Opening Statement

Statement of Ranking Member John Conyers, Jr.
Hearing on:  Exploring Alternative Solutions on the Internet Sales Tax Issue
Full Committee
Wednesday, March 12, 2014 at 10:00 A.M.
2141 Rayburn Building

     Since the Supreme Court’s 1992 Quill decision, Congress has considered various legislative responses.  These include the Main Street Fairness Act and the Marketplace Fairness Act, which the Senate overwhelmingly passed last May.  But today’s hearing focuses on alternatives to those prior legislative initiatives.  And, I welcome the discussion on these ideas.

     As we consider how to best address the remote sales tax issue, however, there are several factors that we should keep in mind.  To begin with, local retailers – who have to collect sales taxes – are increasingly losing their competitive advantage over out-of-state businesses, with each day that passes.  Technological advancements have made it easier for consumers to take advantage of this disparity.  For example, a consumer can walk into a local store, check the price of an item, ask the salesperson a few questions, and then use a smartphone to find an overall lower price online. The online price is generally lower because many consumers do not pay any sales tax online, sometimes saving more than 10% of the overall price of the item.  This gives out-of-state retailers a clear advantage.  They can charge the same basic pre-tax price as a local retailer for a laptop computer or a pair of designer shoes, but the price the consumer actually pays is lower because the retailers do not collect a sales tax.  This helps explain why the percentage of online sales and the total amount of online sales continue to increase.

     I am a strong supporter of competition, especially when it benefits consumers and encourages innovation.  Nevertheless, competitors should compete on things other than sales tax policy.  We should ensure competitive equity among retailers and level the playing field.

     Second, not only does the local retailer suffer because of the disparate treatment of remote sales tax, but state and local governments – and the communities they assist – suffer as a result of reduced tax revenues.  State governments rely on sales and use taxes for nearly one third of their total tax revenue.  Yet, as more Americans purchase more of their goods on the Internet, the states receive less in sales tax revenue.  For example, the Michigan Department of Treasury estimates that total revenue lost to remote sales will total $290 million this fiscal year. Lost tax revenues mean that state and local governments will have fewer resources to provide their residents essential services, like education and police and fire protection.  It also means fewer funds to pay for basic necessities, like salt to melt the ice and snow, and asphalt to fill the potholes. States may instead be forced to replace the erosion of sales taxes by increasing taxes in other areas, something many would surely oppose.  Uncollected sales taxes also have a negative impact on local communities.  Fewer purchases at local retailers translate to fewer local jobs and eventually the closing of stores. The unfair advantage that remote sellers have by not collecting sales taxes, hurts us all.

     Finally, Congress should not delay any further.  In its 1992 Quill decision, the Supreme Court recognized that Congress is best suited to determine whether a remote seller must collect sales taxes. Congress has yet to make that critical determination.  We owe it to our local communities, our local retailers, and state and local governments to act before the end of this year.

     I am pleased that today’s hearing provides us the opportunity to take that next step toward resolving this issue.  Although I would prefer to markup the Senate-passed Marketplace Fairness Act and to consider  amendments to further improve it, I welcome the opportunity to hear workable alternative proposals.  This issue is a prime opportunity for all of us to work in a bipartisan basis on legislation.  But, it is imperative that we do so this year.

     Again I thank Chairman Goodlatte for holding this hearing today. I stand ready to work with him and any other member to move legislation this Congress.  But we should not delay any further.