After receiving support from the largest online retailer in the United States - Amazon.com Inc - and Illinois-based Sears Roebuck and Co., U.S. Senator Dick Durbin (D-IL) and U.S. Representatives, John Conyers (D-MI) and Peter Welch (D-VT) today introduced a bill to allow local Main Street retailers to compete more effectively against out-of-state internet sellers. The legislation is cosponsored by Senators Tim Johnson (D-SD) and Jack Reed (D- RI) in the Senate and Representatives Heath Shuler (D-NC) in the House.
The Main Street Fairness Act would also relieve consumers of the legal burden to report to state tax departments the sales taxes they owe on online purchases, and help struggling governors and mayors collect taxes they are already owed and therefore reduce the need to raise new taxes to fill gaping holes in their budgets.
“Consumers shouldn’t have to face the burden of reporting all of their online purchases. Main Street retailers collect sales taxes on behalf of consumers, why shouldn’t online retailers do the same?” said Durbin. “In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on internet and catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”
“I am pleased to join my colleagues Senator Durbin, Congressman Welch and Congressman Shuler in introducing the “Main Street Fairness Act,” said Conyers. “This bill will level the playing field for local businesses by ensuring that online retailers collect the same sales taxes that brick-and-mortar retailers already do. This will help our state and local governments avoid devastating layoffs and cuts to essential services vital to the well-being of our local communities.”
“Our bill levels the playing field to give Main Street businesses a fighting chance,” said Welch. “When a consumer can walk into a store, try out a product and then go home and buy it online without paying sales tax, Main Street businesses and downtowns lose. Our bill will level the playing field and bring much-needed fairness, strengthen our Main Street businesses, create jobs and revitalize our downtowns.”
The Main Street Fairness Act received support today from the largest online internet retailer, Amazon.com Inc., which has opposed many state-specific attempts in the past to compel online retailers to collect state sales tax. In a letter to Durbin, Amazon.com, Inc’s Vice President for Global Public Policy Paul Misener said: “Amazon.com has long supported a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location, or level of remote sales. To this end, I am writing to thank you for your bill that would allow states that sufficiently simplify their rules to require collection of sales tax by out-of-state sellers.”
“Sears Holdings commends Senator Durbin and Representatives Conyers and Welch for introducing this legislation. We believe it will restore balance and fairness to the system by enabling states to enforce the collection of taxes that are already owed by every customer making a purchase, whether the purchase is online or in a retail store. This is a critical step in addressing an issue that has resulted in over a decade of unfair competition between retailers who collect the sales tax and those who refuse to do so,” said William Harker Senior Vice President Sears Holdings Corporation.
Under a Supreme Court ruling, known as the Quill decision, retailers are only required to collect sales tax in states where they also have brick-and-mortar stores. The burden falls to consumers who are required to report to state tax departments any sales taxes they owe for online purchases. As a result, local retailers are at a competitive disadvantage because they must collect sales taxes at the point of sale while out of state retailers, including many large online and catalog retailers, in effect give their customers a discount by collecting no state or local sales taxes. And, consumers are left with the responsibility of reporting the sales taxes owed on online purchases on their tax returns.
As a result, 44 states and the District of Columbia responded to the Quill decision by working with local governments and the business community to adopt a comprehensive interstate system to harmonize and simplify their sales tax rules and administrative requirements called the Streamlined Sales and Use Tax Agreement. To date, 24 states have changed their laws to comply with this interstate agreement. But the Quill decision made it clear Congress would need to authorize and sanction such an agreement. The Main Street Fairness Act does that while providing assistance for online retailers and small businesses to implement the requirements.
“Over the years, Main Street businesses in South Dakota have struggled to compete with internet vendors who skirt sales tax rules, which leaves brick-and-mortar businesses at a competitive disadvantage and state governments losing billions in uncollected sales taxes,” said Johnson. “The Main Street Fairness Act will help support businesses in our state and also bring in $30 to $40 million in lost sales tax revenue at a time when important programs are being cut left and right. Governors across the country, including South Dakota Gov. Dennis Daugaard, support this commonsense legislation that will streamline collection rules and improve compliance.”
“Rhode Island businesses and workers suffer from an unfair tax disparity that harms many local small businesses and benefits large out-of-state e-retailers. This bill would correct that inequity and help Main Street businesses compete. It has broad support from both mom and pop shops and large businesses like Amazon.com and at a time when states like Rhode Island are struggling with their budgets this bill would be a boost,” said Reed.
“The Main Street Fairness Act is a win for consumers, businesses, and states by requiring Internet-only companies to play by the same rules as Main Street businesses,” said Shuler. “This bill won’t increase taxes for a single consumer. Rather, it will ensure state and local governments are paid the billions of dollars in uncollected taxes already owed from internet and catalog sales at a time when many are struggling with deep budget deficits.”
The Main Street Fairness Act would not require a single penny in additional taxes to be paid that are not already owed. Instead, the legislation would:
- Certify the Streamlined Sales and Use Tax Agreement;
- Provide states who choose to use it with the clear authority to require retailers to collect sales taxes already owed;
- Require the Streamlines Sales and Use Tax Agreement to meet a lengthy list of simplification requirements to ease administrative burdens for sellers;
- Exempt small businesses (as defined by the Governing Board of the Agreement) from collecting sales taxes;
- Compensate retailers for startup administrative costs associated with collecting sales taxes;
- Treat all retailers equally regarding sales tax collection;
- Release consumers from their existing sales tax remittance obligations; and
- Help states and localities collect billions in taxes that are already owed.
The Main Street Fairness Act is supported by the National Governors’ Association, National Conference on State Legislatures, Governing Board of the Streamlined Sales and Use Tax Agreement, National Retail Federation, International Council of Shopping Centers, Retail Industry Leaders Association, National Association of Real Estate Investment Trusts, and National Association of College Stores.
“I commend Senator Durbin and Congressmen Conyers and Welch for supporting state sovereignty by introducing this important legislation, and I encourage members of Congress to support it. We’re not talking about adding a new tax on Internet commerce; we’re correcting a tax avoidance problem. Allowing some remote sellers to avoid this tax is unfair to the main street merchants that make up the lifeblood of our local communities,” said Massachusetts State Senator Richard Moore, NCSL president.”
"We have been very vocal about the unfair advantage that internet retailers have in not collecting sales tax on remote sales. We are urging Congress to introduce and pass the Main Street Fairness Act, which will allow states to end the subsidy being provided to internet retailers, such as Amazon.com. Let me be clear, this is not a new tax. It would merely require internet retailers to collect sales tax on behalf of the states where they do business, something that brick-and-mortar retailers, and even those who sell on the internet, have done for years. The economy is helped by having a level playing field and allowing an open market to determine consumer behavior without government subsidies, which we believe is occurring for online retailers. I commend Senator Durbin for his leadership and hope that this bill will attract significant bi-partisan support in both the House and Senate," said David Simon, Chairman of the Board and Chief Executive Officer of Simon Property Group, Inc.