court, and 20 years after the fact they say: It is wide open. If Congress is not going to act, the Internet retail community has now matured to a point where they should be able to collect sales tax in every taxing entity where a person resides.
I believe that is a much more complex and challenging situation.
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