Senate Approves Marketplace Fairness Act as Budget Amendment
The Senate voted late Friday to approve a budget amendment that would allow states to collect e-commerce sales taxes on in-state purchases from companies that do not have a physical presence in those states. The amendment, approved 75-24, was offered by Sens. Dick Durbin, D-Ill., and Mike Enzi, R-Wyo.
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Allowing such collection would create a level playing field for small brick-and-mortar businesses that have to pay state and local taxes, Durbin said during floor debate Friday night. “Their taxes sustain businesses, sustain schools and highways and police protection,” he said of brick-and-mortar businesses. Allowing states to collect the same taxes from out-of-state online retailers “is a fair thing to do so that those local businesses have a fighting chance,” he continued.
E-commerce sales tax “is a states rights issue,” Enzi said. “No person in a state that doesn’t have a sales tax now would have to pay a sales tax” under the amendment. Additionally, the bill has an exemption for small sellers that sell less than $1 million online, he continued. Those small sellers “don’t have to do this."
An amendment offered by Sen. Kelly Ayotte, R-N.H., would allow each state to collect sales taxes only from businesses that have a physical presence in that state, “which absolutely destroys the whole effort here,” Durbin said. “My amendment is simple,” Ayotte replied. “It respects states’ rights.” The Senate did not vote on Ayotte’s amendment.
"The Durbin-Enzi amendment forgets that we are in a global economy,” Sen. Ron Wyden, D-Ore., said. Oregon does not have a sales tax. “This measure does not and cannot reach foreign retailers.” The bill creates an “administrative nightmare” for online retailers, which will make it harder for them to compete with businesses located wholly abroad and create an incentive to move companies overseas, he said; the amendment “ought to be called the Shop Mexico Bill."
Any e-commerce sales tax legislation should be handled in the Senate Finance Committee, said its chairman, Sen. Max Baucus, D-Mont. “We could easily deal with this” there and “work out all these complexities that have not been addressed.” Montana chooses not to have a sales tax, but “we're going to be forced to have a sales tax” under this amendment, he said. Montana businesses will be required to collect taxes and answer to audits from thousands of tax jurisdictions, he continued.
The Durbin-Enzi amendment “tramples on states rights” and forces online retailers to become tax collectors, Ayotte said. “It’s the long arm of the federal government punishing states like mine that don’t have a sales tax.” Sen. Jon Tester, D-Mont., called the amendment “bad, bad, bad public policy” and “an incredible overreach” on the part of the federal government.
"From the governmental side, this is about the money that they think they can get their hands on,” Sen. Marco Rubio, R-Fla., said. He implored his colleagues to think about the businesses in their states that would come to them with complaints when facing audits from other states. “They're going to have to deal with states that they have nothing to do with. That’s what you're going to have to explain to your businesses.” Rubio criticized the small-seller exemption for being too low. “Depending on what you sell, that [$1 million threshold] may or may not be that much,” and “that figure is going to mean less and less” over time, he said.