On Wednesday, August 1, Steve Bercu, CEO and co-owner of BookPeople, in Austin, Texas, and ABA vice president, was one of four panelists to testify at a Senate Commerce Committee hearing on the Marketplace Fairness Act (S. 1832).
On Wednesday, August 1, Steve Bercu, CEO and co-owner of BookPeople, in Austin, Texas, and ABA vice president, was one of four panelists to testify at a Senate Commerce Committee hearing on the Marketplace Fairness Act (S. 1832). The legislation would give states the right to require remote, online retailers to collect and remit sales tax for in-state purchases and contains a small-seller exception of $500,000. The legislation was introduced by Senators Lamar Alexander (R-TN), Dick Durbin (D-IL), and Mike Enzi (R-WY).
At the hearing, Bercu stressed to the committee that the current failure to equitably collect sales tax promotes “a behavior that has been called ‘showrooming,’ in which consumers spend the time and resources of bricks-and-mortar stores to inform themselves about products, and then make their actual purchases online to avoid paying the sales tax.” He noted that “I have had the misfortune to observe this in my store many times, but what is somewhat discouraging in a small-ticket environment like mine becomes cause for apoplexy in big-ticket worlds. Peers of mine have spent hours explaining every aspect of various cameras and other electronic gadgets only to have the customer tell them they intend to buy online to save the hundreds of dollars due in sales tax.”
Bercu told the committee that retailers “can all compete on price and match any price offered online, but we cannot sell without collecting the sales tax. This [legislation] would level that playing field.”
“We are grateful to Steve for taking the time to travel to Washington, D.C., to testify at this important hearing,” said ABA CEO Oren Teicher. “On behalf of booksellers and other Main Street retailers, Steve was able to clearly and convincingly articulate the true costs of sales tax inequity. It's very encouraging to see that, based on comments at the hearing, most of the Senate Commerce Committee understood the need for a federal solution, and we are thankful for Senators Alexander, Durbin, and Enzi for their leadership on this issue by introducing and sponsoring the bill. As Steve made clear in Wednesday's hearing, the time has come for sales tax fairness.”
Along with Bercu, appearing at the hearing in support of the legislation were: Paul Misener, vice president for Global Public Policy for Amazon.com, and Scott Peterson, executive director for the Streamlined Sales Tax Governing Board. Speaking in opposition to the bill was Steve DelBianco, executive director for NetChoice Coalition.
In the majority statement, Committee Chair Jay Rockefeller (D-WV), a co-sponsor of S. 1832, said: “There is a growing bipartisan consensus around the country that Congress should address this issue. In West Virginia, we are fighting to keep our small towns vibrant — we need local retailers to make that happen. I believe we can have both a vibrant Main Street economy and e-commerce businesses. And, let’s be honest, allowing states to collect sales taxes on online purchases will not stop the growth of e-commerce. But, no matter where or how the purchase is made, our communities need the revenue from these sales to fund basic functions of government. That is only right.”
“The Marketplace Fairness Act is simple, it is about states’ rights, and it is about fairness,” said Sen. Enzi at the hearing. “At a time when state budgets are under increasing pressure, Congress should give state and local governments the ability to enforce their own laws. This will give states less of an excuse to come knocking on the federal door for handouts and will reduce the problem of federally attached strings. It will give states a choice to reduce property taxes or other taxes.”
“Brick and mortar retailers -- the backbone of many communities -- are required to collect sales and use taxes while internet retailers do not,” Sen. Durbin noted. “That gives online retailers a 5 to 10 percent price advantage over local businesses that create jobs and invest directly in our communities. 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 – only if they choose – to treat brick and mortar retailers the same as remote retailers.”
Sen. Alexander stressed that he has “a conservative governor, a conservative lieutenant governor, and a conservative state legislature that think it’s their business, not Washington’s, to decide whether Tennessee should collect state sales taxes from everybody, or just some people, and whether to give out-of-state businesses a 10-percent discount when they sell things in Tennessee. This is an 11-page bill about two words: states’ rights. Washington’s biggest problem is that it makes too many decisions that ought to be made in Tennessee by families, communities, and the state.”
Misener noted that Amazon believed that “most of the important questions” regarding creating “an even-handed framework to collect sales tax” have been answered.”
Peterson noted that the impact of unpaid sales tax is not just a matter of an individual state not collecting what its tax law says should be collected. “The sales tax is too often the price difference that turns local retailers into display cases for consumers who come in and try out the product and then go home and buy online. According to the Department of Commerce, e-commerce sales doubled from 2005 to 2011 and e-commerce sales in the first quarter of 2012 increased 15 percent more than the same quarter in 2011. E-commerce sales are increasing at a rate greater than total sales and the difference are sales that would have otherwise gone to a local retailer.”
In opposition to the bill, DelBianco attempted to bolster his argument by noting during his testimony that BookPeople's website had collected the incorrect sales tax on an attempted order. However, the point appeared less than persuasive when Senator Durbin explained that this only stressed the importance of S.1832, as it would force states to simplify their tax laws to make it easier for retailers to collect and remit, and that in BookPeople’s case, the proposed bill would exempt the bookstore from having to collect because BookPeople's gross remote sales do not exceed $500,000 per year.