Speech by Senator Michael Enzi to the National Conference of State Legislatures

Streamlined Sales and Use Tax Act
National Conference of State Legislatures
Remarks by U.S. Senator Michael Enzi (R-WY)
March 10, 2004

This week the Senate is debating the Senate Budget Resolution for fiscal year 2005. The introduction of the Resolution has intensified the debate on our national funding priorities and the mechanisms by which we control spending. The introduction and subsequent debate has also reminded me why I spent 10 years in the Wyoming legislature rather than the U.S. Senate. Unlike the federal government, state legislatures are held accountable for every single penny. Budgets are too tight to be reckless or excessive. Although we are doing our best to rein in spending this year, it is difficult to get your hands around a trillion-dollar budget.

I am pleased to see Senator Charlie Scott from Casper, Wyoming. Charlie and I served in the Wyoming State Senate for a number of years together. He and I both know that balancing the budget is a challenge. Like many states, Wyoming has a constitutional requirement that forces the Legislature to balance its budget every year. Although Wyoming is one of the few states with a surplus, practicing fiscal constraint in both good times and bad times is difficult.

I know many of your states are facing some of the largest deficits in recent memory. Much of this can be attributed to the downturn in the economy and increased demands imposed by federal legislation. Another huge factor has been the explosion of sales over the Internet and the subsequent decline in sales tax revenues. That's why my colleagues and I introduced the Streamlined Sales and Use Tax Act on October 15, 2003. Our bill will make it easier for American consumers and businesses to conduct sales from remote locations, while also helping states to begin recovering from years of budgetary shortfalls.

As many of you know, our bill -- S. 1736 in the Senate -- would authorize states that have signed the Streamlined Sales and Use Tax Agreement and have passed legislation simplifying their tax system to require all sellers to collect and remit sales tax. Twenty of your states have already passed the implementing legislation required under the agreement. Nine additional states are working on it.

The Streamlined Sales and Use Tax Agreement includes dramatic simplification in almost every aspect of sales and use tax collection and administration, especially for multi-state sellers. It provides for uniform definitions, one-stop registration, and single auditing procedures, among other things.

This bill is not a disguised attempt to increase taxes or put a new tax on the Internet. Consumers are already required to pay sales and use taxes for purchases made over the phone, by mail, or via the Internet. Unfortunately, states can't enforce these user taxes very easily. Our bill would actually help consumers, businesses and states by relieving consumers of their remittance burden, simplifying the entire sales tax system for all sellers, and putting the lost tax revenue back into the state coffers.

S. 1736 will help both consumers and states by reducing the burden on of consumers and providing a mechanism that will allow states to systematically and fairly collect the taxes already owed to them. The tax system should be simplified so that the same rules apply to everyone, whether they sell their merchandise from a storefront, over the phone, through a catalog, or on the Internet. Because mail order and Internet companies don't have to collect and remit sales taxes like brick-and-mortar companies do under current law, Main Street businesses are at a competitive disadvantage due to the appearance of higher prices.

This bill is not about new taxes. Simply put, if Congress continues to allow remote sales taxes to go uncollected and electronic commerce continues to grow as predicted, other taxes -- such as income or property taxes -- will have to be increased to offset the lost revenue. You, as state legislators, will have to make those tough decisions if we don't act. We can help you address this problem, but only if you let your Congressional members know how important it is.

Senator Dorgan from North Dakota and I have been the lead cosponsors on this legislation in the Senate for years. He and I have worked hard to bring it to the table for debate. We were close in 2001 when we were discussing the Internet access tax moratorium. Unfortunately, our amendment to the moratorium failed by a vote of 57 to 43. This year, we decided to separate the two issues because they are so complex and few people understand that taxes on Internet access are different from sales taxes on remote sales. We hope that by keeping the two issues separate, we can avoid the confusion that bogged down the amendment in 2001.

That brings us to today. Senator Dorgan and I have asked the Chairman of the Finance Committee, Senator Grassley, to hold a hearing on S. 1736 by the end of the month. He has mentioned on several occasions his intention to consider the issue in his committee this spring. We are hopeful he will live up to those statements. Additionally, Majority Leader Frist has said he wants to address the issue of streamlined sales and use tax collection this year. While he has not signaled his intention to bring the bill to the floor without full consideration in the Finance Committee, he has expressed interest in the bill as a representative of one of the states hit hardest by the lack of authority to collect.

I would urge each of you to contact each of your Senators -- especially in those states where you have already passed legislation implementing the agreement -- and encouraging them to cosponsor our bill. We currently have 19 cosponsors, which is a good number, but not enough to force the Senate to consider the bill. This is a critical issue and the Senate needs to act this year. We need your help to make sure that happens.