Marketplace Fairness Act

Posted on Tuesday, May 7, 2013 at 2:19 pm

U.S. Senator Lamar Alexander (R-Tenn.) has released the following statement on the U.S. Senate’s passage, by a vote of 69-27, of the Marketplace Fairness Act, of which he is a lead cosponsor:

“This legislation is about two words – states’ rights – and today the U.S. Senate stood up for the Tenth Amendment by saying it is the prerogative of states to set their own tax policies, without playing ‘Mother, may I?’ with the federal government,” Alexander said. “This bill allows states to require out-of-state sellers to do the same thing that in-state sellers already are required to do, and that many online sellers already do, and that is to collect sales tax when they make a sale.”

Alexander continued, “In Tennessee, conservative leaders want to avoid a state income tax and treat out-of-state sellers the same way they do the brick-and-mortar businesses that create jobs for Tennesseans.”

The Marketplace Fairness Act would grant states the option to require that remote businesses, such as those selling online or through catalogs, collect sales taxes on purchases within their borders. Currently, remote businesses do not have to collect sales taxes on behalf of the states they sell into, while brick-and-mortar businesses do, creating a price disadvantage.

Alexander sponsored the legislation along with Senators Mike Enzi (R-Wyo.) and Dick Durbin (D-Ill.) and a bipartisan group of 26 other senators, including Senator Bob Corker (R-Tenn.). The legislation also has the support of Tennessee’s Republican Gov. Bill Haslam, who Alexander said is “among an honor roll of conservatives who support the basic free-market principle that all businesses and taxpayers should be treated the same in the marketplace.”

The facts on the Marketplace Fairness Act:

Myth: This legislation would “tax the Internet.” Fact:  There is a federal moratorium on state “Internet taxes,” which Senator Alexander voted for and which will still be the law when the Marketplace Fairness Act becomes law.

Myth: This legislation is a tax increase. Fact:  The Marketplace Fairness Act is about state sales and use taxes already owed, and does not increase taxes one penny. In fact, by allowing states to collect taxes from everyone who owes them, it will permit states to reduce tax rates. Specifically, the bill would allow states to require online and other out-of-state businesses to do the very same thing in-state businesses have to do: collect sales and use taxes when they make a sale within a state’s borders. Senator Alexander said in March that the legislation “is about two words:  states’ rights. Do we have a Tenth Amendment, or the spirit of a Tenth Amendment? Do we trust governors and legislatures to make decisions, or do we not?”

Myth: This legislation is burdensome to businesses. Fact:  Using existing Internet software, it is as easy for an out-of-state seller to figure a purchaser’s tax as it is to look up the weather. The software identifies the purchaser’s zip code, automatically figures the tax and electronically sends the tax revenues to the appropriate state. Many online sellers already do this. And the law does not apply to any out-of-state seller with $1 million or less in remote sales.

Myth: The legislation is being rushed, like the health care law. Fact: This legislation is a Senate rarity: it is only 11 pages in length, unlike the 2,700-page health care law. The first version of this legislation was introduced in 2001. In 2012, both the Senate Commerce and Finance committees held hearings on almost identical legislation. The exact legislation was introduced on February 14, 2013, so everyone has had plenty of time to read it. The problem has been that that the Finance Committee would not consider the bill.

Myth: Conservatives oppose the legislation. Fact: Just the reverse is true. Al Cardenas, chairman of the American Conservative Union, economist Art Laffer and governors such as Jeb Bush, Mitch Daniels, Mike Pence, Chris Christie, Butch Otter and Bill Haslam all have urged the Senate to enact states’ rights legislation that would permit states to decide for themselves whether to collect taxes from all the taxpayers who owe a tax, or just some of those taxpayers. These governors do not like the current system, which requires states to treat some taxpayers and businesses one way, and other taxpayers and businesses a different way.  As Senator Alexander has said, “We have a Tenth Amendment to the Constitution. States should not have to play ‘Mother, May I’ to the Congress about what their taxes structures should be.”   


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