Rockefeller on Online Sales Tax

August 1, 2012

WASHINGTON, DC--Chairman John D. (Jay) Rockefeller IV today gave an opening statement at the Senate Committee on Commerce, Science, and Transportation hearing titled "Marketplace Fairness: Leveling the Playing Field for Small Business."

I would like to welcome our three distinguished colleagues- Senators Durbin, Alexander and Enzi to the Commerce Committee today to talk about their legislation the Marketplace Fairness Act.  I am pleased to join them in their efforts to get this legislation enacted into law.  I know that Senator Enzi has worked on this issue for more than a decade.  I recall that Senator Enzi’s original bill on this issue was referred to this Committee. He is to be commended for his commitment on this issue.  I have always thought it was the right idea and cosponsored that first bill just as I am cosponsoring his current bill.  When he first introduced this bill, it was not a popular idea.  Over time, more people have come to understand that this is an issue of basic fairness and critical to a state’s fiscal health.  

There is a growing bipartisan consensus around the country that Congress should address this issue.  In West Virginia we are fighting to keep our small towns vibrant -- we need local retailers to make that happen. I believe we can have both a vibrant Main Street economy and e-commerce businesses.  And, let’s be honest, allowing states to collect sales taxes on on-line purchases will not stop the growth of e-commerce.  But, no matter where or how the purchase is made, our communities need the revenue from these sales to fund basic functions of government.   That is only right.  

When we debated Internet sales tax reform 10 years ago, Internet commerce was still in its relative infancy.  Fewer people had online access, and many were reluctant to share their credit card information with online retailers.  But, as the Internet has grown, so too has consumers’ confidence in Internet transactions.  Millions of consumers now “click” and buy online with ease.  Because sales tax is not collected for most Internet transactions, consumers know that they can benefit from a 5%-10% discount online.  In fact, the mobility of cell phones allows shoppers to scan products for information, compare prices online, and make a purchase from an online seller without ever leaving the store.  That strikes me as profoundly unfair to traditional shops and small businesses that end up serving as the display case for consumers who see the product in person but buy it online to avoid paying sales tax.

State and local governments are losing billions.  West Virginia loses a staggering $100 million a year.  It’s my opinion that this revenue could be used to help pay for the state share of Medicaid expansion, among other things.  If Congress does nothing, we’ll end up with states forced to raise income or property taxes to offset the growing loss of sales tax revenue.  That doesn’t seem like the right solution to me.  

To be clear: This debate is not about imposing new taxes.  Instead, it’s just allowing states to collect taxes that are currently owed under existing law, but are being systematically avoided.  Today’s technology, with the tremendous advances made in recent years, makes tax collection simple, cheap and reliable.  In many ways, the Internet is the perfect environment to collect sales tax because it can be automated.  I know there is still a debate on this point.  I look forward to hearing from the witnesses about the costs that businesses will bear and why they believe a small business exemption is not enough to alleviate these concerns. 

I look forward to the testimony and to Senate action to restore fairness to small and local businesses and helping states end the hemorrhaging loses facing states across the country.