Senate Passes Alexander Online Sales Tax Collection Amendment

Friday, March 22, 2013

Senator Lamar Alexander (R-Tenn.) announced Senate passage today of an amendment he sponsored to the budget resolution that would allow Congress to pass legislation giving states the right to collect, or not collect, sales taxes that are already owed under state law from online and remote sellers.

Senator Alexander said the amendment, which passed by a Senate vote of 75-24 with a majority of Republicans voting in favor, “boils down to two words: states’ rights.”

In a speech on the Senate floor Thursday, Senator Alexander asked fellow senators, “Do we have a Tenth Amendment, or the spirit of a Tenth Amendment, or do we not? Do we trust governors and legislatures to make decisions, or do we not? They can decide whether they want to raise or lower taxes, whether they want to collect taxes from some of the people who owe it or from all the people who owe it. That is the issue, these two words: states’ rights …. This is an opportunity for us to express our support for this principle of states’ rights and to give governors and legislatures across the country a chance to treat businesses and taxpayers in the same way – and to stop picking winners and stop picking losers in the marketplace.”

The amendment to the budget resolution was sponsored by Alexander and Senators Mike Enzi (R-Wyo.) and Dick Durbin (D-Ill.) and a bipartisan group of 16 other senators. It had the strong support of Tennessee Republican Gov. Bill Haslam and state legislative leaders.

The Marketplace Fairness Act was first introduced in 2011 by Enzi, Durbin, Alexander and Corker, among others, to give states the option to collect sales taxes already owed under state law from out-of-state businesses. The bill was reintroduced this year on February 14, 2013. Most Americans are surprised to learn that when they buy something online or from an out-of-state retailer, they still owe the same state sales tax that they would have paid if they had made the purchase in their local store. The Marketplace Fairness Act would allow states to collect states sales taxes on remote sales the same way they do purchases in local stores.

Senator Alexander continued: “We’re deciding whether we in the United States Congress are going to make state governments play ‘Mother, May I?’ by coming and pleading with us to allow the state to decide what to do about its own taxes. The state of Tennessee would like to reduce its tax rates. It would like to avoid a state income tax. It doesn’t like the idea of treating one taxpayer one way and another taxpayer another way, and one business one way, and another business another way.

“When I was the governor of Tennessee, nothing made me more unhappy than to look up at Washington and see people of my own political party come up here and think since they had taken an airplane to Washington, they had gotten smarter than I was, suddenly, just by an hour plane ride, and they were going to tell me, as governor, what to do.

“We have an honor roll of conservative governors who’ve said they don’t think states ought to be playing ‘Mother, May I?’ They’re saying, ‘Give us states the power to make these decisions for ourselves –­ that’s consistent with the Tenth Amendment, that’s consistent with our constitutional framework. You, Congress, can make this decision. Give us the power and we’ll lower our tax rates.’ That’s what [Tennessee] wants to do. States might use the money another way. They might use it to pay outstanding teachers more, to lower the tuition rate. Whatever the case, states have the right to be right ­and states have the right to be wrong ….

“Here is the honor roll of conservatives who are asking Congress to reaffirm our commitment to and understanding of our constitutional system, which allows states to make this decision: Al Cardenas, chairman of the American Conservative Union; Governor Bob McDonnell of Virginia; Governor Tom Corbett of Pennsylvania; Governor Bill Haslam of Tennessee; Governor Chris Christie of New Jersey; Governor Rick Snyder of Michigan; Governor Butch Otter of Idaho; Governor Mitch Daniels of Indiana; former Governor Jeb Bush; former Governor Haley Barbour; and the writings of the late William F. Buckley, Jr.; and so on.”

The full text of Alexander’s speech follows:

(The Marketplace Fairness Act) has been heard by the Commerce Committee in the Senate. It has been heard by the Finance Committee …. It has been heard by the House Judiciary Committee. Senator Enzi has been working on it for 14 years.

This is a very simple question. It is a matter of two words: states’ rights. Does a state, any state, have the right to decide whether to collect existing taxes from some of the people who owe the taxes or from all of the people who owe the taxes?

In the state of Tennessee, at the Nashville Boot Company store, let’s say I walk in, I try on a pair of boots, and then I go order it over the Internet so I do not have to pay the sales tax. What the state of Tennessee wants to do – the conservative Governor Bill Haslam, the conservative Lieutenant Governor Ron Ramsey, the Republican legislature, these are not a bunch of big tax people – they want to collect the sales tax from everybody who owes it and they would like to require those who sell into Tennessee to do the very same thing they do, what the Nashville Boot Company does when I buy from it: They add the sales tax to the bill. They collect it and send it to the state. How hard is that to do?

My wife gave me an ice cream maker for my birthday last year. I ordered some ingredients to make chocolate ice cream over the Internet. When I did that they added to my bill the sales tax based on my zip code. It is as easy as looking up the weather on your computer.

That is all we are deciding here. We are only deciding whether we in the Congress are going to make state governments in our constitutional framework play ‘Mother, May I?,’ by coming and pleading with us to allow the state to decide what to do about its own taxes. The state of Tennessee wishes to reduce its tax rate. It wishes to avoid a state income tax. It doesn't like the idea of treating one taxpayer one way and another one another way; and one business one way and another business another way. It wants to make that decision for itself.

When I was the governor of Tennessee, nothing made me more unhappy than to look up at Washington and see people of my own political party come up here and think since they had taken an airplane to Washington, they had gotten smarter than I was, suddenly, just by an hour plane ride, and they were going to tell me, as governor, what to do.

Now we have an honor roll of conservatives, and I will just speak to the conservatives on my side for a while, who said we do not think states ought to be playing ‘Mother, May I?’ to the federal government on this question. Give state legislatures the power to make these decisions for themselves. That is consistent with the Tenth Amendment. That is consistent with our constitutional framework. And most of them are saying, as ours is in Tennessee: If you give us this power, the right to do it, which the Supreme Court has said you clearly have the right to do it – you, Congress, are the most qualified to do it. You can make this decision. Give us this power and we will lower our tax rate. That is what our state wants to do.

It might use the money another way. They might use it to pay outstanding teachers more, to lower the tuition rate. But states have the right to be right, and states have the right to be wrong.

There was a Supreme Court case 20 years ago at a time when most senators didn't even know there was an Internet. The Court did say that states could not impose a burden on interstate commerce. But it said Congress could write the rules for doing that. Now it is about as easy to add the sales tax if you are buying from a catalog or buying over the Internet as it is if you buy from a local store. There is no reason for us to take the position that only we know best about how states should make decisions about their services or their taxes.

Some are worried that this might increase taxes. I have said most governors think they will lower tax rates. But here is the honor roll of conservatives who are asking the Congress to reaffirm our commitment and understanding of our constitutional system which allows states to make this decision: Al Cardenas, chairman of the American Conservative Union; Governor Bob McDonnell of Virginia; Governor Tom Corbett of Pennsylvania; Governor Bill Haslam of Tennessee; Governor Chris Christie of New Jersey; Governor Rick Snyder of Michigan; Governor Butch Otter of Idaho; Governor Mitch Daniels of Indiana; former Governor Jeb Bush; former Governor Haley Barbour; the writings of the late William F. Buckley, Jr., et cetera, et cetera.

It is time after 20 years to take this simple 11-page bill that says states have the right to decide for themselves whether to collect an existing tax from some of the people who owe it or from all the people who owe it, by requiring the seller to collect the tax at the time of the sale: same tax, same store. They ought to be able to do that.

In our state of Tennessee this bill is an insurance policy against a state income tax. We don't have one. We don't want one.

It is also an opportunity for us to treat every taxpayer the same way. If you owe the tax, it is collected at the time of sale and you pay it, you don't avoid it. It is also a chance to treat all of the businesses that sell into Tennessee the same way. If you are going to sell to our six million people, we are going to treat you the same way we treat people in the state. We don't want to create an incentive for people to move out of Tennessee in order to sell into Tennessee. We want there to be a level playing field.

If Montana businesses do not want to sell in Tennessee, that is their prerogative. But if they do, we want to treat them in the same way we treat all the other businesses in Tennessee. Let's make it very clear: This is not a tax on the Internet. We have a federal law that placed a moratorium on Internet access taxes. Let me repeat that. We have a federal law that is an existing moratorium on taxing the Internet. This is a question about whether the state of Idaho, the state of Wyoming, the state of Tennessee, the state of Massachusetts, or any other state, that may say if we are going to have a sales tax then we are going to collect it in the same way from all the people who sell to the people in our state. That is infinitely logical. With the advent of technology it is about as easy to collect it one way as the other. And it is fair …

This bill boils down to two words: It is a states’ rights bill. Do we have a Tenth Amendment, or the spirit of a Tenth Amendment, or do we not? Do we trust governors and legislatures to make decisions, or do we not? Then they can decide whether they want to raise or lower taxes, whether they want to collect taxes from some of the people who owe it or from all the people who owe it. That is the issue, these two words: states’ rights …. This is an opportunity for us to express our support for this principle of states’ rights and to give governors and legislatures across the country a chance to treat businesses and taxpayers in the same way – and stop picking winners and stop picking losers.”


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