ABA Submits Testimony to Senate Finance Committee

This week, the American Booksellers Association submitted written testimony to the U.S. Senate Committee on Finance in support of the Marketplace Fairness Act (S. 1832), legislation that would give states the right to require remote retailers to collect and remit sales tax in the state, if they choose to do so. The testimony was submitted for an April 25 Finance committee hearing, “Tax Reform: What It Means for State and Local Tax and Fiscal Policy,” which focused in part on the Marketplace Fairness Act, among other tax reform prospects.

In the written testimony, ABA CEO Oren Teicher noted: “For more than a decade, our members have worked at an unfair competitive disadvantage compared to remote, online retailers that have nexus in states but have skirted their obligation to collect and remit sales tax. Many of these remote retailers have a physical presence via warehouses, offices, distribution facilities, or a broad network of online affiliates (that act as a virtual sales force for online sellers).

“While our members are more than capable of competing with their online competitors in an open and fair marketplace, it is very difficult for any business owner, no matter how savvy, to compete at a disadvantage equal to their community’s sales tax rate.”

In conclusion, Teicher wrote: “The Marketplace Fairness Act would solve this inequity by authorizing states that choose to do so to require remote retailers to collect and remit sales tax. This is crucial. Some states have already clarified their sales tax laws to account for the clear fact that online affiliates are modern-day sales agents, but even so, many states have been reluctant to follow suit for fear they will bring about a lawsuit from a large, corporate online retailer that wishes to maintain its inequitable competitive edge over Main Street — or, in some cases, because of a different interpretation of the 1992 Quill vs. North Dakota Supreme Court decision.”

Appearing in person at the April 25 hearing were Frank Sammartino, Assistant Director For Tax Analysis, Congressional Budget Office, Washington, D.C.; Dr. Kim Rueben, Senior Fellow, Urban-Brookings Tax Policy Center, Washington, D.C.; Walter Hellerstein, Francis Shackelford Distinguished Professor of Taxation Law, University of Georgia School of Law, Athens; Joseph Henchman, Vice President of Legal and State Projects, Tax Foundation, Washington, D.C.; and Sanford Zinman, Owner, Zinman Accounting, White Plains, New York.

Leading the hearing was Finance Committee Chairman Sen. Max Baucus (D-MT) and Ranking Member Sen. Orrin Hatch (R-UT).

At the hearing, Sen. Ben Cardin (D-MD) expressed strong support for the Marketplace Fairness Act and said that states were losing $11 billion a year in sales tax revenue due to sales tax inequity. He then noted that Maryland alone was losing an estimated $300 million in sales tax revenue, and asked the panel, “Aren’t we picking winners and losers if we don’t take action?”

Dr. Rueben agreed and responded that “Congressional action seems like a no-brainer.”

However, Henchman of the Tax Foundation said that, while bricks-and-mortar stores would only have to collect in a limited number of jurisdictions, online retailers would have to collect in 9,600. He also noted that there wasn’t software that could keep up with legislative changes in all those jurisdictions.

Cardin was incredulous at the idea that software could not solve this issue and told Henchman, “That is an excuse for inaction.”