WASHINGTON, D.C.–(ENEWSPF)–August 1, 2012. U.S. Senator Dick Durbin (D-IL) today urged his colleagues to support a bill that would level the playing field for small businesses by allowing local brick-and-mortar retailers to compete more effectively against out-of-state internet sellers. Durbin’s remarks were made in his testimony at a Senate Commerce Committee hearing examining the bipartisan Marketplace Fairness Act, a bill which he introduced earlier this year with U.S. Senators Mike Enzi (R-IL) and Lamar Alexander (R-TN).
“Brick and mortar retailers—the backbone of many communities—are required to collect sales and use taxes while internet retailers do not. That puts our local businesses at a disadvantage,” said Durbin. “These small businesses on Main Street invest in our communities, they sponsor local softball teams and they create jobs for local workers. But we reward that equation with a 5 to 10 percent price advantage to the online retailer. This price difference is killing our small brick and mortar retailers. That’s not fair and it’s not right.
Durbin continued, “Small businesses in my home state of Illinois don’t want a handout from Washington. They don’t want special treatment. All they want is a level playing field. The Marketplace Fairness Act would level the playing field for small businesses by allowing states—if they so choose—to treat brick and mortar retailers the same as remote retailers.”
The Marketplace Fairness Act would give states the option to collect sales tax already owed under current law from out-of-state businesses, rather than rely on consumers to pay those taxes to the states—the method of tax collection to which they are now restricted. In order to protect the growth of small businesses, the bill prohibits states from requiring remote sellers with less than $500,000 in annual remote nationwide sales to collect state and local sales and use taxes.
The Marketplace Fairness Act has 19 bipartisan cosponsors. Twenty-one Governors – 13 Republican and 8 Democratic – support leveling the playing field for small businesses and over 240 government, business and labor organizations support the bill, including the U.S. Conference of Mayors, the National Association of Counties, the National Retail Federation, the Retail Industry Leaders Association, Amazon.com, the Consumer Electronics Association and the International Council of Shopping Centers.
Senator Durbin’s remarks as prepared for today’s hearing are below:
Senator Richard J. Durbin
August 1, 2012
Marketplace Fairness: Leveling the Playing Field for Small Businesses
Before I talk about what the Marketplace Fairness Act does, let me start by telling you what it does not do.
The bipartisan bill that Sens. Enzi, Alexander and I introduced last November and that now has 19 bipartisan cosponsors does not raise taxes.
However, instead of debating the merits of this issue—like the fact that this bill helps small businesses, saves good-paying local jobs, and allows states and local governments to collect revenue already owed—some continue to claim the bill is a tax increase with the hope of turning this into a political issue.
Whether a tax is already owed is not a matter of opinion.
In my home state of Illinois, use tax is already owed on remote purchases. It’s spelled out in black and white in Illinois state law and consumers are required to report the tax on their state tax form.
As a result, the burden falls on consumers to save their catalog and internet receipts, determine the correct tax rate, and write a check to the state department of revenue.
In Illinois, fewer than 5% of taxpayers pay this tax. Why? Because most people don’t know they owe the tax.
This system doesn’t work for consumers. It doesn’t work for businesses. And it sure doesn’t work for state and local governments.
Brick and mortar retailers—the backbone of many communities—are required to collect sales and use taxes while internet retailers do not. That puts our local businesses at a disadvantage.
I talk with store owners in Illinois who tell me that people come into their stores; ask sales staff questions and try the merchandise on. When they decide exactly what they want, they go home and buy it online.
Sometimes they simply use their smartphone to make the purchase right there in the store.
These small businesses on Main Street invest in our communities, they sponsor local softball teams and they create jobs for local workers.
But we reward that equation with a 5 to 10 percent price advantage to the online retailer.
This price difference is killing our small brick and mortar retailers.
That’s not fair and it’s not right.
Small businesses in my home state of Illinois don’t want a handout from Washington. They don’t want special treatment. All they want is a level playing field.
The Marketplace Fairness Act would level the playing field for small businesses by allowing states—if they so choose—to treat brick and mortar retailers the same as remote retailers.
States can choose to do this by simplifying their sales and use tax collection and administration.
Retailers will receive the software to calculate state and local sales taxes.
The bill has an exemption for small online sellers with less than $500,000 in out-of-state sales annually — to give small start-ups a chance to grow.
If Aunt Jane wants to sell a couple hundred jars of her famous apple butter online, she can, and she would be exempt from sales tax collection.
The Center on Budget and Policy Priorities estimates that states are looking at a combined shortfall of just under $103 billion this year.
States and local governments will lose an estimated $23 billion in uncollected sales and use taxes this year.
Think about that. Allowing states to collect those taxes – taxes they are already owed — would reduce states’ combined budget shortfalls by one-fourth.
In my state, Illinois, we’re looking at a $6.4 billion budget shortfall this year. Illinois is cutting funding per student by 13 percent – the biggest education cuts of any state this year.
The revenue Illinois will lose this year in uncollected sales and use taxes could shrink our budget deficit by nearly 20 percent.
South Carolina is facing a $630 million budget shortfall this year, and $254 million will go uncollected in sales and use taxes. $254 million could help close the budget shortfall or restore cuts made to mental health services, programs for the elderly, and education programs.
Mississippi is looking at a $634 million budget shortfall—and nearly half of that number–$303 million–will go uncollected in sales taxes. Cuts made to education and Medicaid in recent years could be recovered if Mississippi were able to collect
use taxes already owed by its residents.
Georgia has shortened the pre-K school year for 86,000 poor children, eliminated child care funding for 9,600 children and cut teacher salaries by 10 percent. The $838 billion in that Georgia will lose this year in uncollected sales taxes could eliminate 65 percent of its budget shortfall.
Florida will lose nearly $1.5 billion in uncollected sales and use taxes this year. Arizona: $798 million. Nevada: $344 million. The list goes on.
The bill allows states to decide whether to close budget gaps, reduce other taxes, or eliminate cuts in vital services.
This bill is supported by over 240 business and labor organizations.
Eight Democratic Governors and 13 Republican Governors support addressing sales tax fairness, including:
- Governor Quinn from the state of Illinois,
- Governor Christie from the state of New Jersey,
- Governor McDonnell from the commonwealth of Virginia,
- Governor LePage from the state of Maine, and
- Governor Daniels from the state of Indiana.
I would like to thank my colleague Sen. Enzi and Alexander for their commitment to this issue.
I would like to thank you, Chairman Rockefeller and Ranking Member Hutchison, for holding this hearing today.
This opportunity to discuss this issue is important to businesses as well as state and local governments across this country.
It is my hope that we will address this issue this year.
Small businesses cannot wait. State and local governments cannot wait.
I urge my colleagues to take a close look at this bipartisan bill. I urge my colleagues not to be dissuaded by critics who want to play politics with this issue.
This is a bill about fairness and protecting small brick and mortar retailers.
It’s a revenue neutral bill that will allow states and local governments to close budget shortfalls.
I urge my colleagues to support the bill.